Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-103772
333-103772-01
Prospectus Supplement to Prospectus dated April 10, 2003
$25,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Series E 4.90% Senior Notes due December 15, 2013
-----------------
Savannah Electric and Power Company will pay interest on the Series E Senior
Notes on June 15 and December 15 of each year. The first payment will be made
on June 15, 2004. The Series E Senior Notes will be issued only in
denominations of $1,000 and integral multiples of $1,000.
The Series E Senior Notes are not redeemable prior to maturity.
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 accompanying Prospectus. Any
representation to the contrary is a criminal offense.
-----------------
Per
Series E
Senior Note Total
--------------- -----------
Initial Public Offering Price*....................................... 99.813% $24,953,250
Underwriting Discounts and Commissions............................... 0.650% $ 162,500
Net Proceeds, before expenses, to Savannah Electric and Power Company 99.163% $24,790,750
-----------------
* The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Series E Senior Notes will accrue from the
date the Series E Senior Notes are issued.
See "Risk Factors" on page S-3 of this Prospectus Supplement for information on
certain risks related to the purchase of these securities.
The underwriter expects to deliver the Series E Senior Notes in book-entry form
only through the facilities of The Depository Trust Company against payment on
or about December 17, 2003.
-----------------
BANC ONE CAPITAL MARKETS, INC.
-----------------
The date of this Prospectus Supplement is December 10, 2003.
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained or incorporated by reference in this
Prospectus Supplement or the accompanying Prospectus. You must not rely on any
unauthorized information or representations. This Prospectus Supplement and
accompanying Prospectus is an offer to sell only the Series E Senior Notes and
only under circumstances and in jurisdictions where it is lawful to do so. The
information incorporated by reference or contained in this Prospectus
Supplement and accompanying Prospectus is current only as of its date.
Table of Contents
Prospectus Supplement
Page
- ----
Risk Factors................................................................................ S-3
The Company................................................................................. S-3
Selected Financial Information.............................................................. S-3
Use of Proceeds............................................................................. S-4
Description of the Series E Senior Notes.................................................... S-4
Underwriting................................................................................ S-8
Prospectus
About this Prospectus....................................................................... 2
Risk Factors................................................................................ 2
Available Information....................................................................... 2
Incorporation of Certain Documents by Reference............................................. 3
Savannah Electric and Power Company......................................................... 3
Selected Information........................................................................ 4
The Trust................................................................................... 5
Accounting Treatment of the Trust........................................................... 5
Use of Proceeds............................................................................. 5
Description of the Senior Notes............................................................. 6
Description of the Junior Subordinated Notes................................................ 9
Description of the Preferred Securities..................................................... 15
Description of the Guarantee................................................................ 15
Relationship Among the Preferred Securities, the Junior Subordinated Notes and the Guarantee 17
Plan of Distribution........................................................................ 19
Legal Matters............................................................................... 19
Experts..................................................................................... 20
S-2
RISK FACTORS
Investing in the Series E Senior Notes involves risk. Please see the risk
factors in Savannah Electric and Power Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, which is incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus. Before making an
investment decision, you should carefully consider these risks as well as other
information contained or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. The risks and uncertainties not
presently known to Savannah Electric and Power Company or that Savannah
Electric and Power Company currently deems immaterial may also impair its
business operations, its financial results and the value of the Series E Senior
Notes.
THE COMPANY
Savannah Electric and Power Company (the "Company") is a corporation
organized under the laws of the State of Georgia on August 5, 1921. The Company
has its principal office at 600 Bay Street, East, Savannah, Georgia 31401,
telephone (912) 644-7171. The Company is a wholly owned subsidiary of The
Southern Company.
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
2,000 square mile service area comprising the City of Savannah, Georgia and
portions of the surrounding five-county area.
SELECTED FINANCIAL INFORMATION
The following selected financial data for the years ended December 31, 1998
through December 31, 2002 has been derived from the Company's audited financial
statements and related notes, incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. The following selected financial
data for the nine months ended September 30, 2003 has been derived from the
Company's unaudited financial statements and related notes, incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. The
information set forth below is qualified in its entirety by reference to and,
therefore, should be read together with management's discussion and analysis of
results of operations and financial condition, the financial statements and
related notes and other financial information incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus.
Nine Months
Year Ended December 31, Ended
-------------------------------------------- September 30,
1998 1999 2000 2001 2002 2003(1)
-------- -------- -------- -------- -------- -------------
(Thousands, except ratios)
Operating Revenues........... $254,455 $251,594 $295,718 $283,852 $299,552 $248,158
Earnings Before Income Taxes. 40,811 34,891 36,543 33,772 35,313 38,821
Net Income after Dividends on
Preferred Stock............ 23,644 23,083 22,969 22,063 22,880 24,183
Ratio of Earnings to Fixed
Charges(2)................. 4.17 3.23 3.24 3.12 3.36 4.87
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Capitalization
As of September 30, 2003
------------------------------
Actual As Adjusted(3)
-------- ------------------
(Thousands, except percentages)
Common Stock Equity......................... $191,877 $191,877 46.3%
Shares Subject to Mandatory Redemption...... 40,000 -- --
Senior Notes................................ 100,000 160,000 38.6
Other Long-Term Debt........................ 67,612 62,612 15.1
-------- -------- -----
Total, excluding amounts due within one year $399,489 $414,489 100.0%
======== ======== =====
- --------
(1) Due to seasonal variations in the demand for energy, operating results for
the nine months ended September 30, 2003 do not necessarily indicate
operating results for the entire year.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on shares subject to mandatory redemption" and
the debt portion of allowance for funds during construction and (ii) "Fixed
Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on shares subject to mandatory redemption" and the debt
portion of allowance for funds used during construction.
(3) Reflects (i) the redemption in December 2003 of $5,000,000 of a variable
rate revolving credit note which matures September 6, 2005; (ii) the
proposed issuance in December 2003 of $35,000,000 aggregate principal
amount of Series F Senior Notes due December 15, 2028 (the "Series F Senior
Notes"); (iii) the proposed redemption in January 2004 by Savannah Electric
Capital Trust I of $40,000,000 aggregate liquidation amount of its 6.85%
Trust Preferred Securities; and (iv) the issuance of the Series E Senior
Notes offered hereby.
USE OF PROCEEDS
A portion of the proceeds from the sale of the Series E Senior Notes will be
applied by the Company to redeem in January 2004 $5,000,000 outstanding
liquidation amount of Savannah Electric Capital Trust I 6.85% Trust Preferred
Securities. The redemption is subject to the Company's closing the sale of the
Series F Senior Notes. The balance of the proceeds will be used by the Company
to repay a portion of its outstanding short-term indebtedness, which aggregated
approximately $10,000,000 as of December 10, 2003, and for other general
corporate purposes.
