Exhibit 4.4
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
ALABAMA POWER COMPANY
Pursuant to, and with the effect provided in, Section 10-2B-6.02 of the
Code of Alabama, 1975, as amended (the "Code"), the undersigned company adopts
the following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the company is "Alabama Power Company"
(the "Company").
SECOND: The following resolutions amending the Company's Articles of
Incorporation, as amended, providing for, among other things, the issuance and
sale of not more than 1,250 shares of Class A Preferred Stock ($100,000 Stated
Capital Per Share), not in excess of an aggregate $125 million, in one or more
series and establishing each series of the new stock, was duly adopted in the
manner provided by the Code by the Company's Board of Directors at a meeting
held on January 24, 2003, shareholder approval therefor not being required:
RESOLVED, That the relative rights and preferences of 1,250 of the
authorized but unissued shares of undesignated Class A Preferred Stock
(stated capital $100,000 per share) (the "new stock") in those respects
in which the shares thereof may vary from the shares of other series of
Class A Preferred Stock which may now or hereafter be authorized or
created, shall be as follows:
(1) The officers of the Company be and hereby are authorized
to determine the dividend rate or rates, the redemption
provisions and the dividend payment dates of the new stock,
with the new stock having an initial dividend term not to
exceed 5 years and an initial dividend rate not in excess of
6.00% of the stated capital per annum, accruing from the date
of original issue and the dividend payment dates during the
initial dividend term shall be the first days of January,
April, July and October in each year commencing on the
applicable dividend payment date preceding the date of
issuance of the new stock;
(2) The amount payable in the event of liquidation shall be
$100,000 per share, plus accrued dividends;
(3) The shares of such class shall not be, by their terms,
convertible or exchangeable;
(4) The shares of such class shall not be, by their terms,
entitled to the benefit of any sinking fund; and
(5) Upon the issuance of shares of the new stock, there shall
be transferred from the Premium on Capital Stock Account to
the Preferred Stock Account an amount equal to $99,999 per
share, and thereafter the stated capital of each share of the
new stock shall be $100,000 per share.
THIRD: The undersigned officers of the Company pursuant to the
authority granted him by the Company's Board of Directors at a meeting held on
January 24, 2003 hereby establishes and designates, on behalf of the Company, a
series of Class A Preferred Stock comprising 1,250 shares of Flexible Money
Market Class A Preferred Stock (Series 2003A) (the "Flexible Class A Preferred
Stock") with an initial dividend term to commence on the date of issuance and
end on December 31, 2007. Subject to the provisions of Exhibit A, dividends
shall be payable upon the Flexible Class A Preferred Stock at a rate of 4.95% of
the stated capital per annum for the initial dividend term. After the initial
dividend term, the dividend rate, the dividend periods and the dividend payment
dates for the Flexible Class A Preferred Stock will be determined in accordance
with Exhibit A. The Flexible Class A Preferred Stock may be redeemed in
accordance with the provisions of Exhibit A.
IN WITNESS WHEREOF, the undersigned officers of the Company, do hereby
set their hand and the seal of the Company on the 6th day of February, 2003.
William B. Hutchins, III
Executive Vice President, Chief Financial
Officer and Treasurer
Alabama Power Company
Ceila H. Shorts
Assistant Secretary
Alabama Power Company
This Instrument was prepared by:
Monica W. Sargent
Balch & Bingham LLP
1901 Sixth Avenue North, Suite 2600
Birmingham, AL 35203
A-13
EXHIBIT A
Dividends
General. The holders of Flexible Class A Preferred Stock (the "new
Stock" or "Shares") will be entitled to receive, when, as and if declared by
Alabama Power Company's (the "Company") board of directors out of funds legally
available cumulative cash dividends at the applicable dividend rate, determined
in the manner described below under "--Determination of Dividend Rate," payable
on the dates as described below.
