UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c) of the
Securities Exchange Act of 1934
(AMENDMENT NO.)
Check the appropriate box:
[X] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted by Rule 14c-5(d)(2))
[ ] Definitive information statement
ALABAMA POWER COMPANY
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(Name of Registrant as Specified in Its Charter)
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[x] No fee required.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
NOTICE OF 2006
ANNUAL MEETING
& INFORMATION STATEMENT
www.alabamapower.com
[GRAPHIC OMITTED]
ALABAMA POWER COMPANY
Birmingham, Alabama
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on April 28, 2006
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Alabama
Power Company will be held at Alabama Power Company's corporate headquarters,
600 North 18th Street, Birmingham, Alabama 35291 on April 28, 2006 at 8:00 a.m.,
central time, to elect 13 members of the board of directors, to amend Alabama
Power Company's Articles of Incorporation to increase the number of authorized
shares of common stock with a par value of $40 a share which Alabama Power
Company may issue from 15,000,000 shares to 25,000,000 shares and to create a
new class of securities authorized to be issued by Alabama Power Company to be
called preference stock and to transact any other business that may properly
come before said meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 15, 2006 will be
entitled to notice of and to vote at said meeting or any adjournment or
postponement thereof.
The Information Statement and the Annual Report are included in this mailing.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
William E. Zales, Jr.
Vice President and Corporate Secretary
Birmingham, Alabama
March __, 2006
TABLE OF CONTENTS
Page
General Information............................................ 1
Shareholder Proposals.......................................... 1
Nominees for Election as Directors............................. 2
Corporate Governance........................................... 4
Communications to the Board.................................... 6
Board Attendance at Annual Shareholders Meeting................ 6
Audit Committee Report......................................... 7
Compensation and Management Succession Committee Report........ 9
Compensation Committee Interlocks and Insider Participation.... 11
Certain Relationships and Related Transactions................. 11
Executive Compensation Information............................. 12
Stock Ownership Table.......................................... 17
Articles of Incorporation ..................................... 18
Appendix A - Southern Company Audit Committee Charter ......... A-1
Appendix B - Nominating Committee Charter...................... B-1
Appendix C - Amendment to Articles of Incorporation ........... C-1
INFORMATION STATEMENT
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GENERAL INFORMATION
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This Information Statement is furnished by Alabama Power Company (the "Company")
in connection with the 2006 Annual Meeting of Shareholders and any adjournment
or postponement thereof. The meeting will be held on April 28, 2006 at 8:00
a.m., central time, at the Company's corporate headquarters, 600 North 18th
Street, Birmingham, Alabama 35291. This Information Statement is initially being
provided to shareholders on or about March __, 2006.
At the meeting, the shareholders will vote to elect 13 members to the board of
directors and to amend the Company's Articles of Incorporation to increase the
number of authorized shares of common stock with a par value of $40 a share
which the Company may issue from 15,000,000 shares to 25,000,000 shares and to
create a new class of securities authorized to be issued by the Company to be
called preference stock and will transact any other business that may properly
come before the meeting. We are not aware of any other matters to be presented
at the meeting; however, the holder of the Company's common stock will be
entitled to vote on any other matters properly presented.
All shareholders of record on the record date of March 15, 2006 are entitled to
notice of and to vote at the meeting. On that date, there were __________ common
shares outstanding and entitled to vote, all of which are held by The Southern
Company ("Southern Company"). There were also ________ shares of preferred stock
and __________ shares of Class A preferred stock outstanding on that date.
With respect to the election of directors, all of the outstanding shares of
preferred stock and Class A preferred stock are entitled to vote as a single
class with the Company's common stock. Each common share counts as one vote.
Each share of the 4.20% Series, the 4.52% Series, the 4.60% Series, the 4.64%
Series, the 4.72% Series and the 4.92% Series of outstanding preferred stock,
with par value of $100 per share, counts as two-fifths vote, each share of the
5.20% Series, the 5.30% Series and the 5.83% Series of outstanding Class A
preferred stock, with stated capital of $25 per share, counts as one-tenth vote
and each share of the Flexible Money Market Class A preferred stock, with stated
capital of $100,000 per share, counts as 400 votes. The Company's Articles of
Incorporation provide for cumulative voting rights.
With respect to the proposed amendment to the Company's Articles of
Incorporation to increase the authorized number of shares of common stock and to
create the preference stock, all of the outstanding shares of preferred stock
and Class A preferred stock are entitled to vote as a single class with the
Company's common stock. Votes will be tabulated based on the value of each share
as described in "Articles of Incorporation--Vote Required" herein.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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SHAREHOLDER PROPOSALS
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Shareholders may present proper proposals for inclusion in the Company's
information statement and for consideration at the next annual meeting of its
shareholders by submitting their proposals to the Company in a timely manner. In
order to be so considered for inclusion for the 2007 Annual Meeting, shareholder
proposals must be received by the Company no later than January __, 2007.
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NOMINEES FOR ELECTION AS DIRECTORS
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ITEM NO. 1. - ELECTION OF DIRECTORS
A board of 13 directors is to be elected at the annual meeting, each director to
hold office until the next annual meeting of shareholders and until the election
and qualification of a successor board. If any named nominee becomes unavailable
for election, the board may substitute another nominee.
On the following pages there is information concerning the nominees for director
stating, among other things, their names, ages, positions and offices held, and
brief descriptions of their business experience. The ages of the directors set
forth below are as of December 31, 2005.
Charles D. McCrary -- Director since 2001
Mr. McCrary, 54, has served as President and Chief Executive Officer of the
Company since October 2001 and Executive Vice President of Southern Company
since February 2002. He previously served as President and Chief Operating
Officer of the Company from April 2001 to October 2001 and Vice President of
Southern Company from February 1998 to April 2001. He is a Director of AmSouth
Bancorporation, Birmingham, Alabama, and Protective Life Corporation,
Birmingham, Alabama.
Whit Armstrong -- Director since 1982
Mr. Armstrong, 58, is President, Chairman and Chief Executive Officer of The
Citizens Bank, Enterprise, Alabama, and President, Chairman and Chief Executive
Officer of Enterprise Capital Corporation, Inc. He is a Director of Enstar
Group, Inc., Montgomery, Alabama.
David J. Cooper, Sr. -- Director since 1998
Mr. Cooper, 60, is President of Cooper/T. Smith Corporation (a maritime company
with a core business of stevedoring and tugboats), Mobile, Alabama. He is a
Director of Cooper/T. Smith Corporation and subsidiaries, American Equity
Underwriters, Inc., Mobile, Alabama, and AmSouth Bancorporation, Birmingham,
Alabama.
John D. Johns -- Director since 2004
Mr. Johns, 53, has served as Chairman, President and Chief Executive Officer of
Protective Life Corporation (a holding company whose subsidiaries provide
insurance and other financial services), Birmingham, Alabama, since January
2003. He previously served as President and Chief Executive Officer of
Protective Life Corporation from January 2002 to January 2003 and President and
Chief Operating Officer of Protective Life Corporation from August 1996 until
December 2001. He is a Director of Alabama National BanCorporation, Birmingham,
Alabama, Genuine Parts Company, Atlanta, Georgia, and John H. Harland Company,
Decatur, Georgia.
Patricia M. King -- Director since 1997
Ms. King, 60, is President and Chief Executive Officer of Sunny King Automotive
Group (automobile dealerships), Anniston, Alabama.
James K. Lowder -- Director since 1997
Mr. Lowder, 56, is Chairman of The Colonial Company (real estate development and
sales), Montgomery, Alabama. He is a Director of Colonial Properties Trust,
Birmingham, Alabama.
Malcolm Portera -- Director since 2003
Dr. Portera, 59, has served as Chancellor of The University of Alabama System,
Tuscaloosa, Alabama, since January 2002. He previously served as President of
Mississippi State University from January 1998 to December 2001. He is a
Director of Protective Life Corporation, Birmingham, Alabama, and Regions
Financial Corporation, Birmingham, Alabama.
Robert D. Powers -- Director since 1992
Mr. Powers, 55, is President of The Eufaula Agency, Inc. (insurance and real
estate), Eufaula, Alabama.
2
David M. Ratcliffe -- Director since 2004
Mr. Ratcliffe, 57, has served as Chairman of the Board, President and Chief
Executive Officer of Southern Company since July 2004. He previously served as
President of Southern Company from April 2004 until July 2004; Executive Vice
President of Southern Company from May 1999 until April 2004; Chairman and Chief
Executive Officer of Georgia Power Company from January 2004 to April 2004 and
President and Chief Executive Officer of Georgia Power Company from May 1999 to
January 2004. He is a Director of CSX Corporation, Jacksonville, Florida,
Federal Reserve Bank of Atlanta, and Southern Company system companies, Georgia
Power Company and Southern Power Company.
C. Dowd Ritter -- Director since 1997
Mr. Ritter, 58, is Chairman, President and Chief Executive Officer of AmSouth
Bancorporation and AmSouth Bank, Birmingham, Alabama. He is a Director of
Protective Life Corporation, Birmingham, Alabama.
James H. Sanford -- Director since 1983
Mr. Sanford, 61, is Chairman of HOME Place Farms, Inc. (agriculture, computer
services and land development), Prattville, Alabama. He also serves as President
of Autauga Quality Cotton Association, Prattville, Alabama, and Chairman of
Sylvest Farms, Inc., Montgomery, Alabama. He is a Director of Federal Reserve
Bank of Atlanta, Birmingham Branch.
John C. Webb IV -- Director since 1977
Mr. Webb, 63, is President of Webb Lumber Company, Inc. (wholesale lumber and
wood products sales), Demopolis, Alabama.
James W. Wright -- Director since 2000
Mr. Wright, 62, is Chairman, President and Chief Executive Officer of First
Tuskegee Bank, Tuskegee, Alabama. He is also Chairman, President and Chief
Executive Officer of Birthright Incorporated (bank holding company), Tuskegee,
Alabama.
Each nominee has served in his or her present position for at least the past
five years, unless otherwise noted.
Vote Required
The majority of the votes cast by the shares outstanding and entitled to vote at
a meeting at which a quorum is present is required for the election of
directors. The shareholders entitled to vote in the election of directors have
the right to cumulate their votes. Such right permits the shareholders to
multiply the number of votes they are entitled to cast by the number of
directors for whom they are entitled to vote and cast the product for a single
nominee or distribute the product among two or more nominees. A shareholder will
not be entitled to vote cumulatively at the Company's 2006 Annual Meeting unless
such shareholder gives the Company notice of his interest to cumulate his vote
not less than 48 hours before the time set for the meeting. If one shareholder
gives such notice, all shareholders will be entitled to cumulate their votes
without giving further notice.
Southern Company, as the owner of all of the Company's outstanding common stock,
will vote for all of the nominees above.
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CORPORATE GOVERNANCE
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How is the Company organized?
The Company is managed by a core group of officers and governed by a board of
directors which has been set at a total not to exceed 25 members. The current
nominees for election as directors consist of 13 members -- 11 non-employees,
the chief executive officer of the Company and the chief executive officer of
Southern Company.
What are directors paid for their services?
o Standard Arrangements. The following compensation was paid to the
Company's directors during 2005 for service as a member of the board
of directors and any board committee(s), except that employee
directors received no fees or compensation for service as a member of
the board of directors or any board committee. At the election of the
director, all or a portion of the cash retainer and meeting fees may
be payable in Southern Company common stock. Also, at the election of
the director, all or a portion of directors' compensation, including
the stock retainer, may be deferred under the Company's deferred
compensation plan for its directors until membership on the board is
terminated. If a director elects to defer the stock retainer, it is
payable in Southern Company common stock following termination from
the board.
Annual Cash Retainer Fee................... $25,000 for directors serving as chair of a board committee
and $22,000 for other directors
Annual Stock Retainer Fee.................. 520 shares of Southern Company common stock
Meeting Fees............................... $1,800 for each board meeting attended and $1,200 for each
committee meeting attended
o Other Arrangements. No director received other compensation for
services as a director during the year ending December 31, 2005 in
addition to or in lieu of that specified by the standard arrangements
specified above.
Governance Policies and Processes
Southern Company owns all of the Company's outstanding common stock, which
represents a substantial majority of the overall voting power of the Company's
equity securities, and the Company has listed only debt and preferred stock on
the New York Stock Exchange (the "NYSE"). Accordingly, under the rules of the
NYSE, the Company is exempt from most of the NYSE's listing standards relating
to corporate governance. The Company has voluntarily complied with certain of
the NYSE's listing standards relating to corporate governance where such
compliance is deemed to be in the best interests of the Company's shareholders.