DESCRIPTION OF THE SERIES E SENIOR NOTES
Set forth below is a description of the specific terms of the Series E 4.90%
Senior Notes due December 15, 2013 (the "Series E Senior Notes"). This
description supplements, and should be read together with, the description of
the general terms and provisions of the senior notes set forth in the
accompanying Prospectus under the caption "Description of the Senior Notes."
The following description does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the description in the
accompanying Prospectus and the Senior Note Indenture dated as of March 1, 1998
(the "Senior Note Indenture") between the Company and The Bank of New York, as
trustee (the "Senior Note Indenture Trustee").
General
The Series E Senior Notes will be issued as a series of senior notes under
the Senior Note Indenture. The Series E Senior Notes will initially be issued
in the aggregate principal amount of $25,000,000. The Company may, without the
consent of the holders of the Series E Senior Notes, issue additional notes
having the same ranking and the same interest rate, maturity and other terms as
the Series E Senior Notes, except for the public offering price and issue date.
Any additional notes having such similar terms, together with the Series E
Senior Notes, will constitute a single series of senior notes under the Senior
Note Indenture.
The entire principal amount of the Series E Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on December 15, 2013. The Series E Senior Notes are not subject
S-4
to any sinking fund provision. The Series E Senior Notes are available for
purchase in denominations of $1,000 and any integral multiple of $1,000.
Interest
Each Series E Senior Note shall bear interest at the rate of 4.90% per annum
from the date of original issuance, payable semiannually in arrears on June 15
and December 15 of each year to the person in whose name such Series E Senior
Note is registered at the close of business on the fifteenth calendar day prior
to such payment date (whether or not a Business Day). The initial interest
payment date is June 15, 2004. The amount of interest payable will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that any
date on which interest is payable on the Series E Senior Notes is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on such date. "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 Senior Note Indenture Trustee's corporate trust office is closed for
business.
Ranking
The Series E Senior Notes will be direct, unsecured and unsubordinated
obligations of the Company ranking equally with all other unsecured and
unsubordinated obligations of the Company. The Series E Senior Notes will be
effectively subordinated to all secured debt of the Company, including its
first mortgage bonds, aggregating approximately $26,000,000 outstanding at
September 30, 2003. The Senior Note Indenture contains no restrictions on the
amount of additional indebtedness that may be incurred by the Company.
Redemption
The Series E Senior Notes will not be redeemable at the option of the
Company prior to maturity.
Book-Entry Only Issuance--The Depository Trust Company
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Series E Senior Notes. The Series E Senior Notes will be
issued only as fully-registered securities 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 Series E Senior Notes certificates
will be issued, representing in the aggregate the total principal amount of
Series E Senior Notes, and will be deposited with the Senior Note Indenture
Trustee on behalf of 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. 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
S-5
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 Direct Participants,
"Participants"). The DTC rules applicable to its Participants are on file with
the Securities and Exchange Commission (the "Commission"). More information
about DTC can be found at www. dtcc.com.
Purchases of Series E Senior Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series E
Senior Notes on DTC's records. The ownership interest of each actual purchaser
of Series E Senior Notes ("Beneficial Owner") is in turn to be recorded on the
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 Participants through which the
Beneficial Owners purchased Series E Senior Notes. Transfers of ownership
interests in the Series E Senior Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Series E Senior Notes, except in the event that use of the book-entry system
for the Series E Senior Notes is discontinued.
To facilitate subsequent transfers, all Series E Senior Notes 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 Series E Senior Notes with DTC and their
registration in the name Cede & Co. or such other DTC nominee do not effect any
changes in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Series E Senior Notes. DTC's records reflect only the identity of
the Direct Participants to whose accounts such Series E Senior Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to the Series E Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. (or such other
DTC nominee) will itself consent or vote with respect to Series E Senior Notes.
Under its usual procedures, DTC would mail an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
(or such other DTC nominee's) consenting or voting rights to those Direct
Participants to whose accounts the Series E Senior Notes are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Payments on the Series E Senior Notes 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 Company or the Senior Note
Indenture Trustee on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers registered in "street name," and will be the responsibility of such
Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment to Cede
& Co. (or such other nominee as may be requested by an authorized
representative of DTC) is the responsibility of the Company, 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
Participants.
S-6
Except as provided herein, a Beneficial Owner of a global Series E Senior
Note will not be entitled to receive physical delivery of Series E Senior
Notes. Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series E Senior Notes. 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 Series E Senior Note.
DTC may discontinue providing its services as securities depositary with
respect to the Series E Senior Notes at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor securities
depositary is not obtained, Series E Senior Notes 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 Series E Senior Notes. In that event,
certificates for the Series E Senior Notes 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 believes to be reliable, but
the Company takes no responsibility for the accuracy thereof. The Company has
no responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
S-7
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to Banc One Capital
Markets, Inc. (the "Underwriter") and the Underwriter has agreed to purchase
the entire principal amount of Series E Senior Notes.
The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the Series E Senior Notes are subject to,
among other things, the approval of certain legal matters by its counsel and
certain other conditions. The Underwriter is obligated to take and pay for all
the Series E Senior Notes if any are taken.
The Underwriter proposes initially to offer all or part of the Series E
Senior Notes to the public at the public offering price set forth on the cover
page of this Prospectus Supplement and may offer the Series E Senior Notes to
certain securities dealers at such price less a concession not in excess of
0.400% of the principal amount of the Series E Senior Notes. The Underwriter
may allow, and such dealers may reallow, a discount not in excess of 0.250% of
the principal amount of the Series E Senior Notes to certain brokers and
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has agreed, during the period of 15 days from the date of the
Underwriting Agreement, not to sell, offer to sell, grant any option for the
sale of or otherwise dispose of any Series E Senior Notes, any security
convertible into or exchangeable into or exercisable for Series E Senior Notes
or any debt securities substantially similar to the Series E Senior Notes
(except for the Series E Senior Notes issued pursuant to the Underwriting
Agreement and the Series F Senior Notes), without the prior written consent of
the Underwriter.
The underwriting discounts and commissions to be paid to the Underwriter by
the Company with this offering will be 0.650% per Series E Senior Note, for a
total of $162,500. In addition, the Company estimates that it will incur other
offering expenses of approximately $215,000.
In order to facilitate the offering of the Series E Senior Notes, the
Underwriter or its affiliates may engage in transactions that stabilize,
maintain or otherwise affect the price of the Series E Senior Notes.
