SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27854; 70-10215)
The Southern Company
Order Authorizing Issuance of Common Stock for Outside Directors Stock Plan
June 4, 2004
The Southern Company ("Southern"), a registered public-utility holding company located in Atlanta, Georgia, has filed with the Securities and Exchange Commission ("Commission") a declaration under sections 6(a), 7 and 12(e) of the Public Utility Holding Act of 1935, as amended, ("Act"), and rules 23, 24, 54, 62 and 65 under the Act. The Securities and Exchange Commission ("Commission") issued a notice of the declaration and an order authorizing the solicitation of proxies in connection with the declaration on April 14, 2004 (HCAR No. 27834).
Southern requests authorization to issue, from time to time through May 26, 2014, shares of its common stock, par value $5.00 per share ("Common Stock"), in accordance with the Outside Directors Stock Plan for Directors of The Southern Company and Certain of its Subsidiaries ("Plan"), as described in the declaration. The Plan is a consolidation of the Outside Directors Stock Plan for The Southern Company ("Southern Stock Plan") and the Outside Directors Stock Plan for Subsidiaries of The Southern Company ("Subsidiaries Stock Plan") and will be administered by Southern's Governance Committee ( "Committee"), which will have exclusive authority to interpret it. Its purpose is to provide a mechanism for non-employee directors to increase their ownership of Common Stock automatically and thereby further align their interest with those of Southern's stockholders. The Board of Directors of Southern has adopted the Plan, subject to stockholder approval.
The Plan provides for a portion of the retainer fee for non-employee directors of Southern and any subsidiary of Southern that the Board of Directors of Southern determines to bring under the Plan and that adopts the Plan ("Subsidiaries") to be paid in unrestricted shares of Common Stock. It also permits each non-employee director to elect to have all or a portion of the remainder of the director fee paid in shares of Common Stock instead of cash. Southern expects that the initial Subsidiaries will be Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company and that the approximate number of participants under the Plan will initially be 50. The portion of the director fee paid in Common Stock to Southern's non-employee directors in accordance with the Plan will automatically be deferred in accordance with the terms of the deferred compensation plan maintained by Southern. The non-employee directors of each Subsidiary may elect to have the portion of the director fee paid in Common Stock in accordance with the Plan deferred in accordance with the terms of the deferred compensation plan maintained by such Subsidiary for its directors.
One million shares of Common Stock and the unissued shares of Common Stock previously authorized and registered for issuance under the Southern Stock Plan and the Subsidiaries Stock Plan (approximately 1,700,000 shares) will be available for payment to the participants under the Plan.
The Board of Directors of Southern may terminate or amend the Plan at any time, however, without shareholder approval no amendment may be made which would, absent that shareholder approval, disqualify the Plan for coverage under rule 16b-3 promulgated by the Commission under the Securities Exchange Act of 1934, as amended. The Plan will terminate on May 26, 2014, unless terminated sooner by Southern's Board of Directors.
Southern further proposes to submit the Plan for consideration and action by its stockholders at the annual meeting of stockholders to be held on May 26, 2004, and to solicit proxies from its stockholders. In the event that Southern considers it desirable to do so, it may employ professional proxy solicitors to assist in the solicitation of proxies and pay their expenses and compensation for such assistance which, it is estimated, will not exceed $10,000.
Approval of the Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy at the annual meeting.
The proposed transactions are subject to rule 53, which provides that, in determining whether to approve the issue or sale of a security for purposes of financing the acquisition of an exempt wholesale generator ("EWG") or foreign utility company ("FUCO"), the Commission shall not make certain adverse findings if the conditions set forth in rules 53(a)(1) through (a)(4) are met, and are not otherwise made inapplicable by reason of the existence of any of the circumstances described in rule 53(b). Southern states that it currently meets all of the conditions of rule 53(a), except for clause (1). At December 31, 2003, Southern's "aggregate investment," as defined in rule 53(a)(1), in EWGs and FUCOs was approximately $304 billion, or approximately 5.83% of Southern's "consolidated retained earnings," also as defined in rule 53(a)(1), as of December 31, 2003 ($5.213 billion).1 With respect to rule 53(a)(1), however, the Commission has determined that Southern's financing of investments in EWGs and FUCOs in an amount greater than the amount that would otherwise be allowed by rule 53(a)(1) would not have either of the adverse effects set forth in rule 53(c).2 In addition, Southern states that it has complied and will continue to comply with the record-keeping requirements of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of operating company personnel to render services to EWGs and FUCOs and the requirements of rule 53(a)(4) concerning the submission of copies of certain filings under the Act to retail rate regulatory commissions. Further, none of the circumstances described in rule 53(b) has occurred. Finally, rule 53(c) is, by its terms, inapplicable since the requirements of rules 53(a) and 53(b) are satisfied.
Fees and expenses in the estimated amount of $910,000 are expected to be incurred in connection with the proposed transactions (including costs associated with the solicitation of proxies). Southern states that no state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.
Due notice of the filing of the declaration has been given in the manner prescribed in rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. On the basis of the facts in the record, it is found that the applicable standards of the Act and rules under the Act are satisfied, and no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and the rules under the Act, that the declaration is permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland
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