In addition, under the rules of the Securities and Exchange Commission (the
"SEC"), the Company is exempt from the audit committee requirements of Section
301 of the Sarbanes-Oxley Act of 2002 and, therefore, is not required to have an
audit committee or an audit committee report on whether it has an audit
committee financial expert.
EXECUTIVE SESSIONS
It is the policy of the directors to hold an executive session of the
non-management directors without management participation at each scheduled
board of directors meeting. The chairman of the Controls and Compliance
Committee presides over such executive sessions. Information on how to
communicate with the chairman of the Controls and Compliance Committee or the
non-management directors is provided under "Communications to the Board" below.
COMMITTEES OF THE BOARD
Controls and Compliance Committee:
o Members are Mr. Webb, Chairman; Mr. R. Kent Henslee and Mr. Lowder
o Met four times in 2005
o Oversees the Company's internal control and compliance matters
4
The Company's Controls and Compliance Committee meets periodically with
management, internal auditors and the independent registered public accounting
firm to discuss auditing, internal controls and compliance matters.
The Southern Company Audit Committee provides broad oversight of the Company's
financial reporting, audit processes, internal controls and legal, regulatory
and ethical compliance. The Southern Company Audit Committee appoints the
Company's independent registered public accounting firm, approves their services
and fees and establishes and reviews the scope and timing of their audits. The
Southern Company Audit Committee also reviews and discusses the Company's
financial statements with management and the independent registered public
accounting firm. Such discussions include critical accounting policies and
practices, material alternative financial treatments within generally accepted
accounting principles, proposed adjustments, control recommendations,
significant management judgments and accounting estimates, new accounting
policies, changes in accounting principles, any disagreements with management
and other material written communications between the independent registered
public accounting firm and management. The Southern Company Audit Committee also
recommends the filing of the Company's financial statements with the SEC.
The charter of the Southern Company Audit Committee is available on Southern
Company's website (www.southerncompany.com) and is attached to this Information
Statement as Appendix A. The Southern Company Audit Committee has authority to
appoint, compensate and oversee the work of the independent auditors.
Compensation Committee:
o Members are Mr. Wallace D. Malone, Jr., Chairman; Mr. Armstrong and
Dr. Portera
o Met three times in 2005
o Oversees the administration of the Company's compensation arrangements
The Company's Compensation Committee reviews and provides input to Southern
Company's Compensation and Management Succession Committee on the performance
and compensation of the Company's chief executive officer and makes
recommendations regarding the fees paid to members of the Company's board of
directors.
Southern Company's Compensation and Management Succession Committee approves the
corporate performance goals used to determine incentive compensation and
establishes the mechanism for setting compensation levels for the Company's
executive officers. It also administers executive compensation plans and reviews
management succession plans.
Nominating Committee:
o Members are Mr. Ritter, Chairman; Mr. Cooper; Mr. Johns; Mr. Ratcliffe
and Mr. Sanford
o Met one time in 2005
o Considers and recommends nominees for election as directors
The Nominating Committee, with input from the Company's chief executive officer,
identifies director nominees. The Nominating Committee evaluates candidates
based on the requirements set forth in the Company's by-laws and regulatory
requirements applicable to the Company. The Company is exempt from the NYSE's
listing standards relating to director independence. Consequently, the board of
directors has not determined whether the members of the Nominating Committee are
independent under such standards.
Southern Company owns all of the Company's common stock, and, as a result,
Southern Company's affirmative vote is sufficient to elect director nominees.
Consequently, the Nominating Committee does not accept proposals from preferred
shareholders regarding potential candidates for director nominees. Southern
Company's chief executive officer is a member of the Nominating Committee and
may propose on behalf of Southern Company potential candidates for director
nominees at any meeting of the Nominating Committee.
The Nominating Committee operates under a written charter. The Nominating
Committee charter is attached to this Information Statement as Appendix B.
Executive Committee:
o Members are Mr. McCrary, Chairman; Mr. Carl E. Jones, Jr.; Mr. Wallace
D. Malone, Jr. and Mr. Ritter
o Met three times in 2005
o Acts in place of full board on matters that require board action
between scheduled meetings of the board to the extent permitted by law
and within certain limits set by the board
5
Nuclear Committee:
o Members are Mr. Powers, Chairman; Ms. King and Mr. Wright
o Met four times in 2005
o Reviews nuclear activities
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The board of directors met four times in 2005. Average director attendance at
all board and committee meetings was 98 percent. No nominee attended less than
75 percent of applicable meetings.
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COMMUNICATIONS TO THE BOARD
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Shareholders and other parties interested in communicating directly with the
Company's board of directors, the chairman of the Controls and Compliance
Committee or the non-management directors may contact them by writing c/o
Corporate Secretary, Alabama Power Company, 600 North 18th Street, Birmingham,
Alabama 35291 or by sending an email to apcocorpsec@southernco.com. The
Corporate Secretary will receive the correspondence and forward it to the
individual director or directors to whom the correspondence is directed or the
chairman of the Controls and Compliance Committee. The Corporate Secretary will
not forward any correspondence that is unduly hostile, threatening, illegal, not
reasonably related to the Company or its business or similarly inappropriate.
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BOARD ATTENDANCE AT ANNUAL SHAREHOLDERS MEETING
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The Company does not have a policy relating to attendance at the Company's
annual meeting of shareholders by directors. The Company does not solicit
proxies for the election of directors because the affirmative vote of Southern
Company is sufficient to elect the nominees and, therefore, holders of the
Company's preferred stock rarely attend the annual meeting. Consequently, a
policy encouraging directors to attend the annual meeting of shareholders is not
necessary. One of the Company's 16 directors attended the Company's 2005 Annual
Meeting of shareholders.
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AUDIT COMMITTEE REPORT
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The Southern Company Audit Committee (the "Audit Committee") oversees the
Company's financial reporting process on behalf of the board of directors of
Southern Company. The Company's management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the audited financial statements of the Company in the Annual
Report with management. The Audit Committee also reviews the Company's quarterly
and annual reports on Forms 10-Q and 10-K prior to filing with the SEC. The
Audit Committee's review process includes discussions of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgments and estimates and the clarity of disclosures in the
financial statements.
The independent registered public accounting firm is responsible for expressing
an opinion on the conformity of those audited financial statements with
accounting principles generally accepted in the United States. The Audit
Committee reviewed with the independent registered public accounting firm their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards, rules and
regulations of the Public Company Accounting Oversight Board ("PCAOB") and SEC
and the NYSE corporate governance rules. In addition, the Audit Committee has
discussed with the independent registered public accounting firm their
independence from management and the Company including the matters in the
written disclosures made under Rule 3600T of the PCAOB, which, on an interim
basis, has adopted Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees." The Audit Committee has also considered
whether the independent registered public accounting firm's provision of
non-audit services to the Company is compatible with maintaining their
independence.
The Audit Committee discussed the overall scopes and plans with the Company's
internal auditors and independent registered public accounting firm for their
respective audits. The Audit Committee meets with the internal auditors and
independent registered public accounting firm, with and without management
present, to discuss the results of their audits, their evaluations of the
Company's internal controls and the overall quality of the Company's financial
reporting. The Audit Committee also meets privately with Southern Company's
compliance officer. The Audit Committee held 11 meetings during 2005.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the board of directors of Southern Company (and the
board approved) that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2005 and
filed with the SEC. The Audit Committee also reappointed Deloitte & Touche LLP
as the Company's independent registered public accounting firm for 2006. At the
2006 Annual Meeting of Southern Company's shareholders, its shareholders will be
asked to ratify the Audit Committee's selection of the independent registered
public accounting firm.
Members of the Committee:
J. Neal Purcell, Chair
Francis S. Blake
Donald M. James
Zack T. Pate
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Principal Independent Registered Public Accounting Firm Fees
The following represents the fees billed to the Company for the two most recent
fiscal years by Deloitte & Touche LLP ("Deloitte & Touche") -- the Company's
principal independent registered public accounting firm for 2004 and 2005.
2004 2005
---------------------
(in thousands)
Audit Fees(1) $2,546 $2,619
Audit-Related Fees 0 0
Tax Fees 16 0
All Other Fees 0 0
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Total $2,562 $2,619
============================================
(1) Includes services performed in connection with financing transactions.
The Audit Committee (on behalf of Southern Company and all of its subsidiaries,
including the Company) has adopted a Policy on Engagement of the Independent
Auditor for Audit and Non-Audit Services that includes requirements for the
Audit Committee to pre-approve services provided by Deloitte & Touche. This
policy was initially adopted in July 2002 and since that time, all services
included in the chart above have been pre-approved by the Audit Committee.
Under the policy, the independent registered public accounting firm delivers an
annual arrangements letter which provides a description of services anticipated
to be rendered to the Company by the independent registered public accounting
firm for the Audit Committee to approve. The Audit Committee's approval of the
independent registered public accounting firm's annual arrangements letter
constitutes pre-approval of all services covered in the letter. In addition,
under the policy, the Audit Committee has pre-approved the engagement of the
independent registered public accounting firm to provide services related to the
issuance of comfort letters and consents required for securities sales by the
Company and services related to consultation on routine accounting and tax
matters. The Audit Committee has delegated pre-approval authority to the Chair
of the Audit Committee with respect to permissible services up to a limit of
$50,000 per engagement. The Chair of the Audit Committee is required to report
any pre-approval decisions at the next scheduled Audit Committee meeting.
Under the policy, prohibited non-audit services are services prohibited by the
SEC to be performed by the Company's independent registered public accounting
firm. These services include bookkeeping or other services related to the
preparation of accounting records of the Company, financial information systems
design and implementation, appraisal or valuation services, fairness opinions or
contribution-in-kind reports, actuarial services, internal audit outsourcing
services, management functions or human resources, broker-dealer, investment
advisor or investment banking services, legal services and expert services
unrelated to the audit and any other service that the PCAOB determines is
impermissible. In addition, officers of the Company may not engage the
independent registered public accounting firm to perform any personal services,
such as personal financial planning or personal income tax services.
Principal Independent Registered Public Accounting Firm Representation
No representative of Deloitte & Touche is expected to be present at the meeting
unless no later than three business days prior to the day of the meeting the
Company's Corporate Secretary has received written notice from a shareholder
addressed to the Corporate Secretary at Alabama Power Company, 600 North 18th
Street, Birmingham, Alabama 35291, that such shareholder will attend the meeting
and wishes to ask questions of a representative of Deloitte & Touche.
8
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COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE REPORT
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Southern Company's Compensation and Management Succession Committee (the
"Committee") is responsible for the oversight and administration of the
Company's executive compensation program. The Committee is composed entirely of
independent, non-employee directors and operates pursuant to a written charter.
TOTAL EXECUTIVE COMPENSATION
Executive Compensation Philosophy
The executive compensation program is based on a philosophy that total executive
compensation must be competitive and must be tied to the Company's and Southern
Company's short- and long-term performance. With the objective of maximizing
Southern Company shareholder value over time, our program aligns the interests
of our executives and the Company's and Southern Company's shareholders.
Determination of Total Executive Compensation
The Committee retains an independent executive compensation consultant who
provides information on total executive compensation paid at other large
companies in the electric and gas utility industries. Most of these companies
are included in the 12 companies that comprise the S&P Electric Utility Index.
Based on the market data, total executive compensation targets are set at an
appropriate size-adjusted level. This means that for target level performance,
the program is designed to pay executives an amount that is at or about the
median of the market. Total executive compensation is paid through an
appropriate mix of both fixed and performance-based (incentive) compensation.
Because the program focuses on incentive compensation, actual total compensation
paid can be above or below the targets based on actual corporate performance.
Components of Total Executive Compensation
The primary components of the executive compensation program are:
o Base pay (salary);
o Short-term incentives (annual performance-based compensation); and
o Long-term incentives (stock options and performance-based dividend
equivalents).
The Company also provides certain perquisites that the Committee reviews
periodically to determine if they are reasonable and appropriate. The primary
perquisites provided by the Company are financial planning services, club
memberships (for business use) and home security.
BASE PAY
A range for base pay is determined for each executive officer, including Mr.
McCrary, by comparing the base pay at the appropriate peer group of companies
described previously. Base pay is generally set at a level that is at or below
the size-adjusted median paid at those companies because of the emphasis on
incentive compensation in the executive compensation program. The 2005 base pay
level for the named executive officers, including Mr. McCrary, was at or near
the median.
ANNUAL PERFORMANCE-BASED COMPENSATION
Annual performance-based compensation is paid through the Southern Company
Omnibus Incentive Compensation Plan. All executive officers participated in this
plan in 2005.
Performance Goals
Annual performance-based compensation is based on the attainment of corporate
performance goals and attainment of the Company's operational goals. All
performance goals were set in the first quarter of the year.