Specifically, the Underwriter or its affiliates may over-allot in connection
with this offering, creating short positions in the Series E Senior Notes for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Series E Senior Notes, the Underwriter or its affiliates may bid
for and purchase Series E Senior Notes in the open market. Finally, the
Underwriter or its affiliates may reclaim selling concessions allowed to a
dealer for distributing Series E Senior Notes in this offering, if the
Underwriter or its affiliates repurchase previously distributed Series E Senior
Notes in transactions that cover short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
price of the Series E Senior Notes above independent market levels. The
Underwriter or its affiliates is 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.
Neither the Company nor the Underwriter 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 Series E Senior Notes. In
addition, neither the Company nor the Underwriter makes any representation that
such transactions will be engaged in or that such transactions, once commenced,
will not be discontinued without notice.
It is expected that the delivery of the Series E Senior Notes will be made
on the date specified on the cover page of this Prospectus Supplement which
will be the fifth Business Day following the date of this Prospectus
S-8
Supplement. Under Rule 15c6-1 of the Commission under the 1934 Act, trades in
the secondary market generally are required to settle in three Business Days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
the purchasers who wish to trade the Series E Senior Notes on the date of this
Prospectus Supplement or the next succeeding Business Day will be required to
specify an alternative settlement cycle at the time of any such trade to
prevent failed settlement and should consult their own advisor.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter and its affiliates engage in transactions with and perform
services for the Company in the ordinary course of business and have engaged,
and may in the future engage, in commercial banking and/or investment banking
transactions with the Company or its affiliates.
The Series E Senior Notes will not have an established trading market when
issued. There can be no assurance of a secondary market for the Series E Senior
Notes or the continued liquidity of such market if one develops. It is not
anticipated that the Series E Senior Notes will be listed on any securities
exchange.
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PROSPECTUS
$95,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Savannah Electric and Power Company
Senior Notes
Junior Subordinated Notes
-----------------
Savannah Electric Capital Trust II
Trust Preferred Securities
Fully and unconditionally guaranteed, as set forth in this prospectus, by
Savannah Electric and Power Company
a subsidiary of The Southern Company
-----------------
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest.
See "Risk Factors" on page 2 for information on certain risks related to the
purchase of securities offered by this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
April 10, 2003
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement filed with the
Securities and Exchange Commission (the "Commission") using a "shelf"
registration process under the Securities Act of 1933, as amended (the "1933
Act"). Under the shelf process, Savannah Electric and Power Company (the
"Company") may sell, in one or more transactions,
. senior notes (the "Senior Notes")
. junior subordinated notes (the "Junior Subordinated Notes")
and Savannah Electric Capital Trust II (the "Trust") may sell
. trust preferred securities or capital securities (the "Preferred
Securities")
in one or more offerings up to a total dollar amount of $95,000,000. This
Prospectus provides a general description of those securities. Each time the
Company sells securities, the Company will provide a prospectus supplement that
will contain specific information about the terms of that offering ("Prospectus
Supplement"). The Prospectus Supplement may also add, update or change
information contained in this Prospectus. You should read this Prospectus and
the applicable Prospectus Supplement together with additional information under
the heading "Available Information."
RISK FACTORS
Investing in the Company's securities involves risk. Please see the risk
factors described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002, which is incorporated by reference in this
Prospectus. Before making an investment decision, you should carefully consider
these risks as well as other information contained or incorporated by reference
in this Prospectus. The risks and uncertainties described are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
the Company or that the Company currently deems immaterial may also impair its
business operations, its financial results and the value of its securities.
AVAILABLE INFORMATION
The Company and the Trust have filed with the Commission a combined
registration statement on Form S-3 (the "Registration Statement," which term
encompasses any amendments of the Registration Statement and exhibits to the
Registration Statement) under the 1933 Act. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement, to which reference is made.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance with the
1934 Act files reports and other information with the Commission. Such reports
and other information can be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants including the Company that file electronically at
http://www.sec.gov. In addition, reports and other material concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
No separate financial statements of the Trust are included in this
Prospectus. The Company considers that such statements would not be material to
holders of the Preferred Securities because the Trust has no independent
operations and exists for the sole purpose of investing the proceeds of the
sale of the Trust Securities (as defined below) in Junior Subordinated Notes.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2002 has been filed with the Commission pursuant to the 1934 Act and is
incorporated by reference in this Prospectus and made a part of this Prospectus.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and made a part of this Prospectus
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated by reference in this Prospectus
(other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference in this Prospectus). Such requests
should be directed to Kirby R. Willis, Vice President, Treasurer and Chief
Financial Officer, Savannah Electric and Power Company, 600 Bay Street, East,
Savannah, Georgia 31401, telephone: (912) 644-7171.
SAVANNAH ELECTRIC AND POWER COMPANY
The Company was incorporated under the laws of the State of Georgia on
August 5, 1921. The principal executive offices of the Company are located at
600 Bay Street, East, Savannah, Georgia 31401, and the telephone number is
(912) 644-7171.
The Company is a wholly owned subsidiary of The Southern Company
("Southern"), a holding company registered under the Public Utility Holding
Company Act of 1935, as amended. The Company is engaged in the generation and
purchase of electricity and the distribution and sale of electricity at retail
and, as a member of the Southern electric system power pool, the transmission
and sale of wholesale energy. The Company has approximately 137,000 customers
in a five-county area in Eastern Georgia containing approximately 2,000 square
miles, including the City of Savannah and its environs, most of Chatham County,
most of Effingham County and portions of Bryan, Bulloch and Screven Counties.
The Company's service area has a population of approximately 320,000 with
approximately 93% located in metropolitan Savannah. The City of Savannah is one
of the largest general cargo ports, and a leading foreign trade port, on the
Southeast U.S. Atlantic Coast.
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SELECTED INFORMATION
The following material, which is presented in this Prospectus solely to
furnish limited introductory information regarding the Company, has been
selected from, or is based upon, the detailed information and financial
statements appearing in the documents incorporated by reference in this
Prospectus or elsewhere in this Prospectus, is qualified in its entirety by
reference to those documents and, therefore, should be read together with those
documents.
Savannah Electric and Power Company
Business........................... Generation, transmission, distribution and sale of
electric energy
Service Area....................... Approximately 2,000 square miles comprising the
City of Savannah, Georgia and portions of the
surrounding five-county area
Service Area Population
(2000 Census).................... Approximately 320,000
Customers at December 31, 2002..... 137,218
Generating Capacity at December 31,
2002 (kilowatts)................. 787,631
Sources of Generation during 2002
(kilowatt-hours)................. Coal (91%), Gas (8%) and Oil (1%)
Certain Ratios
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
Year Ended December 31,
------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges(1)..................... 4.17 3.23 3.24 3.12 3.36
Ratio of Earnings to Fixed Charges Plus Preferred Dividend
Requirements (Pre-Income Tax Basis)(2).................. 3.32 3.23 3.24 3.12 3.36
- --------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on preferred securities of subsidiary" and the
debt portion of allowance for funds used during construction, and
(ii) "Fixed Charges" consist of "Interest expense, net of amounts
capitalized," "Distributions on preferred securities of subsidiary" and 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.