Dividends on the new Stock will accumulate, whether or not declared,
from the date on which the Company originally issues the new Stock at the
dividend rate applicable from time to time. The applicable rate for the initial
dividend period will be 4.95%. Dividends on the new Stock will be payable for
the initial dividend period on January 1, April 1, July 1 and October 1 of each
year, commencing April 1, 2003, or, if any such date is not a business day, on
the next business day. For subsequent dividend periods, dividends on new Stock
will be payable (1) on the business day following the last day of each dividend
period, regardless of its length, and (2) in addition, in the case of dividend
periods of more than 99 days, on the following additional dates:
o if such dividend period is from 100 to 190 days, on the 91st day of
such dividend period;
o if such dividend period is from 191 to 281 days, on the 91st and 182nd
days of such dividend period;
o if such dividend period is from 282 days to 364 days, on the 91st,
182nd and 273rd days of such dividend period; and
o if such dividend period is one year or longer, on January 1, April 1,
July 1 and October 1 of each year,
provided that in all such cases, if such date is not a business day, the
dividend payment date will be the next business day.
Notwithstanding the foregoing, if any date on which dividends on the
new Stock would be payable as described in the preceding paragraph is a day that
would result in the number of days in the then current dividend period not being
at least equal to the then current minimum holding period required for corporate
taxpayers to be entitled to the dividends received deduction, then dividends
with respect to such dividend period will be payable on the first business day
following such date on which dividends would be so payable that results in the
number of days in such dividend period being at least equal to that minimum
holding period or, if earlier, the 98th day of such dividend period.
Moreover, notwithstanding the foregoing, in the event of a change in
law altering the minimum holding period, the Company will adjust, if necessary,
the number of days in each regular dividend period and the minimum number of
days of each special dividend period commencing after the date of such change in
law to equal or exceed the minimum holding period; provided that the number of
days in a regular dividend period will not exceed by more than nine days the
length of the minimum holding period and will be evenly divisible by seven, and
the maximum number of days in a regular dividend period, as adjusted, will not
exceed 98 days.
On any change in the number of days in any then current dividend period
or in the number of days in regular dividend periods or the minimum duration of
a special dividend period as a result of a change in the minimum holding period,
the Company will mail notice of such change to all holders of record of the new
Stock. In addition, under the broker-dealer agreements described under "The
Auction--Broker-Dealer Agreements" below, each broker-dealer will be required to
mail notice of such change to each existing holder who acquired the new Stock
through such broker-dealer and, to the knowledge of such broker-dealer, has not
disposed of such new Stock.
Each date on which dividends on the new Stock will be payable as set
forth above is referred to as a "Dividend Payment Date." Although any particular
Dividend Payment Date for the Shares may not occur on the day of the week or the
date originally scheduled as a Dividend Payment Date for the new Stock because
of the adjustments set forth above, each succeeding Dividend Payment Date for
the new Stock will occur, subject to such adjustments, on the day of the week or
the date originally scheduled as a Dividend Payment Date for the new Stock as if
each preceding Dividend Payment Date had occurred when initially scheduled.
On or prior to any Dividend Payment Date for the new Stock, the Company
must pay to the auction agent sufficient funds for the payment in full of all
accumulated dividends with respect to the new Stock payable on such Dividend
Payment Date.
Each dividend on the new Stock will be payable to the holder or holders
of record on the record date fixed by the Company's board of directors prior to
the applicable Dividend Payment Date. Dividends in arrears for any past dividend
period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the holder or holders of record on the record date
fixed by the Company's board of directors. Any dividend payment made on the new
Stock will first be applied toward payment of all accumulated dividends with
respect to the earliest dividend period for the new Stock for which dividends
have not been paid.
So long as the new Stock is held of record by the nominee of the
securities depository, dividends will be paid to the nominee of the securities
depository on each Dividend Payment Date. The securities depository will credit
the accounts of The Depository Trust Company ("DTC") participants in accordance
with the securities depository's normal procedures, which now provide for
payments in same-day funds. The DTC participants will be responsible for holding
or disbursing such payments to such existing holders in accordance with the
instructions of such existing holders.
Except as described below under "--Determination of Dividend Rate," (1)
holders of the new Stock will not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends on the new
Stock as provided herein, and (2) no interest or sum of money in lieu of
interest will be payable in respect of any dividend payment on the new Stock
which may be in arrears.