For 2005, the corporate performance goals included specific targets for:
o Southern Company earnings -- earnings per share ("EPS") and
o The Company's return on equity ("ROE").
9
The Committee believes that accomplishing the corporate goals is essential for
the Company's and Southern Company's continued success and sustained financial
performance. A target performance level is set for each corporate performance
goal. Performance above or below the targets results in proportionately higher
or lower performance-based compensation. The amount is then adjusted, up or
down, based on the degree of achievement of the Company's adjusting goals
related to such measures as capital expenditures, cash flow, safety, customer
satisfaction, system reliability, plant availability and diversity.
A target percentage of base pay is established for each executive officer based
on his position level, for target-level performance. Annual performance-based
compensation may range from 0 percent of the target to 240 percent based on
actual corporate performance.
No performance-based compensation is paid if performance is below a threshold
level or if a minimum earnings level is not reached. Also, no performance-based
compensation is paid if Southern Company's current earnings are not sufficient
to fund the Southern Company common stock dividend at the same level as the
prior year. The Committee also capped the maximum amount for the annual
performance-based compensation for Mr. McCrary at 0.6 percent of Southern
Company's net income.
Annual Performance-Based Compensation Payments
Performance met or exceeded the target levels in all areas in 2005, resulting in
performance-based compensation that exceeded the target levels.
Mr. McCrary's annual performance-based compensation under the Southern Company
Omnibus Incentive Compensation Plan for target-level performance was 75 percent
of his base pay. The target percentage of base pay for the other executive
officers ranged from 50 to 55 percent. The amount paid to each individual for
2005 performance was based 50 percent on the degree of achievement of Southern
Company's EPS goal and 50 percent on the degree of achievement of the Company's
ROE goal. Performance for both goals exceeded the target, resulting in payouts
to all named executive officers that were 184 percent of their respective target
amounts.
LONG-TERM INCENTIVES
The Committee bases a significant portion of the total compensation program on
long-term incentives, including Southern Company stock options and performance
dividend equivalents.
Stock Options
Executives are granted options with 10-year terms to purchase Southern Company's
common stock at the market price on the date of the grant under the terms of the
Southern Company Omnibus Incentive Compensation Plan. The estimated annualized
value represented nearly 25 percent of Mr. McCrary's total target compensation
and 14 to 23 percent for the other executive officers. The size of prior grants
was not considered in determining the size of the grants made in 2005. The
options fully vest upon retirement and expire at the earlier of five years from
the date of retirement or the end of the 10-year term.
Performance Dividends
The executive officers, including Mr. McCrary, also are paid performance-based
dividend equivalents on most stock options held at the end of the year. Dividend
equivalents can range from 5 percent of the Southern Company common stock
dividend paid during the year if Southern Company total shareholder return over
a four-year period, compared to a group of other utility companies, is above the
10th percentile to 100 percent of the dividend paid if it reaches the 90th
percentile. For eligible stock options held on December 31, 2005, all
participants, including the named executive officers received a payout of $0.83
per option for above-target performance under the Southern Company Omnibus
Incentive Compensation Plan.
10
OTHER COMPENSATION
The Company participates in the Southern Company Deferred Compensation Plan for
eligible employees, including the executive officers. Participation is voluntary
and permits deferral of up to 50 percent of salary and up to 100 percent of
performance-based compensation. Except for certain prescribed hardship
conditions, all amounts are deferred until termination of employment. A
participant has two investment options under this plan -- a prime-rate
investment option and an option that tracks the performance of Southern Company
common stock, neither of which produce above-market earnings. This is an
unfunded plan and all amounts deferred are payable out of the general assets of
the Company. The Committee has reviewed the terms of this plan. The Committee
does not consider earnings on deferred compensation in establishing total
compensation targets.
The Company also participates in additional non-qualified deferred compensation
plans and arrangements that provide post-retirement compensation. In addition,
the Committee reviews other benefit programs that are generally available to all
employees of the Company.
POLICY ON INCOME TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
limits the deductibility of certain executives' compensation that exceeds $1
million per year unless the compensation is paid under a performance-based plan
as defined in the Code and that has been approved by shareholders. Southern
Company has obtained shareholder approval of the Omnibus Incentive Compensation
Plan. However, because the policy is to maximize long-term shareholder value,
tax deductibility is only one factor considered in setting compensation.
SUMMARY
The Committee believes that the policies and programs described in this report
link pay and performance and serve the best interest of the Company's and
Southern Company's shareholders. The Committee frequently reviews the various
pay plans and policies and modifies them as it deems necessary to continue to
attract, retain and motivate talented executives.
Members of the Committee:
Gerald J. St. Pe, Chair
Thomas F. Chapman
Donald M. James
William G. Smith, Jr.
--------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
--------------------------------------------------------------------------------
Southern Company's Compensation and Management Succession Committee is made up
of non-employee directors who have never served as executive officers of
Southern Company or the Company. During 2005, none of Southern Company's or the
Company's executive officers served on the board of directors of any entities
whose officers serve on Southern Company's board of directors.
--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
Mr. Whit Armstrong is President, Chairman and Chief Executive Officer of The
Citizens Bank, Enterprise, Alabama; Mr. Carl E. Jones, Jr. is Chairman of
Regions Financial Corporation, Birmingham, Alabama; Mr. Wallace D. Malone, Jr.
served as Vice Chairman of Wachovia Corporation, Charlotte, North Carolina; Mr.
C. Dowd Ritter is Chairman, President and Chief Executive Officer of AmSouth
Bancorporation and AmSouth Bank, Birmingham, Alabama, and Mr. James W. Wright is
Chairman, President and Chief Executive Officer of First Tuskegee Bank,
Tuskegee, Alabama. During 2005, these banks furnished a number of regular
banking services in the ordinary course of business to the Company. The Company
intends to maintain normal banking relations with all the aforesaid banks in the
future.
11
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION INFORMATION
--------------------------------------------------------------------------------
Employment Contracts and Termination of Employment and Change in Control
Arrangements
The Company has adopted Southern Company's Change in Control Program, which is
applicable to certain of its officers, and as part of the program has entered
into individual change in control agreements with Messrs. McCrary and C. Alan
Martin. If an executive is involuntarily terminated, other than for cause,
within two years following a change in control of Southern Company or the
Company, the agreements provide for:
o lump sum payment of two or three times annual compensation,
o up to five years' coverage under group health and life insurance plans,
o immediate vesting of all stock options, stock appreciation rights and
restricted stock previously granted,
o payment of any accrued long-term and short-term bonuses and dividend
equivalents and
o payment of any excise tax liability incurred as a result of payments made
under any individual agreements.
A Southern Company change in control is defined under the agreements as:
o acquisition of at least 20 percent of Southern Company's stock,
o a change in the majority of the members of Southern Company's board of
directors in connection with an actual or threatened change in control,
o a merger or other business combination that results in Southern
Company's shareholders immediately before the merger owning less than 65
percent of the voting power after the merger or
o a sale of substantially all the assets of Southern Company.
A change in control of the Company is defined under the agreements as:
o acquisition of at least 50 percent of the Company's stock,
o a merger or other business combination unless Southern Company controls
the surviving entity or
o a sale of substantially all of the assets of the Company.
Southern Company also has amended its short- and long-term incentive plan to
provide for pro-rata payments at not less than target-level performance if a
change in control occurs and the plan is not continued or replaced with a
comparable plan or plans.
12
Summary Compensation Table
The following table sets forth information concerning the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company serving at the end of 2005.
Long-Term Compensation
--------------------------
Number of
Annual Compensation Securities Long-Term
--------------------------------------------
Other Annual Underlying Incentive All Other
Name and Principal Compensation Stock Options Payouts Compensation
Position Year Salary Bonus ($) ($) (1) (Shares) ($) (2) ($) (3)
($)
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
Charles D. McCrary 2005 580,495 808,636 86,706 86,454 256,887 131,643
President, Chief Executive 2004 551,989 648,749 8,205 71,424 384,772 29,685
Officer and Director 2003 521,649 694,948 9,111 72,054 483,081 26,180
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
C. Alan Martin 2005 367,818 374,370 3,607 39,418 100,110 19,839
Executive Vice President 2004 357,144 306,181 6,008 39,838 195,234 18,918
2003 346,112 337,538 9,987 41,359 261,977 21,857
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
Art P. Beattie 2005 231,941 216,584 12,253 21,558 56,876 36,159
Executive Vice President,
Chief Financial Officer
and Treasurer (4)
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
Steve R. Spencer 2005 338,729 313,128 38,657 30,687 50,852 91,797
Executive 2004 330,196 257,343 35,930 31,165 86,749 90,677
Vice President 2003 290,026 283,698 7,502 29,414 164,081 16,536
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
Jerry L. Stewart 2005 304,530 333,663 416 32,814 119,647 16,689
Senior Vice President 2004 286,863 311,581 9,925 32,224 163,090 35,635
2003 265,028 297,171 17,963 30,381 178,471 49,116
------------------------------- ------- ---------- ---------- -------------- -------------- ----------- --------------
(1) This column reports tax reimbursements on certain perquisites and personal
benefits as well as on additional incentive compensation, if applicable.
Additional incentive compensation is reported in the "All Other
Compensation" column.
(2) Payout of performance dividend equivalents on stock options granted after
1996 that were held by the named executive officer at the end of the
performance periods under the Southern Company Omnibus Incentive
Compensation Plan for the four-year performance periods ended December 31,
2003, 2004 and 2005, respectively. Effective January 1, 2005, dividend
equivalents can range from approximately five percent of the Southern
Company common stock dividend paid during the last year of the performance
period if Southern Company total shareholder return over the four-year
period, compared to a group of other large utility companies, is above the
10th percentile to 100 percent of the dividend paid if it reaches the 90th
percentile. For eligible stock options held on December 31, 2003, 2004 and
2005, all named executive officers earned a payout of $1.385, $1.22 and
$0.83 per option, respectively.
(3) Company contributions in 2005 to the Southern Company Employee Savings Plan
(ESP), Employee Stock Ownership Plan (ESOP) and non-pension related
accruals under the Southern Company Supplemental Benefit Plan (SBP) are
provided in the following table:
13
Name ESP ESOP SBP
----------------------------------------- ---------- -------- -----------
Charles D. McCrary $7,878 $ 773 $ 22,992
----------------------------------------- ---------- -------- -----------
C. Alan Martin 8,839 773 10,227
----------------------------------------- ---------- -------- -----------
Art P. Beattie 8,368 773 2,018
----------------------------------------- ---------- -------- -----------
Steve R. Spencer 7,972 773 8,052
----------------------------------------- ---------- -------- -----------
Jerry L. Stewart 9,450 773 6,466
----------------------------------------- ---------- -------- -----------
In 2005, Messrs. McCrary, Beattie and Spencer received additional
compensation of $100,000, $25,000 and $75,000, respectively.
In 2004, Messrs. Spencer and Stewart received additional incentive
compensation of $75,000 and $20,000, respectively.
In 2003, Messrs. Martin, Spencer and Stewart received additional incentive
compensation of $4,000, $4,000 and $35,000, respectively.
(4) Mr. Beattie was named an executive officer effective February 1, 2005.
Stock Option Grants in 2005
The following table sets forth all stock option grants to the named executive
officers of the Company during the year ending December 31, 2005.
Number of
Securities Percent of
Underlying Total Exercise or Grant Date
Options Options Granted Base Price Expiration Present
Name Granted (1) to Employees in ($/Sh) (1) Date (1) Value ($)
Fiscal Year (2) (3)
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
Charles D. McCrary 86,454 7.3 32.70 2/18/2015 337,171
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
C. Alan Martin 39,418 3.3 32.70 2/18/2015 153,730
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
Art P. Beattie 21,558 1.8 32.70 2/18/2015 84,076
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
Steve R. Spencer 30,687 2.6 32.70 2/18/2015 119,679
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
Jerry L. Stewart 32,814 2.8 32.70 2/18/2015 127,975
----------------------------------------------- ------------ ---------------- ------------- ------------- ------------
(1) Under the terms of the Southern Company Omnibus Incentive Compensation Plan,
stock option grants to the named executive officers were made on February
18, 2005 and vest annually at a rate of one-third on the anniversary date of
the grant. Grants fully vest upon termination as a result of death, total
disability, or retirement and expire five years after retirement, three
years after death or total disability, or their normal expiration date if
earlier. The exercise price is the average of the high and low price of
Southern Company common stock on the date granted. Options may be
transferred to a revocable trust and for Mr. McCrary, options may also be
transferred to certain family members, family trusts and family limited
partnerships.
(2) A total of 1,179,681 stock options were granted in 2005 to employees of the
Company.