4
THE TRUST
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 March
23, 2001. The Trust's business is defined in a trust agreement, executed by the
Company, as Depositor, and the Delaware Trustee of the Trust. This trust
agreement will be amended and restated in its entirety substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part (the "Trust Agreement"). The Trust Agreement will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act"). The Company will own all of the common securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") of the Trust. The Trust Securities represent undivided beneficial
interests in the assets of the Trust. 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 a related series of Junior Subordinated Notes, and (iii)
engaging in only those other activities necessary, appropriate, convenient or
incidental to these purposes. The payment of periodic cash distributions on the
Preferred Securities and payments on liquidation and redemption with respect to
the Preferred Securities, in each case to the extent the Trust has funds
legally and immediately available for these purposes, will be guaranteed by the
Company (the "Guarantee") to the extent set forth under "Description of the
Guarantee."
The Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Company as the holder of the Common Securities: two
officers of the Company as Administrative Trustees; The Bank of New York as
Property Trustee; and The Bank of New York (Delaware) as Delaware Trustee
(collectively, the "Securities Trustees"). The Property Trustee of the Trust
will act as the indenture trustee with respect to the Trust for purposes of
compliance with the provisions of the 1939 Act.
The principal place of business of the Trust shall be c/o the Company, 600
Bay Street, East, Savannah, Georgia 31401, telephone (912) 644-7171, Attn:
Treasurer.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities for further information concerning the Trust.
ACCOUNTING TREATMENT OF THE TRUST
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 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.
USE OF PROCEEDS
The Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described
in an applicable Prospectus Supplement, the net proceeds received by the
Company from such investment and any proceeds received from the sale of its
Senior Notes or other sales of its Junior Subordinated Notes will be used in
connection with its ongoing construction program, to pay scheduled maturities
and/or refundings of its securities, to repay short-term indebtedness to the
extent outstanding and for other general corporate purposes.
5
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Senior Note Indenture
dated as of March 1, 1998 between the Company and The Bank of New York, as
trustee (the "Senior Note Indenture Trustee"), as to be supplemented by a
supplemental indenture to the Senior Note Indenture establishing the Senior
Notes of each series (the Senior Note Indenture, as so supplemented, is
referred to as the "Senior Note Indenture"), the forms of which are filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The terms of the Senior Notes will include those stated in the Senior Note
Indenture and those made a part of the Senior Note Indenture by reference to
the 1939 Act. Certain capitalized terms used in this Prospectus and not defined
in this Prospectus are defined in the Senior Note Indenture.
General
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank equally with all other unsecured and
unsubordinated debt of the Company. The Senior Notes will be effectively
subordinated to all secured debt of the Company, including its first mortgage
bonds, aggregating approximately $36,000,000 outstanding at December 31, 2002.
Effective February 19, 2003, a second lien of $14,000,000 was released. The
Senior Note Indenture does not limit the aggregate principal amount of Senior
Notes that may be issued under the Senior Note Indenture and provides that
Senior Notes may be issued from time to time in one or more series pursuant to
an indenture supplemental to the Senior Note Indenture. The Senior Note
Indenture gives the Company the ability to reopen a previous issue of Senior
Notes and issue additional Senior Notes of such series, unless otherwise
provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
by such Prospectus Supplement: (i) the title of such Senior Notes; (ii) any
limit on the aggregate principal amount of such Senior Notes; (iii) the date or
dates on which the principal of such Senior Notes is payable; (iv) the rate or
rates at which such Senior Notes shall bear interest, if any, or any method by
which such rate or rates will be determined, the date or dates from which such
interest will accrue, the interest payment dates on which such interest shall
be payable, and the regular record date for the interest payable on any
interest payment date; (v) the place or places where the principal of (and
premium, if any) and interest, if any, on such Senior Notes shall be payable;
(vi) the period or periods within which, the price or prices at which and the
terms and conditions on which such Senior Notes may be redeemed, in whole or in
part, at the option of the Company or at the option of the holder prior to
their maturity; (vii) the obligation, if any, of the Company to redeem or
purchase such Senior Notes; (viii) the denominations in which such Senior Notes
shall be issuable; (ix) if other than the principal amount of the Senior Notes,
the portion of the principal amount of such Senior Notes which shall be payable
upon declaration of acceleration of the maturity of such Senior Notes; (x) any
deletions from, modifications of or additions to the Events of Default or
covenants of the Company as provided in the Senior Note Indenture pertaining to
such Senior Notes; (xi) whether such Senior Notes shall be issued in whole or
in part in the form of a Global Security; and (xii) any other terms of such
Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders of
Senior Notes protection in the event of a highly leveraged transaction
involving the Company.
Events of Default
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an interest payment date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier redemption;
or
6
(c) failure for three Business Days to deposit any sinking fund payment
when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty of the
Company in the Senior Note Indenture (other than a covenant or warranty
which has expressly been included in the Senior Note Indenture solely for
the benefit of one or more series of Senior Notes other than such series)
for 90 days after written notice to the Company from the Senior Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Senior Notes of such series; or
(e) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount of
the Senior Notes due and payable immediately by notice in writing to the
Company (and to the Senior Note Indenture Trustee if given by the holders), and
upon any such declaration such principal amount shall become immediately due
and payable. At any time after such a declaration of acceleration with respect
to the Senior Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Senior Note Indenture, the holders of not less than a majority in aggregate
outstanding principal amount of the Senior Notes of such series may rescind and
annul such declaration and its consequences if the default has been cured or
waived and the Company has paid or deposited with the Senior Note Indenture
Trustee a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration and all sums paid or advanced by
the Senior Note Indenture Trustee, including reasonable compensation and
expenses of the Senior Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended without the consent of the
holder of each outstanding Senior Note of such series affected.
Registration and Transfer
The Company shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
Payment and Paying Agent
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as the Company may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
to an interest payment as such address shall appear in the Security Register
with respect to the Senior Notes. Payment of interest on Senior Notes on any
interest payment date will be made to the person in whose name the Senior Notes
(or predecessor security) are registered at the close of business on the record
date for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Note Indenture Trustee will act as Paying Agent with respect to the
Senior Notes. The Company may at any time designate additional Paying
7
Agents or rescind the designation of any Paying Agents or approve a change in
the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Senior Notes will from that time forward look only to the Company for payment
of such principal and interest.