So long as any Shares are outstanding,
o no dividend, other than a dividend in common stock or any other
capital stock of the Company ranking junior to the new Stock as to
dividends and upon liquidation, may be declared or made upon any
shares of preferred stock of the Company ranking on a parity with
the new Stock as to dividends and upon liquidation,
o neither the common stock nor any other shares of capital stock of
the Company ranking junior to the new Stock as to dividends and
upon liquidation, nor any preferred stock ranking on a parity with
the new Stock as to dividends and upon liquidation, may be
redeemed, purchased or otherwise acquired for any consideration,
nor may any funds be paid to, or made available for, a sinking
fund for the redemption of any shares of such stock, by the
Company, except by conversion into or exchange for common stock or
shares of capital stock of the Company ranking junior to the new
Stock as to dividends or upon liquidation,
unless, in each case, the full cumulative dividends on the outstanding new Stock
have been, or contemporaneously are, paid or declared and a sum sufficient for
the payment thereof has been or is set apart for such payment. In addition, the
Company may not declare or pay any dividend or distribution on its capital stock
(including preferred stock), other than dividends paid in shares of its common
stock, if the Company:
o extends interest payment periods on its junior subordinated notes
issued to trusts; or
o is in default with respect to payments on the junior subordinated
notes or under related guarantees.
When dividends are not paid or declared and set aside for payment in
full, as described in the previous paragraph, upon the new Stock and any
preferred stock ranking on a parity with the new Stock, all dividends declared
upon the new Stock and any preferred stock ranking on a parity with the new
Stock must be declared pro rata so that the amount of dividends declared per
Share and parity preferred stock will in all cases bear to each other the same
ratio that accumulated dividends per Share and parity preferred stock bear to
each other.
Subsequent Dividend Periods. After the initial dividend period for the
new Stock, each subsequent dividend period for the new Stock will be a regular
dividend period; provided that, except as described in the next paragraph and
under "--Determination of Dividend Rate," the Company may specify the duration
for any special dividend period and other special provisions for the new Stock
by a notice delivered or mailed by the Company to the addresses of record of the
holders of the new Stock not less than 10 days nor more than 60 days prior to
the Auction Date, as defined herein, for such subsequent dividend period, which
notice will specify:
o the Company's determination of the length of the special dividend
period,
o in the case of any special dividend period in excess of 99 days in
duration, any subsequent Dividend Payment Date or Dates other than
the subsequent period-end Dividend Payment Date for such special
dividend period,
o if the Company has elected that the new Stock should not be
subject to redemption during all or any specified portion of the
special dividend period (a "Non-Call Period"), a statement to that
effect,
o if the Company has elected that the dividends received deduction
gross-up provision described under "Changes in the Dividends
Received Deduction" apply during the special dividend period, a
statement to that effect, and
o if the Company has specified that all or any portion of the
special dividend period will be a Non-Call Period and that the
dividends received deductions gross-up provision will apply and
has affirmatively elected to have the right to redeem the new
Stock during such special dividend period if there is any
amendment to the Internal Revenue Code of 1986, as amended (the
"Code"), that has the effect of reducing the Dividends Received
Percentage as described in "Redemption," a statement to that
effect.
In the event the Company has elected a special dividend period for a
subsequent dividend period as described in "Changes in the Dividends Received
Deduction," the Company may withdraw its election by giving notice to holders of
the new Stock by no later than 3:00 p.m., New York City time, on the business
day before the Auction Date with respect to which the notice was delivered, and
thereafter the election by the Company of a special dividend period will be of
no force and effect. Copies of all notices related to special dividend periods
will be delivered in person, by telecopier or by other written electronic
communication to the auction agent by the Company at the same time they are
transmitted to the holders of new Stock. The auction agent will thereupon
provide copies of the notices to broker-dealers as soon as practicable after
receiving the notice. In the event the Company has effectively revoked its
election of a special dividend period, the following dividend period will be a
regular dividend period. No defect in the notice or in the mailing thereof will
affect the validity of any change in any dividend period.
In the event that Sufficient Clearing Bids, as defined below, have not
been made in any Auction, as described in "The Auction," such that the dividend
rate for the next dividend period will be equal to the maximum applicable
dividend rate, then the subsequent dividend period will be a regular dividend
period, regardless of whether the Company has elected a special dividend period,
and the maximum applicable dividend rate will be determined based upon such
regular dividend period. In such event, existing holders of the new Stock that
have submitted sell orders will not be able to sell in the Auction, as defined
below, all, and may not be able to sell any, Shares subject to such sell orders.