(3) Value was calculated using the Black-Scholes option valuation model. The
actual value, if any, ultimately realized depends on the market value of
Southern Company's common stock at a future date. Significant assumptions
are shown below:
Risk-free Dividend Expected
Volatility Rate of Return Yield Term
---------------------- --------------- ---------- ---------
17.9% 3.87% 4.38% 5 years
---------------------- --------------- ---------- ---------
14
Aggregated Stock Option Exercises in 2005 and Year-End Option Values
The following table sets forth information concerning options exercised during
the year ending December 31, 2005 by the named executive officers and the value
of unexercised options held by them as of December 31, 2005.
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Value Options at Fiscal In-the-Money Options
Acquired on Realized Year-End(#) at Year-End($)(2)
----------------------------- ----------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
Charles D. McCrary 92,338 1,125,892 151,415 158,088 1,052,499 555,157
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
C. Alan Martin 78,831 713,096 40,853 79,762 247,539 296,089
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
Art P. Beattie 7,731 111,510 35,735 32,790 327,325 101,801
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
Steve R. Spencer 40,525 288,079 0 61,628 0 224,932
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
Jerry L. Stewart 22,341 328,025 79,730 64,423 1,351,490 234,487
--------------------------------- ------------- ----------- -------------- -------------- ------------- --------------
(1) The "Value Realized" is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the
time of exercise above the exercise price.
(2) This column represents the excess of the fair market value of Southern
Company common stock of $34.53 per share, as of December 31, 2005, above the
exercise price of the options. The Exercisable column reports the "value" of
options that are vested and therefore could be exercised. The Unexercisable
column reports the "value" of options that are not vested and therefore
could not be exercised as of December 31, 2005.
Defined Benefit or Actuarial Plan Disclosure
The following table sets forth the estimated annual pension benefits payable at
normal retirement age under Southern Company's qualified Pension Plan, as well
as non-qualified supplemental benefits, based on the stated compensation and
years of service with the Southern Company system for the named executive
officers at the Company. Compensation for pension purposes is limited to the
average of the highest three of the final 10 years' compensation. Compensation
is base salary plus the excess of annual incentive compensation over 15 percent
of base salary. The compensation components are reported under columns titled
"Salary" and "Bonus" in the Summary Compensation Table detailed earlier in this
Information Statement.
The amounts shown in the table were calculated according to the final average
pay formula and are based on a single life annuity without reduction for joint
and survivor annuities or computation of the Social Security offset which would
apply in most cases.
Years of Accredited Service
---------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------------------------------ ------------ ------------- ------------ ------------- ------------ --------------
$ 100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000
300,000 76,500 102,000 127,500 153,000 178,500 204,000
500,000 127,500 170,000 212,500 255,000 297,500 340,000
700,000 178,500 238,000 297,500 357,000 416,500 476,000
900,000 229,500 306,000 382,500 459,000 535,500 612,000
1,100,000 280,500 374,000 467,500 561,000 654,500 748,000
1,300,000 331,500 442,000 552,500 663,000 773,500 884,000
1,500,000 382,500 510,000 637,500 765,000 892,500 1,020,000
15
As of December 31, 2005, the applicable compensation levels and accredited
service for determination of pension benefits would have been:
------------------------------------------- ----------------
Accredited
Name Compensation Years of
Service
------------------------------------------- ----------------
$ 1,190,756 31
Charles D. McCrary
------------------------------------------- ----------------
C. Alan Martin 645,938 33
------------------------------------------- ----------------
Art P. Beattie 324,322 29
------------------------------------------- ----------------
Steve R. Spencer 566,582 26
------------------------------------------- ----------------
Jerry L. Stewart 560,632 32
------------------------------------------- ----------------
16
--------------------------------------------------------------------------------
STOCK OWNERSHIP TABLE
--------------------------------------------------------------------------------
Southern Company is the beneficial owner of 100 percent of the outstanding
common stock of the Company. The following table shows the number of shares of
Southern Company common stock owned by directors, nominees and executive
officers as of December 31, 2005. It is based on information furnished by the
directors, nominees and executive officers. The shares owned by all directors,
nominees and executive officers as a group constitute less than one percent of
the total number of shares of Southern Company common stock outstanding on
December 31, 2005.
Shares
Beneficially
Owned Include:
------------------
Shares
Shares Individuals
Name of Directors, Nominees Beneficially Have Rights to
and Executive Officers Title of Security Owned (1) Acquire Within 60
Days (2)
---------------------------------------------- --------------------------------------- ------------ ------------------
Whit Armstrong Southern Company Common Stock 16,951
---------------------------------------------- --------------------------------------- ------------ ------------------
David J. Cooper, Sr. Southern Company Common Stock 9,402
---------------------------------------------- --------------------------------------- ------------ ------------------
R. Kent Henslee Southern Company Common Stock 13,949
---------------------------------------------- --------------------------------------- ------------ ------------------
John D. Johns Southern Company Common Stock 2,818
---------------------------------------------- --------------------------------------- ------------ ------------------
Carl E. Jones, Jr. Southern Company Common Stock 17,432
---------------------------------------------- --------------------------------------- ------------ ------------------
Patricia M. King Southern Company Common Stock 3,704
---------------------------------------------- --------------------------------------- ------------ ------------------
James K. Lowder Southern Company Common Stock 13,045
---------------------------------------------- --------------------------------------- ------------ ------------------
Wallace D. Malone, Jr. Southern Company Common Stock 3,295
---------------------------------------------- --------------------------------------- ------------ ------------------
Charles D. McCrary Southern Company Common Stock 232,408 228,059
---------------------------------------------- --------------------------------------- ------------ ------------------
Malcolm Portera Southern Company Common Stock 4,338
---------------------------------------------- --------------------------------------- ------------ ------------------
Robert D. Powers Southern Company Common Stock 4,265
---------------------------------------------- --------------------------------------- ------------ ------------------
David M. Ratcliffe Southern Company Common Stock 611,615 596,499
---------------------------------------------- --------------------------------------- ------------ ------------------
C. Dowd Ritter Southern Company Common Stock 3,704
---------------------------------------------- --------------------------------------- ------------ ------------------
James H. Sanford Southern Company Common Stock 7,541
---------------------------------------------- --------------------------------------- ------------ ------------------
John C. Webb, IV Southern Company Common Stock 13,063
---------------------------------------------- --------------------------------------- ------------ ------------------
James W. Wright Southern Company Common Stock 5,286
---------------------------------------------- --------------------------------------- ------------ ------------------
Art P. Beattie Southern Company Common Stock 54,518 50,456
---------------------------------------------- --------------------------------------- ------------ ------------------
C. Alan Martin Southern Company Common Stock 86,096 81,058
---------------------------------------------- --------------------------------------- ------------ ------------------
Steve R. Spencer Southern Company Common Stock 33,016 30,422
---------------------------------------------- --------------------------------------- ------------ ------------------
Jerry L. Stewart Southern Company Common Stock 118,839 111,536
---------------------------------------------- --------------------------------------- ------------ ------------------
Directors, Nominees and Executive Officers
as a group (20 people) Southern Company Common Stock 1,255,285 1,098,030
---------------------------------------------- --------------------------------------- ------------ ------------------
(1) "Beneficial ownership" means the sole or shared power to vote, or to direct
the voting of, a security, and/or investment power with respect to a
security or any combination thereof.
(2) Indicates shares of Southern Company's common stock that certain executive
officers have the right to acquire within 60 days. Shares indicated are
included in the Shares Beneficially Owned Column.
Section 16(a) Beneficial Ownership Reporting Compliance.
No reporting person of the Company failed to file, on a timely basis, the
reports required by Section 16(a).
17
--------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
--------------------------------------------------------------------------------
ITEM NO. 2 - PROPOSED AMENDMENT
The board has approved, and recommends to the shareholders that they adopt, an
amendment to the Company's Articles of Incorporation that would increase the
Company's authorized common stock from 15,000,000 shares to 25,000,000 shares
and create a new class of securities authorized to be issued by the Company to
be called preference stock. If the amendment is adopted, Article IX of the
Company's Articles of Incorporation will be amended and restated to read as set
forth in Appendix C hereto.
Of the 15,000,000 currently authorized shares of common stock, 9,250,000 shares
are outstanding. The additional shares of common stock for which authorization
is sought would be a part of the existing class of common stock, and, if and
when issued, would have the same rights and privileges as the shares of common
stock presently outstanding or authorized to be issued.
The shares of preference stock for which authorization is sought will be a new
class of capital stock of the Company and will rank junior to the rights and
preferences of the Company's preferred stock and Class A preferred stock and
senior to the rights and preferences of the Company's common stock. The proposal
authorizes the Company to issue not in excess of 40,000,000 shares of preference
stock. The shares of the preference stock may be divided into and issued in
series. The board will establish the specific terms, rights, preferences,
limitations and restrictions of each series of preference stock in an amendment
to the Company's Articles of Incorporation with respect to such series.
The Company expects to issue the common stock to Southern Company for cash in an
offering exempt from registration under the Securities Act of 1933, as amended
("1933 Act"). The Company expects to issue the preference stock for cash in
public offerings registered under the 1933 Act.
Purpose and Effect of Amendment
The board believes that an increase in the number of shares of authorized common
stock as contemplated by the proposal would benefit the Company and its
shareholders by giving the Company needed flexibility in its corporate planning
and its ability to raise additional capital and respond to developments in the
Company's business. The board has no present intention to authorize the issuance
of any shares of common stock to any person other than Southern Company.
The board believes that the creation and authorization of preference stock as
contemplated by the proposal would benefit the Company and its shareholders by
giving the Company needed flexibility in its ability to raise capital and
respond to changes in the capital markets. Dividends on the Company's preferred
stock and Class A preferred stock are cumulative. The terms of the preference
stock permit the issuance of preference stock with non-cumulative dividends.
The additional shares of common stock and the shares of preference stock will be
issuable without further authorization by vote or consent of the shareholders of
the Company and on such terms and for such consideration as may be determined by
the board, subject to applicable law, and in such amounts as authorized by the
Alabama Public Service Commission.
Vote Required
The proposed increase in the authorized number of shares of common stock
requires the affirmative vote of the larger amount in total value of the common
stock and all classes of preferred stock and Class A preferred stock voting as a
single class. The proposed creation and authorization of the preference stock
requires the affirmative vote of two-thirds of the total value of the common
stock and all classes of preferred stock and Class A preferred stock voting as a
single class.
For voting purposes, the total value of the preferred stock shall be equal to
the par value of all shares of preferred stock outstanding, the total value of
18
the Class A preferred stock shall be equal to the stated value of all shares of
Class A preferred stock outstanding and the total value of the common stock
shall be equal to the par value of all shares of common stock outstanding plus
Paid-in capital. The total value of the outstanding preferred stock is
$47,511,500, the total value of the outstanding Class A preferred stock is
$425,000,000 and the total value of the outstanding common stock using Paid-in
capital as of December 31, 2005 is $2,365,056,000. Southern Company, as owner of
all of the Company's common stock, will vote for the proposed amendment.
19
APPENDIX A
Southern Company
Audit Committee Charter
This Charter identifies the composition, purpose, authority, meeting
requirements and responsibilities of the Southern Company (the Company) Audit
Committee (the Committee) as approved by the Southern Company Board of Directors
(the Board).
I. Composition
The Committee will be comprised of at least three independent members of the
Board, each of whom will be financially literate. A deliberate effort will be
made to include at least one Director who is a financial expert. The selection
of Committee members will be in accordance with requirements for independence
and financial literacy and expertise, as interpreted by the Board in its best
business judgment, giving full consideration to the rules of the Securities and
Exchange Commission (SEC) and the New York Stock Exchange.
II. Purpose
To assist the Board of Directors in fulfilling its oversight
responsibilities for the following:
A. Integrity of the financial reporting process;
B. The system of internal control;
C. The independence and performance of the internal and independent audit
process;
D. The Company's process for monitoring adherence with the spirit and intent
of its Code of Ethics and compliance with laws and regulations; and
E. Assistance to Executive Management and the Chief Executive Officer in
setting an appropriate "Tone at the Top" that encourages the highest levels
of ethical behavior and integrity in all matters.
III. Authority
The Audit Committee has authority to conduct or authorize investigations
into any matters within its scope of responsibility. It is empowered to:
A. Appoint, compensate, and oversee the work of the independent auditors.
B. Resolve any disagreements between management and the independent
auditors regarding financial reporting.
C. Pre-approve all auditing and non-audit services provided by the
independent auditors.
D. Retain independent counsel, accountants, or others to advise the
committee or assist in the conduct of an investigation. E. Seek any
information it requires from employees--all of whom are directed to
cooperate with the Committee's requests--or external parties. F. Meet
with Company officers, independent auditors, internal auditors, inside
counsel or outside counsel, as necessary.