Modification
The Senior Note Indenture contains provisions permitting the Company and the
Senior Note Indenture Trustee, with the consent of the holders of not less than
a majority in principal amount of the outstanding Senior Notes of each series
that is affected, to modify the Senior Note Indenture or the rights of the
holders of the Senior Notes of such series; provided, that no such modification
may, without the consent of the holder of each outstanding Senior Note that is
affected, (i) change the stated maturity of the principal of, or any
installment of principal of or interest on, any Senior Note, or reduce the
principal amount thereof or the rate of interest on any Senior Note or any
premium payable upon the redemption of any Senior Note, or change the method of
calculating the rate of interest on any Senior Note, or impair the right to
institute suit for the enforcement of any such payment on or after the stated
maturity of any Senior Note (or, in the case of redemption, on or after the
redemption date), or (ii) reduce the percentage of principal amount of the
outstanding Senior Notes of any series, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of the Senior
Note Indenture or certain defaults under the Senior Note Indenture and their
consequences) provided for in the Senior Note Indenture, or (iii) modify any of
the provisions of the Senior Note Indenture relating to supplemental
indentures, waiver of past defaults, or waiver of certain covenants, except to
increase any such percentage or to provide that certain other provisions of the
Senior Note Indenture cannot be modified or waived without the consent of the
holder of each outstanding Senior Note that is affected.
In addition, the Company and the Senior Note Indenture Trustee may execute,
without the consent of any holders of Senior Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
Senior Notes.
Consolidation, Merger and Sale
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state in the United States or the District of Columbia and such other
corporation or person expressly assumes, by supplemental indenture executed and
delivered to the Senior Note Indenture Trustee, the payment of the principal of
(and premium, if any) and interest on all the Senior Notes and the performance
of every covenant of the Senior Note Indenture on the part of the Company to be
performed or observed; (2) immediately after giving effect to such
transactions, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing; and (3) the Company has delivered to the Senior Note Indenture
Trustee an officers' certificate and an opinion of counsel, each stating that
such transaction complies with the provisions of the Senior Note Indenture
governing consolidation, merger, conveyance, transfer or lease and that all
conditions precedent to the transaction have been complied with.
Information Concerning the Senior Note Indenture Trustee
The Senior Note Indenture Trustee, prior to an Event of Default with respect
to Senior Notes of any series, undertakes to perform, with respect to Senior
Notes of such series, only such duties as are specifically set forth in the
Senior Note Indenture and, in case an Event of Default with respect to Senior
Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as
8
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Senior Note Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Senior Note
Indenture at the request of any holder of Senior Notes of any series, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred by the Senior Note Indenture Trustee. The
Senior Note Indenture Trustee is not required to expend or risk its own funds
or otherwise incur any financial liability in the performance of its duties if
the Senior Note Indenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
The Bank of New York, the Senior Note Indenture Trustee, also serves as
Subordinated Note Indenture Trustee, as Property Trustee and as Guarantee
Trustee. The Company and/or certain of its affiliates maintain deposit accounts
and banking relationships with The Bank of New York. The Bank of New York also
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
Miscellaneous
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any
such assignment, the Company will remain primarily liable for all such
obligations. Subject to the foregoing, the Senior Note Indenture will be
binding upon and inure to the benefit of the parties to the Senior Note
Indenture and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture dated as of December 1, 1998 between the Company
and The Bank of New York, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture to the
Subordinated Note Indenture establishing the Junior Subordinated Notes of each
series (the Subordinated Note Indenture, as so supplemented, is referred to as
the "Subordinated Note Indenture"), the forms of which are filed as exhibits to
the Registration Statement of which this Prospectus forms a part. The terms of
the Junior Subordinated Notes will include those stated in the Subordinated
Note Indenture and those made a part of the Subordinated Note Indenture by
reference to the 1939 Act. Certain capitalized terms used in this Prospectus
and not defined in this Prospectus are defined in the Subordinated Note
Indenture.
General
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued under the Subordinated Note
Indenture and provides that Junior Subordinated Notes may be issued from time
to time in one or more series pursuant to an indenture supplemental to the
Subordinated Note Indenture. The Subordinated Note Indenture gives the Company
the ability to reopen a previous issue of Junior Subordinated Notes and issue
additional Junior Subordinated Notes of such series, unless otherwise provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered by such Prospectus Supplement: (i) the title of
9
such Junior Subordinated Notes; (ii) any limit on the aggregate principal
amount of such Junior Subordinated Notes; (iii) the date or dates on which the
principal of such Junior Subordinated Notes is payable; (iv) the rate or rates
at which such Junior Subordinated Notes shall bear interest, if any, or any
method by which such rate or rates will be determined, the date or dates from
which such interest will accrue, the interest payment dates on which such
interest shall be payable, and the regular record date for the interest payable
on any interest payment date; (v) the place or places where the principal of
(and premium, if any) and interest, if any, on such Junior Subordinated Notes
shall be payable; (vi) the period or periods within which, the price or prices
at which and the terms and conditions on which such Junior Subordinated Notes
may be redeemed, in whole or in part, at the option of the Company or at the
option of the holder prior to their maturity; (vii) the obligation, if any, of
the Company to redeem or purchase such Junior Subordinated Notes; (viii) the
denominations in which such Junior Subordinated Notes shall be issuable; (ix)
if other than the principal amount of the Junior Subordinated Notes, the
portion of the principal amount of such Junior Subordinated Notes which shall
be payable upon declaration of acceleration of the maturity of such Junior
Subordinated Notes; (x) any deletions from, modifications of or additions to
the Events of Default or covenants of the Company as provided in the
Subordinated Note Indenture pertaining to such Junior Subordinated Notes;
(xi) whether such Junior Subordinated Notes shall be issued in whole or in part
in the form of a Global Security; (xii) the right, if any, of the Company to
extend the interest payment periods of such Junior Subordinated Notes; and
(xiii) any other terms of such Junior Subordinated Notes. The terms of any
series of Junior Subordinated Notes issued to the Trust will correspond to
those of the Preferred Securities of the Trust as described in the Prospectus
Supplement relating to the Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving the Company.
Subordination
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of the Company. No
payment of principal of (including redemption payments, if any), or premium, if
any, or interest on (including Additional Interest (as defined below)) the
Junior Subordinated Notes may be made if (a) any Senior Indebtedness is not
paid when due and any applicable grace period with respect to such default has
ended with such default not being cured or waived or otherwise ceasing to
exist, or (b) the maturity of any Senior Indebtedness has been accelerated
because of a default, or (c) notice has been given of the exercise of an option
to require repayment, mandatory payment or prepayment or otherwise. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities, or any bankruptcy,
insolvency or similar proceedings of the Company, the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness before the holders of
the Junior Subordinated Notes are entitled to receive or retain any payment or
distribution. Subject to the prior payment of all Senior Indebtedness, the
rights of the holders of the Junior Subordinated Notes will be subrogated to
the rights of the holders of Senior Indebtedness to receive payments and
distributions applicable to such Senior Indebtedness until all amounts owing on
the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment due in respect of indebtedness of the Company, whether outstanding at
the date of execution of the Subordinated Note Indenture or incurred, created
or assumed after the execution of the Subordinated Note Indenture, (a) in
respect of money borrowed (including any financial derivative, hedging or
futures contract or similar instrument) and (b) evidenced by securities,
debentures, bonds, notes or other similar instruments issued by the Company
that, by their terms, are senior or senior subordinated debt securities
including, without limitation, all obligations under its indentures with
various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type
referred to in
10
clauses (i) through (iv) above of other persons the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or that ranks equally
with the Junior Subordinated Notes and (2) any unsecured indebtedness between
or among the Company or its affiliates. Such Senior Indebtedness shall continue
to be Senior Indebtedness and be entitled to the benefits of the subordination
provisions contained in the Subordinated Note Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of December 31, 2002,
Senior Indebtedness of the Company aggregated approximately $192,000,000.
Additional Interest
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is the Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest on such interest due from such interest payment
date to the date of payment, compounded quarterly, on each interest payment
date.
Certain Covenants
The Company covenants in the Subordinated Note Indenture, for the benefit of
the holders of each series of Junior Subordinated Notes, that, (i) if at such
time the Company shall have given notice of its election to extend an interest
payment period for such series of Junior Subordinated Notes and such extension
shall be continuing, (ii) if at such time the Company shall be in default with
respect to its payment or other obligations under the Guarantee with respect to
the Trust Securities, if any, related to such series of Junior Subordinated
Notes, or (iii) if at such time an Event of Default under the Subordinated Note
Indenture with respect to such series of Junior Subordinated Notes shall have
occurred and be continuing, (a) the Company shall not declare or pay any
dividend or make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, and (b) 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 equally with or junior to the Junior Subordinated Notes. None of the
foregoing, however, shall restrict (i) any of the actions described in the
preceding sentence resulting from any reclassifications of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, or (ii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities remain outstanding, the Company covenants (i) to directly or
indirectly maintain 100% ownership of the Common Securities; provided, however,
that any permitted successor of the Company under the Subordinated Note
Indenture may succeed to the Company's ownership of such Common Securities, and
(ii) to use its reasonable efforts to cause the Trust (a) to remain a statutory
trust, except in connection with the distribution of Junior Subordinated Notes
to the holders of Trust Securities in liquidation of the Trust, the redemption
of all of the Trust Securities, or certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
11
Events of Default
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated Notes
of such series, including any Additional Interest (as defined in clause (ii)
of the definition of Additional Interest in the Subordinated Note Indenture)
in respect of the Junior Subordinated Notes, when due on an interest payment
date other than at maturity or upon earlier redemption; provided, however,
that a valid extension of the interest payment period by the Company shall
not constitute a default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in clause
(i) of the definition of Additional Interest in the Subordinated Note
Indenture); or
(c) failure to pay principal or premium, if any, or interest, including
Additional Interest (as defined in clause (ii) of the definition of
Additional Interest in the Subordinated Note Indenture), on the Junior
Subordinated Notes of such series when due at maturity or upon earlier
redemption; or
(d) failure for three Business Days to deposit any sinking fund payment
when due by the terms of a Junior Subordinated Note of such series; or
(e) failure to observe or perform any other covenant or warranty of the
Company in the Subordinated Note Indenture (other than a covenant or
warranty which has expressly been included in the Subordinated Note
Indenture solely for the benefit of one or more series of Junior
Subordinated Notes other than such series) for 90 days after written notice
to the Company from the Subordinated Note Indenture Trustee or the holders
of at least 25% in principal amount of the outstanding Junior Subordinated
Notes of such series; or
(f) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount of the
Junior Subordinated Notes due and payable immediately by notice in writing to
the Company (and to the Subordinated Note Indenture Trustee if given by the
holders), and upon any such declaration such principal amount shall become
immediately due and payable. At any time after such a declaration of
acceleration with respect to the Junior Subordinated Notes of any series had
been made and before a judgment or decree for payment of the money due has been
obtained as provided in Article Five of the Subordinated Note Indenture, the
holders of not less than a majority in aggregate outstanding principal amount
of the Junior Subordinated Notes of such series may rescind and annul such
declaration and its consequences if the default has been cured or waived and
the Company has paid or deposited with the Subordinated Note Indenture Trustee
a sum sufficient to pay all matured installments of interest (including any
Additional Interest) and principal due otherwise than by acceleration and all
sums paid or advanced by the Subordinated Note Indenture Trustee, including
reasonable compensation and expenses of the Subordinated Note Indenture Trustee.
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 Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default
12
in respect of a covenant or provision which under Article Nine of the
Subordinated Note Indenture cannot be modified or amended without the consent
of the holder of each outstanding Junior Subordinated Note of such series
affected.
Registration and Transfer
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
Payment and Paying Agent
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that, at the
option of the Company, payment of any interest may be made by wire transfer or
by check mailed to the address of the person entitled to an interest payment as
such address shall appear in the Security Register with respect to the Junior
Subordinated Notes. Payment of interest on Junior Subordinated Notes on any
interest payment date will be made to the person in whose name the Junior
Subordinated Notes (or predecessor security) are registered at the close of
business on the record date for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to
the Junior Subordinated Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the Company, and the holder of
such Junior Subordinated Notes will from that time forward look only to the
Company for payment of such principal and interest.
Modification
The Subordinated Note Indenture contains provisions permitting the Company
and the Subordinated Note Indenture Trustee, with the consent of the holders of
not less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series that is affected, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Notes of
such series; provided, that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Note that is affected, (i)
change the stated maturity of the principal of, or any installment of principal
of or interest on, any Junior Subordinated Note, or reduce the principal amount
of any Junior Subordinated Note or the rate of interest (including Additional
Interest) on any Junior Subordinated Note or any premium payable upon the
redemption thereof, or change the method of calculating the rate of interest on
any Junior Subordinated Note, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity of any Junior
Subordinated Note (or, in the case of redemption, on or after the redemption
date), or (ii) reduce the percentage of principal amount of the outstanding
Junior Subordinated Notes of any series, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of the
Subordinated Note Indenture or certain defaults under the Subordinated Note
Indenture and their consequences) provided for in the Subordinated Note
Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note that is affected thereby, or (iv) modify the
provisions of the Subordinated Note Indenture with respect to the subordination
of the Junior Subordinated Notes in a manner adverse to such holder.
13
In addition, the Company and the Subordinated Note Indenture Trustee may
execute, without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of Junior Subordinated Notes.