In the execution of its duties, the Committee will report to the Board of
Directors.
IV. Meeting Requirements
The Committee shall meet a minimum of four times each year, or more often if
warranted, to receive reports and to discuss the quarterly and annual financial
A-1
statements, including disclosures and other related information. The Committee
shall meet separately, at least annually, with Company management, the Director
of Internal Auditing, the Compliance Officer, and the independent auditors to
discuss matters that the Committee or any of these persons believe should be
discussed privately. Meetings of the Committee may utilize conference call,
Internet or other similar electronic communication technology.
V. Responsibilities
A. Financial Reporting and Independent Audit Process -
The oversight responsibility of the Committee in the area of financial
reporting (including disclosure controls and procedures and internal
control over financial reporting) is to provide reasonable assurance
that the Company's financial disclosures and accounting practices
accurately portray the financial condition, results of operations,
cash flows, plans and long-term commitments of the Company on a
consolidated basis, as well as on a separate company basis for each
consolidated subsidiary that has publicly traded securities. To
accomplish this, the Committee will:
1. Provide oversight of the independent audit process, including
direct responsibility for:
a. Annual appointment of the independent auditors.
b. Compensation of the independent auditors.
c. Review and confirmation of the independence of the external
auditors by obtaining statements from the auditors on
relationships between the auditors and the Company,
including non-audit services, and discussing the
relationships with the auditors. Ensure that non-audit
services provided by the independent auditors comply with
and are disclosed to investors in periodic reports required
by the Securities Exchange Act of 1934 and the Sarbanes
Oxley Act of 2002.
d. Review of the independent auditors' quarterly and annual
work plans, and results of audit engagements.
e. Review of the experience and qualifications of the senior
members of the independent audit team annually and ensure
that all partner rotation requirements are executed.
f. Evaluation of the independent auditors' performance.
g. Oversight of the coordination of the independent auditors'
activities with the Internal Auditing and Accounting
functions.
2. Review and discuss with management the quarterly and annual
consolidated earnings announcements and earnings guidance
provided to analysts and rating agencies.
3. Review and discuss with management and the independent auditors
the quarterly and annual financial reports and recommend those
reports for filing with the SEC. The financial reports include
the Southern Company consolidated financial reports as well as
the separate financial reports for all consolidated subsidiaries
with publicly traded securities.
a. The review and discussion will be based on timely reports
from the independent auditors, including:
i. All critical accounting policies and practices to be
used.
ii. All alternative treatments of financial information
within generally accepted accounting principles that
have been discussed with management; ramifications of
the use of such alternative disclosures and treatments,
and the treatment preferred by the independent
auditors.
iii. Other material written communications between the
independent auditors and management, such as any
management letter or schedule of unadjusted
differences.
b. In addition, the following items will also be reviewed and
discussed:
i. Significant judgments and estimates made by management.
ii. Significant reporting or operational issues identified
during the reporting period, including how they were
resolved.
iii. Issues on which management sought second accounting
opinions.
A-2
iv. Significant regulatory changes and accounting and
reporting developments proposed by Financial Accounting
Standards Board, SEC, Public Company Accounting
Oversight Board (PCAOB) or other regulatory agencies.
v. Any audit problems or difficulties and management's
response.
4. Review the letter of management representations given to the
independent auditors in connection with the audit of the annual
financial statements.
B. Internal Control -
The responsibility of the Committee in the area of internal control,
in addition to the actions described in Section (V).(A.)., is to:
1. Provide oversight of the internal audit function including:
a. Review of audit plans, budgets and staffing levels.
b. Review of audit results.
c. Review of management's appointment, appraisal of, and/or
removal of the Company's Director of Internal Auditing. At
least every two years, regardless of the performance of the
incumbent, the President and Chief Executive Officer will
review with the Committee the merits of reassigning the
Director of Internal Auditing.
2. Assess management's response to any financial reporting or
compliance deficiencies.
3. Provide oversight of the Company's Legal and Regulatory
Compliance and Ethics Programs, including:
a. Creation and maintenance of procedures for:
i. Receipt, retention and treatment of complaints received
by management regarding accounting, internal accounting
controls or audit matters.
ii. Confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing
matters.
b. Review of plans and activities of the Company's Corporate
Compliance Officer.
c. Review of results of auditing or other monitoring programs
designed to prevent or detect violations of laws or
regulations.
d. Review of corporate policies relating to compliance with
laws and regulations, ethics, conflict of interest and the
investigation of misconduct or fraud.
e. Review of reported cases of employee fraud, conflict of
interest, unethical or illegal conduct.
4. Review the quality assurance practices of the internal auditing
function and the independent auditors.
5. Review and discuss significant risks facing the Company and the
guidelines and policies to govern the process by which risk
assessment and risk management is undertaken.
C. Conduct an annual self-assessment of the Committee's performance.
D. Other
1. Set clear employment policies for Southern Company's hiring of
employees or former employees of the independent auditors.
2. Report Committee activities and findings to the Board on a
regular basis.
3. Report Committee activities in the Company's annual proxy
statement to shareholders.
4. Review this charter at least annually and recommend appropriate
changes.
ADOPTED ON October 17, 2005
BY THE SOUTHERN COMPANY
BOARD OF DIRECTORS
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APPENDIX B
Alabama Power Company
Nominating Committee Charter
Function
The Nominating Committee identifies and recommends to the Board of Directors the
nominees for election to the Board.
Membership
The Committee shall be composed of no less than three directors. The Chairman
shall be selected from among the Committee members. The Committee and its
Chairman shall be appointed annually by the Board of Directors.
Meetings
The Nominating Committee has no scheduled meeting times. Special meetings will
be called "as needed" by the Chairman of the Committee on one day's notice to
all members of the Committee. A quorum for the transaction of any business by
the Committee shall be a majority of the members of the Committee. The act of a
majority of the directors serving at any meeting of the Committee at which a
quorum is present shall be the act of the Committee.
Approved: April 25, 2003
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APPENDIX C
Proposed Amendment and Restatement of Article IX of
Alabama Power Company's Articles of Incorporation
Article IX
Capital Stock
The corporation is authorized to issue four classes of shares
of capital stock to be designated, respectively, "common stock,"
"preferred stock," "Class A preferred stock" and "preference stock."
The total number of shares of stock which the corporation shall have
authority to issue shall be 96,350,000 shares, of which 25,000,000
shares shall be common stock with a par value of $40 per share,
3,850,000 shares shall be preferred stock with a par value of $100 per
share, 27,500,000 shares shall be Class A preferred stock with a par
value of $1 per share and 40,000,000 shares shall be preference stock
with a par value of $1 per share. The designations, preferences, voting
powers or restrictions or qualifications thereof, the rights of
redemption, retirement and conversion of the shares of capital stock of
the corporation, and the general provisions with respect thereto, shall
be as hereinafter set forth; provided, however, that the preferred
stock, Class A preferred stock and preference stock may be divided into
and issued from time to time in one or more series, each such series of
preferred stock or Class A preferred stock being hereinafter for
convenience referred to as a "class" of preferred stock or Class A
preferred stock, as the case may be, all such series of preferred stock
or Class A preferred stock being hereinafter for convenience
collectively referred to as "classes" of preferred stock or Class A
preferred stock, as the case may be, and each such series of preference
stock shall be referred to as a "series," of preference stock The board
of directors shall have, and is hereby granted the power and authority
to divide the unissued shares of preferred stock, Class A preferred
stock and preference stock into series (including the power and
authority to reclassify, in the manner provided by law, all or any
number of the unissued shares of preferred stock authorized at the time
of the adoption of the joint agreement between Alabama Power Company
and Birmingham Electric Company prescribing the terms and conditions of
the merger of Birmingham Electric Company into and with Alabama Power
Company), to fix and determine the following relative rights and
preferences of any such series of preferred stock and Class A preferred
stock, and the number of shares constituting any such series and the
designation thereof, or any of them: (1) the dividend rate, (2) the
dividend payment dates, (3) the redemption price thereof, (4) the
amount payable in event of liquidation, voluntary and involuntary and
(5) the sinking fund provisions, if any, for the redemption or purchase
of shares; to fix and determine the following relative rights and
preferences of any such series of preference stock, and the number of
shares constituting any such series and the designation thereof, or any
of them: (1) the dividend rate, (2) the dividend payment dates, (3) the
dividend rights, including the cumulative or non-cumulative nature
thereof, (4) the terms and conditions for redemption of shares and the
redemption price thereof, (5) the amount payable in event of
liquidation, voluntary and involuntary, (6) the sinking fund
provisions, if any, for the redemption or purchase of shares and (7)
special voting rights, if any; and to increase or decrease the number
of shares of any such series subsequent to the issue of shares of that
series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall assume the
status of authorized but unissued shares of preferred stock, Class A
preferred stock or preference stock, as the case may be. The board of
directors may issue and sell such shares of preferred stock, Class A
preferred stock or preference stock in series and any other authorized
shares provided for in this Article IX. Upon the issuance of shares of
Class A preferred stock and preference stock, there shall be
transferred to stated capital represented by each such share of Class A
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preferred stock or preference stock, as the case may be, an amount
equal to the excess of the consideration received over the par value
thereof (up to an amount which, when added to such par value, shall not
exceed such share's preferential claim in the event of involuntary
liquidation) and the stated capital represented by each share so
determined shall be equal to such share's preferential claim in the
event of involuntary liquidation.
A. Preferred Stock
1. Classes of Preferred Stock
* * * *
2. General Provisions
The following provisions shall apply to all classes of
preferred stock and Class A preferred stock which may now or hereafter
be authorized or created irrespective of class:
a. The holders of the preferred stock and Class A preferred
stock of each class shall be entitled to receive dividends, payable
when and as declared by the board of directors, on such dates and at
such rates as shall be determined for the respective classes, from the
first day of the current dividend period within which such stock shall
have been originally issued or from such other date within such
dividend period as the board of directors may have determined for such
class, before any dividends shall be declared or paid upon or set apart
for the common stock or any other kind of stock of the corporation not
having preference over the preferred stock and Class A preferred stock
as to the payment of dividends. Such dividends shall be cumulative so
that if for any dividend period or periods dividends shall not have
been paid or declared and set apart for payment upon all outstanding
preferred stock and Class A preferred stock at the rates and from the
dates determined for the respective classes, the deficiency shall be
fully paid, or declared and set apart for payment, before any dividends
shall be declared or paid upon the common stock or any other kind of
stock of the corporation not having preference over the preferred stock
and Class A preferred stock as to the payment of dividends. Dividends
shall not be declared and set apart for payment, or paid, on the
preferred stock or Class A preferred stock of any one class, for any
dividend period, unless dividends have been or are contemporaneously
declared and set apart for payment, or paid, on the preferred stock and
Class A preferred stock of all classes for all dividend periods
terminating on the same or on an earlier date.
b. When full cumulative dividends as aforesaid upon the
preferred stock and Class A preferred stock of all classes then
outstanding for all past dividend periods and for the current dividend
periods shall have been paid or declared and set apart for payment, the
board of directors may declare dividends on the common stock or on any
other kind of stock over which the preferred stock and Class A
preferred stock have preference as to the payment of dividends, and no
holders of any class of the preferred stock or Class A preferred stock
as such shall be entitled to share therein. No dividends (other than
dividends paid in stock over which the preferred stock and Class A
preferred stock have preference as to the payment of dividends and as
to assets or dividends paid in cash or property, if presently
thereafter there shall be paid to the corporation in cash or property
an amount equal to such dividends, for shares of, or as a capital
contribution with respect to, such stock over which the preferred stock
and Class A preferred stock have such preference) shall be paid or any
other distribution of assets made, by purchase of shares or otherwise,
on common stock or on any other kind of stock over which the preferred
stock and Class A preferred stock have preference as to the payment of
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dividends or as to assets except out of accumulated surplus available
for distribution to stock over which the preferred stock and Class A
preferred stock have preference as to the payment of dividends and as
to assets, earned subsequent to January 31, 1942.