Consolidation, Merger and Sale
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state of the United States or the District of Columbia and such other
corporation or person expressly assumes, by supplemental indenture executed and
delivered to the Subordinated Note Indenture Trustee, the payment of the
principal of (and premium, if any) and interest (including Additional Interest)
on all the Junior Subordinated Notes and the performance of every covenant of
the Subordinated Note Indenture on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transactions, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and (3) the
Company has delivered to the Subordinated Note Indenture Trustee an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the provisions of the Subordinated Note Indenture governing
consolidation, merger, conveyance, transfer or lease and that all conditions
precedent to the transaction have been complied with.
Information Concerning the Subordinated Note Indenture Trustee
The Subordinated Note Indenture Trustee, prior to an Event of Default with
respect to Junior Subordinated Notes of any series, undertakes to perform, with
respect to Junior Subordinated Notes of such series, only such duties as are
specifically set forth in the Subordinated Note Indenture and, in case an Event
of Default with respect to Junior Subordinated Notes of any series has occurred
and is continuing, shall exercise, with respect to Junior Subordinated Notes of
such series, the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the
Subordinated Note Indenture Trustee is under no obligation to exercise any of
the powers vested in it by the Subordinated Note Indenture at the request of
any holder of Junior Subordinated Notes of any series, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred by the Subordinated Note Indenture Trustee. The
Subordinated Note Indenture Trustee is not required to expend or risk its own
funds or otherwise incur any financial liability in the performance of its
duties if the Subordinated Note Indenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
The Bank of New York, the Subordinated Note Indenture Trustee, also serves
as Senior Note Indenture Trustee, as Property Trustee and as Guarantee Trustee.
The Company and/or certain of its affiliates maintain deposit accounts and
banking relationships with The Bank of New York. The Bank of New York also
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State
of New York.
Miscellaneous
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any
such assignment, the Company will remain primarily liable for all such
obligations. Subject to the foregoing, the Subordinated Note Indenture will be
binding upon and inure to the benefit of the parties to the Subordinated Note
Indenture and their respective successors and assigns.
14
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating to the Preferred Securities.
The Trust Agreement will authorize the Administrative Trustees, on behalf of
the Trust, to issue the Preferred Securities. The Preferred Securities will
have such terms, including distributions, redemption, voting, liquidation
rights and such other preferred, deferral or other special rights or such
restrictions as shall be set forth in the Trust Agreement. Reference is made to
the Prospectus Supplement relating to the Preferred Securities for specific
terms, including (i) the distinctive designation of the Preferred Securities;
(ii) the number of Preferred Securities issued; (iii) the annual distribution
rate (or method of determining such rate) for Preferred Securities and the date
or dates on which such distributions shall be payable; (iv) whether
distributions on the Preferred Securities shall be cumulative and, in the case
of Preferred Securities having cumulative distribution rights, the date or
dates, or method of determining the date or dates, from which distributions on
the Preferred Securities shall be cumulative; (v) the amount or amounts that
shall be paid out of the assets of the Trust to the holders of the Preferred
Securities upon voluntary or involuntary dissolution, winding-up or termination
of the Trust; (vi) the obligation, if any, of the Trust to purchase or redeem
the Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which the Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to
such obligation; (vii) the voting rights, if any, of the Preferred Securities
in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified action or amendments to the
Trust Agreement; (viii) the rights, if any, to defer distributions on the
Preferred Securities by extending the interest payment period on the related
Junior Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of the Preferred Securities not
inconsistent with the Trust Agreement or applicable law. All Preferred
Securities offered by this Prospectus will be guaranteed by the Company to the
extent set forth under "Description of the Guarantee." Any material United
States federal income tax considerations applicable to an offering of Preferred
Securities will be described in the Prospectus Supplement relating to the
Preferred Securities.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities from time to time. The Guarantee will be qualified as an
indenture under the 1939 Act. The Bank of New York will act as indenture
trustee under the Guarantee (the "Guarantee Trustee") for purposes of the 1939
Act. The terms of the Guarantee will be those set forth in such Guarantee and
those made part of such Guarantee by the 1939 Act. The following summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Guarantee, the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and the 1939 Act. The Guarantee will be held by the
Guarantee Trustee for the benefit of holders of the Preferred Securities.
General
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth in the Guarantee, to pay in full, to the holders
of the Preferred Securities, the Guarantee Payments (as defined below), to the
extent not paid by, or on behalf of, the Trust, regardless of any defense,
right of set-off or counterclaim that the Company may have or assert against
any person. The following payments or distributions with respect to the
Preferred Securities to the extent not paid or made by, or on behalf of, the
Trust will be subject to the Guarantee (without duplication): (i) any accrued
and unpaid distributions required to be paid on the Preferred Securities but if
and only if and to the extent that the Trust has funds legally and immediately
available for these distributions, (ii) the redemption price, including all
accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), with respect to any Preferred Securities called for redemption by the
Trust, but if and only to the extent the Trust has funds legally and
immediately available to pay such Redemption Price, and (iii) upon a
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities or the redemption of all of the Preferred
15
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of
payment, to the extent the Trust has funds legally and immediately available
for such purpose, and (b) the amount of assets of the Trust remaining available
for distribution to holders of Preferred Securities in liquidation of the Trust
(the "Guarantee Payments"). The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of the Preferred Securities or by causing the Trust to
pay such amounts to such holders.
The Guarantee will be a guarantee of the Guarantee Payments with respect to
the Preferred Securities from the time of issuance of the Preferred Securities,
but will not apply to the payment of distributions and other payments on the
Preferred Securities when the Trust does not have sufficient funds legally and
immediately available to make such distributions or other payments. If the
Company does not make interest payments on the Junior Subordinated Notes held
by the Property Trustee, the Trust will not make distributions on its Preferred
Securities.
Subordination
The Company's obligations under the Guarantee to make the Guarantee Payments
will constitute an unsecured obligation of the Company and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made equal or subordinate by their terms, (ii) equal to the most
senior preferred or preference stock now issued by the Company or issued at a
later date by the Company and with any guarantee now entered into by the
Company or entered into at a later date by the Company in respect of any
preferred or preference securities of any affiliate of the Company, and (iii)
senior to all common stock of the Company. The terms of the Preferred
Securities will provide that each holder of Preferred Securities by acceptance
of Preferred Securities agrees to the subordination provisions and other terms
of the Guarantee. The Company has outstanding common stock that ranks junior to
the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
Amendments and Assignment
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the Preferred Securities (in which case no
consent will be required), the Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
Termination
The Guarantee will terminate and be of no further force and effect as to the
Preferred Securities upon full payment of the Redemption Price of all Preferred
Securities, upon distribution of Junior Subordinated Notes to the holders of
Preferred Securities, or upon full payment of the amounts payable upon
liquidation of the Trust. The Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid with respect to the Preferred
Securities or under the Guarantee.
16
Events of Default
An event of default under the Guarantee will occur upon the failure by the
Company to perform any of its payment obligations under such Guarantee. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee. Any holder of the Preferred Securities may institute a
legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity. The holders of a majority in liquidation
amount of Preferred Securities may, by vote, on behalf of the holders of all
the Preferred Securities, waive any past event of default and its consequences.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to the Guarantee and after the curing or waiving of all events of
default with respect to the Guarantee, undertakes to perform only such duties
as are specifically set forth in the Guarantee and, in case an event of default
has occurred, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Guarantee at the request of any holder of the
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred by the Guarantee Trustee.
The Bank of New York, the Guarantee Trustee, also serves as Property
Trustee, as Senior Note Indenture Trustee and as Subordinated Note Indenture
Trustee. The Company and/or certain of its affiliates maintain deposit accounts
and banking relationships with The Bank of New York. The Bank of New York
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
The Agreement as to Expenses and Liabilities
Pursuant to the Agreement as to Expenses and Liabilities to be entered into
by the Company under the Trust Agreement, the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Trust becomes
indebted or liable the full payment of any indebtedness, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to the
holders of the Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED NOTES AND
THE GUARANTEE
As long as payments of interest and other payments are made when due on the
series of Junior Subordinated Notes issued to the Trust, such payments will be
sufficient to cover distributions and payments due on the Trust Securities
primarily because (i) the aggregate principal amount of the series of Junior
Subordinated Notes will be equal to the sum of the aggregate stated liquidation
amount of the Trust Securities; (ii) the interest rate and interest and other
payment dates on the Junior Subordinated Notes will match the distribution rate
and distribution and other payment dates for the Preferred Securities; (iii)
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.
17
Payments of distributions (to the extent funds for such purpose are legally
and immediately available) and other payments due on the Preferred Securities
(to the extent funds for such purpose are legally and immediately available)
will be guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Junior Subordinated Notes, it is not expected that the Trust will have
sufficient funds to pay distributions on the Preferred Securities. The
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 Junior
Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement
provides a mechanism that allows the holders of the Preferred Securities to
appoint a substitute Property Trustee. Such holders may also direct the
Property Trustee to enforce its rights under the Junior Subordinated Notes,
including proceeding directly against the Company to enforce the Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the 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
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 Junior Subordinated Notes
having a principal amount equal to the aggregate stated liquidation amount of
the Preferred Securities of such holder on or after the due dates specified in
the Junior Subordinated Notes.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism that allows the holders of the Preferred Securities to
direct the Guarantee Trustee to enforce its rights under the Guarantee. 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 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 Junior Subordinated Notes are distributed in connection with
such action, the holders of the Preferred Securities will be entitled to
receive, out of assets legally available for distribution to holders, a
liquidation distribution in cash as described in the applicable Prospectus
Supplement. Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Junior Subordinated Notes,
would be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Indebtedness, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive payments
or distributions. Because the Company is guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Trust (other than
the Trust's obligations to holders of the Preferred Securities) pursuant to the
Agreement as to Expenses and Liabilities, the positions of a holder of
Preferred Securities and a holder of Junior Subordinated Notes relative to
other creditors and to stockholders of 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 Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated
Notes until such Senior Indebtedness has been paid in full or
18
any payment default of Senior Indebtedness has been cured or waived. Failure to
make required payments on the Junior Subordinated Notes would constitute an
Event of Default under the Subordinated Note Indenture with respect to the
Junior Subordinated Notes except that failure to make interest payments on the
Junior Subordinated Notes will not be an Event of Default during an extension
period as described in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the Senior Notes and the Junior Subordinated Notes and
the Trust may sell the Preferred Securities in one or more of the following
ways from time to time: (i) to underwriters for resale to the public or to
institutional investors; (ii) directly to institutional investors; or (iii)
through agents to the public or to institutional investors. The Prospectus
Supplement with respect to each series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will set forth the terms of the offering of such
Senior Notes, Junior Subordinated Notes or Preferred Securities, including the
name or names of any underwriters or agents, the purchase price of such Senior
Notes, Junior Subordinated Notes or Preferred Securities and the proceeds to
the Company or the Trust from such sale, any underwriting discounts or agency
fees and other items constituting underwriters' or agents' compensation, any
initial public offering price, any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchange on which such Senior
Notes, Junior Subordinated Notes or Preferred Securities may be listed.
If underwriters participate in the sale, such Senior Notes, Junior
Subordinated Notes or Preferred Securities will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all of such series of Senior
Notes, Junior Subordinated Notes or Preferred Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Company and/or the Trust to indemnification against certain civil
liabilities, including liabilities under the 1933 Act. Underwriters and agents
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
Each series of Senior Notes, Junior Subordinated Notes or Preferred
Securities will be a new issue of securities and will have no established
trading market. Any underwriters to whom Senior Notes, Junior Subordinated
Notes or Preferred Securities are sold for public offering and sale may make a
market in such Senior Notes, Junior Subordinated Notes or Preferred Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. The Senior Notes, Junior Subordinated
Notes or Preferred Securities may or may not be listed on a national securities
exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of 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 Senior Notes, the Junior
Subordinated Notes, the Guarantee and certain matters relating to such
securities will be passed upon on behalf of the Company by Bouhan, Williams &
Levy LLP, Savannah, Georgia, and by Troutman Sanders LLP, Atlanta, Georgia.
Certain legal matters will be passed upon for the underwriters by Dewey
Ballantine LLP, New York, New York.
19
EXPERTS
The financial statements and the related financial statement schedule as of
and for the year ended December 31, 2002 incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated by reference herein, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Certain of the Company's financial statements incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP ("Andersen"),
independent public accountants, as indicated in their reports with respect to
the financial statements, and are incorporated by reference in this Prospectus,
in reliance upon the authority of Andersen as experts in giving such reports.
On March 28, 2002, Southern's Board of Directors, upon recommendation of its
Audit Committee, decided not to engage Andersen as the Company's principal
public accountants. The Company has not obtained a reissued report from
Andersen and has been unable to obtain, after reasonable efforts, Andersen's
written consent to incorporate by reference Andersen's reports on the financial
statements. Under these circumstances, Rule 437a under the 1933 Act permits
this Prospectus to be filed without a written consent from Andersen. The
absence of such written consent from Andersen may limit a holder's ability to
assert claims against Andersen under Section 11(a) of the 1933 Act for any
untrue statement of a material fact contained in the financial statements
audited by Andersen or any omissions to state a material fact required to be
stated in the financial statements.
20
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$25,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Series E 4.90% Senior Notes
due December 15, 2013
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PROSPECTUS SUPPLEMENT
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BANC ONE CAPITAL MARKETS, INC.
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