c. Upon any dissolution, liquidation or winding up of the
corporation, whether voluntary or involuntary, the holders of preferred
stock and Class A preferred stock of each class, without any preference
of the shares of any class of preferred stock or Class A preferred
stock over the shares of any other class of preferred stock or Class A
preferred stock, shall be entitled to receive out of the assets of the
corporation, whether capital, surplus or other, before any distribution
of the assets to be distributed shall be made to the holders of common
stock or of any other kind of stock not having preference as to assets
over the preferred stock or Class A preferred stock, the amount
specified to be payable on the shares of such class in the event of
voluntary or involuntary liquidation, as the case may be. In case the
assets shall not be sufficient to pay in full the amounts determined to
be payable on all the shares of preferred stock and Class A preferred
stock in the event of voluntary or involuntary liquidation, as the case
may be, then the assets available for such payment shall be distributed
to the extent available as follows: first, to the payment, pro rata, of
the amount payable in the event of involuntary liquidation on each
share of preferred stock and Class A preferred stock outstanding
irrespective of class; second, to the payment of the accrued dividends
on such shares, such payment to be made pro rata in accordance with the
amount of accrued dividends on each such share; and, third, to the
payment of any amounts in excess of the amount payable in the event of
involuntary liquidation on each such share plus accrued dividends which
may be payable on the shares of any class in the event of voluntary or
involuntary liquidation, as the case may be, such payment also to be
made pro rata in accordance with the amounts, if any, so payable on
each such share. After payment to the holders of the preferred stock
and the Class A preferred stock of the full preferential amounts
hereinbefore provided for, the holders of the preferred stock and the
Class A preferred stock as such shall have no right or claim to any of
the remaining assets of the corporation, either upon any distribution
of such assets or upon dissolution, liquidation or winding up, and the
remaining assets to be distributed, if any, upon a distribution of such
assets or upon dissolution, liquidation or winding up, may be
distributed among the holders of the common stock or of any other kind
of stock over which the preferred stock and the Class A preferred stock
have preference as to assets. Without limiting the right of the
corporation to distribute its assets or to dissolve, liquidate or wind
up in connection with any sale, merger, or consolidation, the sale of
all the property of the corporation to, or the merger or consolidation
of the corporation into or with, any other corporation shall not be
deemed to be a distribution of assets or a dissolution, liquidation or
winding up for the purpose of this paragraph.
d. At the option of the board of directors of the corporation,
the corporation may redeem any class of preferred stock or Class A
preferred stock which is redeemable, and each such class may be
redeemed, as a whole or in part, at any time at the redemption price
specified for such class. Not less than thirty nor more than sixty days
prior to the date fixed for redemption a notice of the time and place
thereof shall be given to the holders of record of the preferred stock
or Class A preferred stock so to be redeemed, by mail or publication,
in such manner as may be prescribed by the by-laws of the corporation
or by resolution of the board of directors, but such resolution shall
in no way conflict with the by-laws. In every case of redemption of
less than all the outstanding shares of any one class of preferred
stock or Class A preferred stock, the shares of such class to be
redeemed shall be chosen by lot in such manner as may be prescribed by
resolution of the board of directors. At any time after notice of
redemption has been given in the manner prescribed by the by-laws of
the corporation or by resolution of the board of directors to the
holders of stock so to be redeemed, the corporation may deposit, or may
cause its nominee to deposit, the aggregate redemption price with some
bank or trust company in the Borough of Manhattan, The City of New
York, or in the city of Birmingham, Alabama, named in such notice,
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payable on the date fixed for redemption as aforesaid and in the
amounts aforesaid to the respective orders of the holders of the shares
so to be redeemed, on endorsement to the corporation or its nominee, or
otherwise, as may be required, and upon surrender of the certificates
for such shares. Upon the deposit of such money as aforesaid, or, if no
such deposit is made, upon such redemption date (unless the corporation
defaults in making payment of the redemption price as set forth in such
notice), such holders shall cease to be shareholders with respect to
such shares, and from and after the making of such deposit, or, if no
such deposit is made, after the redemption date (the corporation not
having defaulted in making payment of the redemption price as set forth
in such notice), such holders shall have no interest in or claim
against the corporation, or its nominee, with respect to such shares,
but shall be entitled only to receive such moneys on the date fixed for
redemption as aforesaid from such bank or trust company, or, if no such
deposit is made, from the corporation, without interest thereon, upon
endorsement, if required, and surrender of the certificates as
aforesaid.
If such deposit shall be made by a nominee of the corporation
as aforesaid, the prior holders of the shares for the redemption of
which such deposit shall have been made shall, upon such deposit, cease
to have any right or interest in such shares except as set forth in the
foregoing paragraph, and such nominee shall, upon such deposit, become
the owner of the shares with respect to which such deposit was made and
certificates may be issued to such nominees in evidence of such
ownership.
In case the holder of any such preferred stock or Class A
preferred stock shall not, within six years after such deposit, claim
the amount deposited as above stated for the redemption thereof, the
depositary shall upon demand pay over to the corporation such amounts
so deposited and the depositary shall thereupon be relieved from all
responsibility to the holder thereof. No interest on such deposit shall
be payable to any such holder.
Nothing herein contained shall limit any legal right of the
corporation to purchase or otherwise acquire any shares of the
preferred stock or Class A preferred stock; provided, however, that the
corporation shall not redeem, purchase or otherwise acquire any shares
of the preferred stock or Class A preferred stock, if, at the time of
such redemption, purchase or other acquisition, dividends payable on
the preferred stock or Class A preferred stock of any class shall be in
default in whole or in part, unless, prior to or concurrently with such
redemption, purchase or other acquisition, all such defaults shall be
cured or unless such action has been ordered, approved or permitted
under the Public Utility Holding Company Act of 1935 by the Securities
and Exchange Commission or any successor commission or regulatory
authority of the United States of America.
The corporation may from time to time reissue any shares of
the preferred stock or Class A preferred stock which have been
redeemed, purchased or otherwise acquired by it and resell the same for
such consideration as may be fixed by the board of directors.
e. Notwithstanding any of the provisions of Article XI hereof,
so long as any shares of the preferred stock or Class A preferred stock
are outstanding, the corporation shall not, without the affirmative
vote in favor thereof of the holders of at least two-thirds of the
total voting power of the shares of preferred stock and Class A
preferred stock at the time outstanding,
(1) authorize or create any kind of stock preferred
as to dividends or assets over the preferred stock or Class A
preferred stock or issue (such issuance to be within twelve
months after such vote) any shares of any kind of stock
preferred as to dividends or assets over the preferred stock
or Class A preferred stock or any security convertible into
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such kind of stock or change any of the rights and preferences
of the then outstanding preferred stock or Class A preferred
stock in any manner so as to affect adversely the holders
thereof; provided, however, that if any such change would
adversely affect the holders of only one, but not the other,
such kind of stock, only the vote of the holders of at least
two-thirds of the total voting power of the outstanding shares
of the kind so affected shall be required. Nothing in this
paragraph contained shall authorize any such authorization,
creation or change by the vote of the holders of a less number
of shares of preferred stock or Class A preferred stock, or of
any other class of stock, or of all classes of stock, than is
required for such authorization, creation or change by the
laws of the State of Alabama at the time applicable thereto;
(2) issue, sell or otherwise dispose of any shares of
preferred stock if the total number of shares thereof
thereafter issued and outstanding would exceed 300,000, or
issue, sell or otherwise dispose of any shares of Class A
preferred stock, or issue, sell or otherwise dispose of any
kind of stock over which the preferred stock and Class A
preferred stock do not have preference as to the payment of
dividends and as to assets, or issue, sell or otherwise
dispose of any shares of preferred stock or Class A preferred
stock or of any kind of stock over which the preferred stock
and Class A preferred stock do not have preference as to the
payment of dividends and as to assets, which have been
redeemed, purchased or otherwise acquired by the corporation,
unless, in any such case, (a) the net income of the
corporation available for the payment of dividends for a
period of twelve consecutive calendar months within the
fifteen calendar months immediately preceding the issuance,
sale or disposition of such stock (including, in any case in
which such stock is to be issued, sold or otherwise disposed
of in connection with the acquisition of new property, the net
income of the property to be so acquired, computed on the same
basis as the net income of the corporation available for the
payment of dividends) is at least equal to two times the
annual dividend requirements on all outstanding shares of
preferred stock and Class A preferred stock and of all kinds
of stock over which the preferred stock and Class A preferred
stock do not have preference as to the payment of dividends
and as to assets, including the shares proposed to be issued,
and (b) the gross income of the corporation available for the
payment of interest for a period of twelve consecutive
calendar months within the fifteen calendar months immediately
preceding the issuance, sale or disposition of such stock
(including, in any case in which such stock is to be issued,
sold or otherwise disposed of in connection with the
acquisition of new property, the gross income of the property
to be so acquired, computed on the same basis as the gross
income of the corporation available for the payment of
interest) is at least equal to one and one-half times the
aggregate of the annual interest requirements (adjusted by
provision for amortization of debt discount and expense or of
premium on debt, as the case may be) on all outstanding
indebtedness of the corporation and the annual dividend
requirements (adjusted by provision for amortization of
preferred stock premium and expense) on all outstanding shares
of preferred stock and Class A preferred stock and of all
kinds of stock over which the preferred stock and Class A
preferred stock do not have preference as to the payment of
dividends and as to assets, including the shares proposed to
be issued; or
(3) issue, sell or otherwise dispose of any shares of
preferred stock if the total number of shares thereof
thereafter issued and outstanding would exceed 300,000, or
issue, sell or otherwise dispose of any shares of Class A
preferred stock, or issue, sell or otherwise dispose of any
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kind of stock over which the preferred stock and Class A
preferred stock do not have preference as to the payment of
dividends and as to assets, or issue, sell or otherwise
dispose of any shares of preferred stock or Class A preferred
stock, or of any kind of stock over which the preferred stock
and Class A preferred stock do not have preference as to the
payment of dividends and as to assets, which have been
redeemed, purchased or otherwise acquired by the corporation,
unless, in any such case, the aggregate of the par value of,
or stated capital represented by, the outstanding shares of
common stock and of the surplus of the corporation (paid in,
earned and other, if any) shall be not less than the aggregate
amount payable in the event of involuntary liquidation upon
all outstanding shares of preferred stock and Class A
preferred stock and all kinds of stock over which the
preferred stock and Class A preferred stock do not have
preference as to the payment of dividends and as to assets,
including the shares proposed to be issued, provided that no
portion of the surplus of the corporation utilized to satisfy
the foregoing requirement shall be available for dividends or
other distributions of assets, by purchase of shares or
otherwise, on common stock or on any other kind of stock over
which the preferred stock and Class A preferred stock have
preference as to the payment of dividends and as to assets,
until such additional shares are retired or until and to the
extent that the par value of, or stated capital represented
by, the outstanding shares of common stock shall have been
increased.
3. Definition of Terms
a. The term "accrued dividends" shall be deemed to mean in
respect of any share of the preferred stock or Class A preferred stock
of any class, as of any given date, the amount, if any, by which the
product of the rate of dividend per annum, determined upon the shares
of such class, multiplied by the number of years and any fractional
part of a year which shall have elapsed from the date after which
dividends on such stock became cumulative to such given date, exceeds
the total dividends actually paid on such stock and the dividends
declared and set apart for payment. Accumulations of dividends shall
not bear interest.
b. The term "outstanding," whenever used herein with respect
to shares of preferred stock or Class A preferred stock or of any other
kind of stock which are by their terms redeemable, or with respect to
bonds or other evidences of indebtedness, shall not include any such
shares or bonds or evidences of indebtedness which have been called for
redemption in accordance with the provisions applicable thereto, notice
of such call for redemption having been given or appropriately provided
for as required by such provisions, and for the redemption of which a
sum of money sufficient to pay the amount payable on such redemption
shall have been deposited by the corporation with a bank or trust
company, irrevocably in trust for such purpose, or any bonds or other
evidences of indebtedness for the payment of which at maturity
provision has been made in a similar manner.
c. The term "net income of the corporation available for the
payment of dividends" shall mean the balance remaining after deducting
from the total gross revenues of the corporation from all sources the
following: (1) all operating expenses and taxes, including charges to
income for general taxes and for federal and state taxes measured by
income, for retirement or depreciation reserve and for amortization or
other disposition of amounts, if any, classified as amounts in excess
of original cost of utility plant, and (2) all interest charges and
other income deductions, including charges to income for the
amortization of debt discount, premium and expense and of preferred
stock and Class A preferred stock premium and expense, and the total
amount, if any, by which the charges to income or earned surplus during
such period as provision for depreciation shall have been less than an
amount equal to the product of the applicable percentage (as defined
below) and the mathematical average of the amounts of depreciable
property (as defined in Section 3 of the Supplemental Indenture dated
as of May 1, 1957) at the opening of business on the first day and at
the close of business on the last day of such period. The term
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"applicable percentage" shall mean 3.0% or such other percentage as
shall be authorized or approved, upon application by the corporation,
by the Securities and Exchange Commission, or by any successor
commission thereto, under the Public Utility Holding Company Act of
1935.
d. The term "gross income of the corporation available for the
payment of interest" shall mean the balance remaining after deducting
from the total gross revenues of the corporation from all sources all
operating expenses and taxes, including charges to income for general
taxes and for federal and state taxes measured by income, for
retirement or depreciation reserve and for amortization or other
disposition of amounts, if any, classified as amounts in excess of
original cost of utility plant, and the total amount, if any, by which
the charges to income or earned surplus during such period as provision
for depreciation shall have been less than an amount equal to the
product of the applicable percentage (as defined below) and the
mathematical average of the amounts of depreciable property (as defined
in Section 3 of the Supplemental Indenture dated as of May 1, 1957) at
the opening of business on the first day and at the close of business
on the last day of such period. The term "applicable percentage" shall
mean 3.0% or such other percentage as shall be authorized or approved,
upon application by the corporation, by the Securities and Exchange
Commission, or by any successor commission thereto, under the Public
Utility Holding Company Act of 1935.
B. Preference Stock
1. General Provisions
The following provisions shall apply to all series of
preference stock which may now or hereafter be authorized or created
irrespective of series:
a. The preference stock is subject to the prior rights and
preferences of the preferred stock and Class A preferred stock.
b. So long as any shares of preference stock are outstanding,
no dividends shall be declared or paid upon or set apart for the common
stock or any other kind of stock not having preference over the
preference stock as to the payment of dividends and as to assets, nor
any sums applied to the purchase, redemption or retirement of any class
of such stock, unless (i) full dividends on all shares of cumulative
preference stock, of all series outstanding, for all past dividend
periods shall have been paid or declared and a sum sufficient for the
payment thereof set apart and the full dividend for the then-current
dividend period shall have been or concurrently shall be declared, and
(ii) full dividends for the then-current dividend period on all shares
of non-cumulative preference stock, of all series outstanding, have
been, or contemporaneously are, paid, or declared and a sum sufficient
for the payment thereof set aside. Unpaid accrued dividends on the
preference stock shall not bear interest.
When specified dividends are not paid in full on all series of
preference stock, the shares of each series of preference stock shall
share ratably in any partial payment of dividends in accordance with
the sums which would be payable on said shares if all dividends were
paid in full; provided, however, that non-cumulative preference stock
shall not share in accumulations of accrued and unpaid dividends for
prior dividend periods unless previously declared.
After such dividends as aforesaid upon the preference stock of
all series then outstanding shall have been paid or declared and set
apart for payment, the board of directors may declare dividends on the
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common stock or any other class of stock over which the preference
stock has preference as to the payment of dividends, and no holders of
any series of the preference stock as such shall be entitled to share
therein.
c. Upon any dissolution, liquidation or winding up of the
corporation, whether voluntary or involuntary, before any distribution
shall be made to the holders of the common stock or any other class of
stock over which the preference stock has preference as to the payment
of dividends or assets, but subject to the prior rights and preferences
of the holders of preferred stock and the Class A preferred stock, the
holders of preference stock of each series, without any preference of
the shares of any series of preference stock over the shares of any
other series of preference stock, shall be entitled to receive out of
the assets of the corporation, whether capital, surplus or other, the
amount specified to be payable on the shares of such series in the
event of voluntary or involuntary liquidation, as the case may be.
In case the assets shall not be sufficient to pay in full the
amounts determined to be payable on all the shares of preference stock
in the event of voluntary or involuntary liquidation, as the case may
be, then the assets available for such payment shall be distributed to
the extent available as follows: first, to the payment, pro rata, of
the amount payable in the event of involuntary liquidation on each
share of preference stock outstanding irrespective of series; second,
to the payment of the accrued dividends, if any, on such shares, such
payment to be made pro rata in accordance with the amount of accrued
dividends on each such share; and, third, to the payment of any amounts
in excess of the amount payable in the event of involuntary liquidation
on each share plus accrued dividends which may be payable on the shares
of any series in the event of voluntary or involuntary liquidation, as
the case may be, such payment also to be made pro rata in accordance
with the amounts, if any, so payable on each such share. After payment
to the holders of the preference stock of the full preferential amounts
hereinbefore provided for, the holders of the preference stock as such
shall have no right or claim to any of the remaining assets of the
corporation, either upon any distribution of such assets or upon
dissolution, liquidation or winding up, and the remaining assets to be
distributed, if any, upon a distribution of such assets or upon
dissolution, liquidation or winding up, may be distributed among the
holders of the common stock or of any other class of stock over which
the preference stock has preference as to assets. Without limiting the
right of the corporation to distribute its assets or to dissolve,
liquidate or wind up in connection with any sale, merger or
consolidation, the sale of all the property of the corporation to, or
the merger or consolidation of the corporation into or with, any other
corporation shall not be deemed to be a distribution of assets or a
dissolution, liquidation or winding up for the purposes of this
paragraph.
d. So long as any shares of the preference stock are
outstanding, the corporation shall not, without the affirmative vote in
favor thereof of the holders of at least a majority of the total voting
power of the shares of preference stock at the time outstanding voting
together as a single class, increase the authorized shares of preferred
stock or Class A preferred stock or authorize or create any other class
of stock preferred as to dividends or assets over the preference stock
or change any of the rights and preferences of the then outstanding
preference stock in any manner so as to affect adversely the holders
thereof; provided, however, that if any such change would affect
adversely the holders of only one or more series of the preference
stock, but not other series of the preference stock, only the vote of
the holders of at least a majority of the total voting power of the
outstanding shares of the series so affected voting together as a
single class shall be required; and provided further that nothing in
this paragraph contained shall authorize any such authorization,
creation or change by the vote of the holders of a less number of
shares of preference stock, or of any other class of stock, or of all
classes of stock, than is required for such authorization, creation or
change by the laws of the State of Alabama at the time applicable
thereto.
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2. Definition of Terms
a. The term "accrued dividends" shall be deemed to mean (1) in
respect of any share of cumulative preference stock of any series, as
of any given date, the amount, if any, by which the product of the rate
of dividend per annum, determined upon the shares of such series,
multiplied by the number of years and any fractional part of a year
which shall have elapsed from the date after which dividends on such
stock became cumulative to such given date, exceeds the total dividends
actually paid on such stock and the dividends declared and set apart
for payment and (2) in respect of any share of non-cumulative
preference stock of any series, as of any given date, the amount, if
any, by which the product of the rate of dividend per annum, determined
upon the shares of such series, multiplied by the number of days which
shall have elapsed for the then current dividend period, exceeds the
total dividends actually paid on such stock and the dividends declared
and set apart for payment for such current dividend period.
b. The term "outstanding," whenever used herein with respect
to shares of preference stock or of any other kind of stock which are
by their terms redeemable, or with respect to bonds or other evidences
of indebtedness, shall not include any such shares or bonds or
evidences of indebtedness which have been called for redemption in
accordance with the provisions applicable thereto, notice of such call
for redemption having been given or appropriately provided for as
required by such provisions, and for the redemption of which a sum of
money sufficient to pay the amount payable on such redemption shall
have been deposited by the corporation with a bank or trust company,
irrevocably in trust for such purpose, or any bonds or other evidences
of indebtedness for the payment of which at maturity provision has been
made in a similar manner.
C. Common Stock
There shall be a class of stock of the corporation designated
as common stock and each share of common stock shall be equal to every
other share of such stock in every respect.
D. Voting Powers
1. At all elections of directors of the corporation, the
holders of preferred stock and Class A preferred stock shall have full
voting rights with the holders of common stock, all voting together as
a single class; each holder of preferred stock and Class A preferred
stock with a stated value of $100 being entitled to two-fifths vote for
each share thereof standing in his name, each holder of Class A
preferred stock with a stated value of $25 per share being entitled to
one-tenth vote for each share thereof standing in his name, each holder
of Class A preferred stock with a stated value of $100,000 being
entitled to 400 votes for each share thereof standing in his name and
each holder of common stock being entitled to one vote for each share
thereof standing in his name. In addition, with the approval of the
board of directors and the holders of a majority of the outstanding
shares of common stock, the Joint Agreement may be amended to provide
that the holders of outstanding shares of any series of preference
stock may be entitled to full voting rights in the election of
directors, to vote together with the holders of common stock, preferred
stock and Class A preferred stock, with each holder of preference stock
being entitled to one-tenth of a vote for each share thereof standing
in his name.
On all other matters, except on matters in respect of which
the laws of the State of Alabama shall provide that all shareholders
shall have the right to vote irrespective of whether such right shall
have been relinquished by any of such shareholders and except as
otherwise herein provided, the holders of common stock shall have the
exclusive right to vote.
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At all elections of directors of the corporation, each
shareholder entitled to vote for directors shall have the right to
cumulate his votes and to give to one candidate for whom he may vote as
many votes as the number of directors to be elected by the holders of
the class of stock held by such shareholder multiplied by the number of
his votes equals, or to distribute them on the same principle among as
many such candidates as he sees fit.
2. Notwithstanding the foregoing, whenever and as often as
four quarterly dividends payable on the preferred stock or Class A
preferred stock of any class shall be in default, in whole or in part,
the holders of the preferred stock and Class A preferred stock of all
classes shall have the exclusive right, voting separately and as a
single class, to vote for and to elect the smallest number of directors
that shall constitute a majority of the then authorized number of
directors of the corporation. In the event of defaults entitling the
preferred stock and Class A preferred stock to vote as aforesaid, the
holders of common stock shall have the exclusive right, subject to the
rights of the holders of the preference stock, voting separately and as
a class, to vote for and to elect the greatest number of directors that
shall constitute a minority of the then authorized number of directors
of the corporation. In each such instance in which the holders of the
preferred stock and the Class A preferred stock are entitled to vote
separately and as a single class or to vote together with the holders
of the preference stock and common stock, other than for the election
of directors, the relative voting power of the various classes of stock
shall be computed as hereinafter provided. These additional voting
rights of the holders of the preferred stock and Class A preferred
stock shall cease, however, when all defaults in the payment of
dividends on their stock shall have been cured, and such dividends
shall be declared and paid out of any funds legally available therefor
as soon as, in the judgment of the board of directors, is reasonably
practicable.
Whenever the right shall have accrued to the holders of the
preferred stock and Class A preferred stock to elect directors, voting
separately as a class, the terms of office, as directors, of all
persons who may be directors of the corporation at the time shall
terminate upon the election of a majority of the board of directors by
the holders of the preferred stock and Class A preferred stock. If the
holders of the common stock shall not then have elected the remaining
directors of the corporation, the directors of the corporation, in
office just prior to the election of a majority of the board of
directors by the holders of the preferred stock and Class A preferred
stock shall elect the remaining directors of the corporation.
Thereafter so long as the majority of the board of directors is being
elected by the holders of the preferred stock and Class A preferred
stock, the remaining directors, whether elected by directors as
aforesaid or by the holders of the common stock, shall continue in
office until their successors are elected by the holders of the common
stock. Any vacancy in the board of directors occurring during any
period that the preferred stock and Class A preferred stock shall have
representatives on the board by exercise of the special right herein
provided to elect a majority of the board, shall be filled by a
majority vote of the remaining directors representing the class of
stock theretofore represented by the director causing the vacancy or by
the remaining director representing such class if there be but one.
Upon the termination of such exclusive right of the holders of the
preferred stock and Class A preferred stock to elect a majority of the
directors of the corporation, the terms of office of all the directors
of the corporation elected by vote of the holders of the preferred
stock and Class A preferred stock shall terminate and their successors
may be elected by the vote of a majority of the remaining directors or
at a meeting of the shareholders of the corporation then entitled to
vote.
Whenever the right shall have accrued to the holders of the
preferred stock and Class A preferred stock to elect directors, voting
separately as a class, it shall be the duty of the chairman of the
board, the president, a vice-president or the secretary of the
corporation forthwith to call and cause notice to be given to the
shareholders entitled to vote at a meeting to be held at such time as
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the officers of the corporation may fix, not less than forty-five nor
more than sixty days after the accrual of such right, for the purpose
of electing directors. The notice so given shall be mailed to each
holder of record of the preferred stock and Class A preferred stock at
his last known address appearing on the books of the corporation and
shall set forth, among other things, (i) that by reason of the fact
that four quarterly dividends payable on the preferred stock or Class A
preferred stock of any class are in default, the holders of the
preferred stock and Class A preferred stock, voting separately as a
class, have the right to elect the smallest number of directors
necessary to constitute a majority of the full board of directors of
the corporation, (ii) that any holder of the preferred stock or Class A
preferred stock has the right, at any reasonable time, to inspect, and
make copies of, the list or lists of holders of the preferred stock and
Class A preferred stock maintained at the principal office of the
corporation or at the office of any transfer agent of the preferred
stock or Class A preferred stock, and (iii) either the entirety of this
paragraph or the substance thereof with respect to the number of shares
of the preferred stock and Class A preferred stock required to be
represented at any meeting, or adjournment thereof, called for the
election of directors of the corporation. At the first meeting of
shareholders held for the purpose of electing directors during such
time as the holders of the preferred stock and Class A preferred stock
shall have the special right, voting separately as a class, to elect
directors, the presence in person or by proxy of the holders of a
majority of the outstanding common stock shall be required to
constitute a quorum of such class for the election of directors, and
the presence in person or by proxy of the holders of a majority of the
total voting power of the outstanding shares of preferred stock and
Class A preferred stock shall be required to constitute a quorum of
such class for the election of directors; provided, however, that in
the absence of a quorum of the holders of the preferred stock and Class
A preferred stock, no election of directors shall be held, but a
majority of the total voting power of the holders of the preferred
stock and Class A preferred stock who are present in person or by proxy
shall have power to adjourn the election of the directors to a date not
less than fifteen nor more than fifty days from the giving of the
notice of such adjourned meeting hereinafter provided for; and
provided, further, that at such adjourned meeting, the presence in
person or by proxy of the holders of 35% of the total voting power of
the outstanding preferred stock and Class A preferred stock shall be
required to constitute a quorum of such class for the election of
directors. In the event such first meeting of shareholders shall be so
adjourned, it shall be the duty of the chairman of the board, the
president, a vice-president or the secretary of the corporation, within
ten days from the date on which such first meeting shall have been
adjourned to cause notice of such adjourned meeting to be given to the
shareholders entitled to vote thereat, such adjourned meeting to be
held not less than fifteen days nor more than fifty days from the
giving of such second notice. Such second notice shall be given in the
form and manner hereinabove provided for with respect to the notice
required to be given of such first meeting of shareholders, and shall
further set forth that a quorum was not present at such first meeting
and that the holders of 35% of the total voting power of the
outstanding preferred stock and Class A preferred stock shall be
required to constitute a quorum of such class for the election of
directors at such adjourned meeting. If the requisite forum of holders
of the preferred stock and Class A preferred stock shall not be present
at said adjourned meeting, then the directors of the corporation then
in office shall remain in office until the next annual meeting of the
corporation, or special meeting in lieu thereof, and until their
successors shall have been elected and shall qualify. Neither such
first meeting nor such adjourned meeting shall be held on a date within
sixty days of the date of the next annual meeting of the corporation or
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special meeting in lieu thereof. At each annual meeting of the
corporation, or special meeting in lieu thereof, held during such time
as the holders of the preferred stock and Class A preferred stock,
voting separately as a class, shall have the right to elect a majority
of the board of directors, the foregoing provisions of this paragraph
shall govern such annual meeting, or special meeting in lieu thereof,
as if said annual meeting or special meeting were the first meeting of
shareholders held for the purpose of electing directors after the right
of the holders of the preferred stock and Class A preferred stock,
voting separately as a class to elect a majority of the board of
directors, should have accrued, with the exception that if, at any
adjourned annual meeting, or special meeting in lieu thereof, 35% of
the total voting power of the outstanding preferred stock and Class A
preferred stock is not present in person or by proxy, subject to the
rights of the holders of the preference stock, all the directors shall
be elected by a vote of the holders of a majority of the common stock
of the corporation present or represented at the meeting.
3. Notwithstanding the foregoing, in the event that (1) with
respect to any series of non-cumulative preference stock, any six
quarterly dividends (whether or not consecutive and whether or not
earned and declared) or (2) with respect to any series of cumulative
preference stock, any six consecutive quarterly dividends, have not
been paid in full on such series of preference stock, in whole or in
part, the holders of the preference stock, together with all other
series of preference stock upon which like voting rights are then
exercisable, shall have the exclusive right, voting separately and as a
single class, to vote for and to elect two additional directors of the
corporation and the authorized number of directors of the corporation
shall be increased accordingly to effect such election. These
additional voting rights of the holders of the preference stock will
continue until such time as (1) with respect to any series of
non-cumulative preference stock, full dividends on such series of
preference stock have been paid or declared and set apart regularly for
at least one year (four consecutive full quarterly dividend periods),
or (2) with respect to any series of cumulative preference stock, the
dividends in arrears and the current dividend on such series of
preference stock shall have been paid or declared and set aside for
payment, at which time in either case, such right will terminate,
subject to revesting in the event of a subsequent failure to pay
dividends of the character described above. Upon termination of the
right of the holders of shares of the preference stock to vote as a
single class for the election of directors, the term of office of all
directors then in office elected by such holders voting as a single
class will terminate immediately.
Whenever the right shall have accrued to the holders of the
preference stock to elect directors, voting separately as a class, it
shall be the duty of the chairman of the board, the president, a
vice-president or the secretary of the corporation forthwith to call
and cause notice to be given to the shareholders entitled to vote at a
meeting to be held at such time as the officers of the corporation may
fix, not less than forty-five nor more than sixty days after the
accrual of such right, for the purpose of electing directors. The
notice so given shall be mailed to each holder of record of the
preference stock at his last known address appearing on the books of
the corporation and shall set forth, among other things, (i) that by
reason of the fact that six quarterly dividends payable on such series
of preference stock have not been paid, the holders of the preference
stock, voting together as a single class with the holders of one or
more other series of preference stock upon which like voting rights are
then exercisable, have the right to elect two additional directors of
the corporation, (ii) that any holder of the preference stock has the
right, at any reasonable time, to inspect, and make copies of, the list
or lists of holders of the preference stock maintained at the principal
office of the corporation or at the office of any transfer agent of the
preference stock, and (iii) either the entirety of this paragraph or
the substance thereof with respect to the number of shares of the
preference stock required to be represented at any meeting, or
adjournment thereof, called for the election of directors of the
corporation.
At the first meeting of shareholders held for the purpose of
electing directors during such time as the holders of the preference
stock shall have the special right, voting separately as a class, to
elect two directors, the presence in person or by proxy of the holders
of a majority of the total voting power of the outstanding shares of
preference stock shall be required to constitute a quorum of such class
for the election of the two additional directors; provided, however,
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that in the absence of a quorum of the holders of the preference stock,
no election of the two additional directors shall be held, but a
majority of the total voting power of the holders of the preference
stock who are present in person or by proxy shall have the power to
adjourn the election of the two additional directors to a date not less
than fifteen nor more than fifty days from the giving of the notice of
such adjourned meeting hereinafter provided for; and provided, further,
that at such adjourned meeting, the presence in person or by proxy of
the holders of 35% of the total voting power of the outstanding
preference stock shall be required to constitute a quorum of such class
for the election of the two additional directors. In the event such
first meeting of shareholders shall be so adjourned, it shall be the
duty of the chairman of the board, the president, a vice-president or
the secretary of the corporation, within ten days from the date on
which such first meeting shall have been adjourned to cause notice of
such adjourned meeting to be given to the shareholders entitled to vote
thereat, such adjourned meeting to be held not less than fifteen days
nor more than fifty days from the giving of such second notice. Such
second notice shall be given in the form and manner hereinabove
provided for with respect to the notice required to be given of such
first meeting of shareholders, and shall further set forth that a
quorum was not present at such first meeting and that the holders of
35% of the total voting power of the outstanding preference stock shall
be required to constitute a quorum of such class for the election of
the two additional directors at such adjourned meeting. If the
requisite forum of holders of the preference stock shall not be present
at said adjourned meeting, then the two directors of the corporation to
be elected by the holders of the preference stock pursuant to the terms
hereof shall be elected at the next annual meeting of the corporation,
or special meeting in lieu thereof, as herein after provided. Neither
such first meeting nor such adjourned meeting shall be held on a date
within sixty days of the date of the next annual meeting of the
corporation or special meeting in lieu thereof. At each annual meeting
of the corporation, or special meeting in lieu thereof, held during
such time as the holders of the preference stock, voting separately as
a single class, shall have the right to elect two additional members of
the board of directors, the foregoing provisions of this paragraph
shall govern such annual meeting, or special meeting in lieu thereof,
as if said annual meeting or special meeting were the first meeting of
shareholders held for the purpose of electing directors after the right
of the holders of the preference stock, voting separately as a class to
elect two additional directors, should have accrued, with the exception
that if, at any adjourned meeting, or special meeting in lieu thereof,
35% of the total voting power of the outstanding preference stock is
not present in person or by proxy, the two directors of the corporation
previously elected by the holders of the preference stock pursuant to
the terms hereof, if any, shall remain in office until the next annual
meeting of the corporation, or special meeting in lieu thereof, and
until their successors shall have been elected and shall qualify.
4. For the purposes of the foregoing provisions, other than
when the holders of the preferred stock, the Class A preferred stock,
the common stock and if this Joint Agreement has been amended to
provide that the holders of the preference stock shall have the right
to vote generally in the election of directors, the preference stock
vote together as a single class for the election of directors, the
preferred stock and Class A preferred stock of all classes shall be
deemed to be a single class and the preference stock of all series
shall be deemed to be a single class, and the relative voting power of
each class of preferred stock and Class A preferred stock, each series
of preference stock and the common stock shall be determined as
follows:
a. the relative voting power of each share of preferred stock
and Class A preferred stock for purposes of all votes and consents
hereunder shall be in the same proportion to all the outstanding shares
of preferred stock and Class A preferred stock as the ratio of (i) the
stated capital of such share to (ii) the aggregate stated capital of
all then outstanding shares of preferred stock and Class A preferred
stock.
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b. the relative voting power of each share of preference stock
for purposes of all votes and consents hereunder shall be in the same
proportion to all the outstanding shares of preference stock as the
ratio of (i) the stated capital of such share to (ii) the aggregate
stated capital of all then outstanding shares of preference stock.
c. for purposes of computation
(1) in voting by holders of preferred stock and Class A
preferred stock as a single class, each share of preferred stock or
Class A preferred stock having the lowest stated capital then
outstanding shall have one vote and each share of preferred stock and
Class A preferred stock having a stated capital other than the lowest
stated capital then outstanding shall have that number of votes which
is proportionate to such one vote as determined pursuant to
subparagraph (a) above,
(2) in voting by holders of preference stock as a single
class, each share of preference stock having the lowest stated capital
then outstanding shall have one vote and each share of preference stock
having a stated capital other than the lowest stated capital then
outstanding shall have that number of votes which is proportionate to
such one vote as determined pursuant to subparagraph (b) above, and
(3) in voting by holders of preferred stock, Class A
preferred stock and preference stock together with the holders of the
common stock, each share of common stock shall have one vote, each
share of preferred stock shall have one vote, each share of Class A
preferred stock shall have that number of votes which is proportionate
to such one vote as determined pursuant to subparagraph (a) above and
each share of preference stock shall have that number of votes which is
proportionate to such one vote as determined pursuant to subparagraph
(b) above.
D. Miscellaneous Provisions
1. The holders of the preferred stock, Class A preferred stock
and preference stock shall have no pre-emptive rights to subscribe to
any additional shares of the capital stock of the corporation of any
kind, or any rights to exchange shares issued for shares to be issued;
but, before issuing or disposing of any shares of common stock or any
bonds, debentures or other obligations, or rights or options, which are
convertible into or exchangeable for or which entitle the holder or
owner to subscribe for or purchase any shares of common stock, the
board of directors shall offer to the holders of the common stock at
the time outstanding, and the holders thereof shall be entitled to
purchase or subscribe for the shares of common stock or the bonds,
debentures or other obligations, or rights or options, which are
convertible into or exchangeable for such stock or which entitle the
holder or owner thereof to subscribe for or purchase such stock, upon
terms not less favorable to the purchaser (without deduction of such
compensation, allowance or discount for the sale, underwriting or
purchase thereof as may be fixed by the board of directors) than those
on which the board of directors issues and disposes of such stock,
bonds, debentures, obligations or rights to other than such holders of
common stock
2. The corporation may issue and dispose of any of its
authorized shares of stock for such consideration as may be fixed from
time to time by the board of directors subject to the laws of the state
of Alabama then applicable.
3. The corporation may from time to time, out of its net
profits or surplus earnings, purchase any of its stock outstanding at
such price as may be fixed by its board of directors and accepted by
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the holders of the stock purchased, but such price shall not exceed the
redemption price, if any, of the stock purchased.
4. The corporation shall be entitled to treat the person in
whose name any share, right or option is registered as the owner
thereof, for all purposes, and shall not be bound to recognize any
equitable or other claim to or interest in such share, right or option
on the part of any other person, whether or not the corporation shall
have notice thereof, save as may be expressly provided by the laws of
the state of Alabama.
5. A director shall be fully protected in relying in good
faith upon the books of account of the corporation or statements
prepared by any of its officials as to the value and amount of the
assets, liabilities and net profits of the corporation, or any other
facts pertinent to the existence and amount of surplus or other funds
from which dividends might properly be declared and paid.
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