Thus, under certain circumstances, existing holders of new Stock may not have
liquidity of investment.
Determination of Dividend Rate. The dividend rate for the initial
dividend period for the new Stock will be 4.95% per annum. The initial dividend
period begins on and includes the date that the Company originally issues the
new Stock and ends on December 31, 2007. The dividend rate for each subsequent
dividend period for the new Stock will be, except as provided below, the rate
per annum that results from the implementation of the auction procedures. Each
periodic implementation of the auction procedures set forth in Exhibit B is
referred to as an "Auction." As used herein, applicable dividend rate means the
rate per annum at which dividends are payable on the new Stock for any dividend
period. See "The Auction--Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate."
If an Auction for any subsequent dividend period for the new Stock is
not held for any reason, other than as a result of the failure of the Company to
pay dividends or amounts payable upon redemption of the new Stock as described
below, the subsequent dividend period will be a regular dividend period and the
dividend rate on the Shares for such subsequent dividend period will be the
maximum applicable dividend rate on the business day immediately prior to the
commencement of the subsequent dividend period. See "The Auction--Orders by
Existing and Potential Holders."
During the initial dividend period and any special dividend period in
excess of 364 days in duration, the amount of dividends accumulated and payable,
if declared, per Share for each period that begins on a Dividend Payment Date
and ends on the day before the next Dividend Payment Date will be computed by
(1) multiplying the applicable dividend rate for such dividend period by 25% and
(2) multiplying $100,000 by the rate so obtained. The amount of dividends
accumulated and payable, if declared, per Share on any Dividend Payment Date
with respect to any regular dividend period and any period during the initial
dividend period and any special dividend period in excess of 364 days that is
covered by the preceding sentence will be computed by (x) multiplying the
applicable dividend rate for such dividend period by a fraction, the numerator
of which is the actual number of days in the portion of such dividend period
prior to such Dividend Payment Date as to which dividends have not been paid and
the denominator of which is 360, and (y) multiplying $100,000 by the rate so
obtained.
If the Company fails to pay to the auction agent on or prior to any
period-end Dividend Payment Date for the new Stock the full amount of all
accumulated and unpaid dividends payable on the new Stock on such period-end
Dividend Payment Date, then:
o if such failure to pay is cured as provided below, the applicable
dividend rate for the new Stock for the dividend period commencing
on the period-end Dividend Payment Date on which the Company
failed to pay will be equal to the dividend rate determined on the
Auction Date immediately preceding such period-end Dividend
Payment Date; and
o if such failure to pay is not cured as provided below, then,
for the period (the "Dividend Non-Payment Period") commencing
on and including such period-end Dividend Payment Date and
ending on and including the business day on which, by 12:00 noon,
New York City time, all unpaid cash dividends have been
deposited with the auction agent or otherwise made
available for payment to the applicable holders in same day
funds (provided that, at least two business days but no more than
30 days prior to such business day, the Company must
have given the auction agent, the securities depository and the
applicable holders written notice of such deposit or
availability):
- each subsequent dividend period will be a regular dividend
period, regardless of any special dividend period election
made by the Company, and Auctions for the new Stock will be
suspended and will not resume, in each case until all
accumulated and unpaid dividends on the new Stock for all past
dividend periods have been paid to the auction agent, not
later than the second business day before an Auction Date for
the new Stock; and
- the applicable dividend rate for the new Stock during such
Dividend Non-Payment Period will be equal to the maximum
applicable dividend rate for the new Stock, as determined on
the business day prior to the first day of each such
subsequent dividend period, but with the credit ratings for
the new Stock, for purposes of determining such maximum
applicable dividend rate, being deemed to be below "Baa3" by
Moody's Investor Service, Inc. ("Moody's") and below "BBB-" by
Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies ("S&P") (the "Non-Payment Period Rate").
If the Company fails to pay to the auction agent on or prior to any
date set for redemption of less than all of the Shares the full amount payable
upon redemption of the Shares called for redemption, then:
o Auctions for the new Stock will be suspended and will not resume
until all amounts payable upon the redemption of the new Stock
called for redemption have been paid to the auction agent, not
later than the second business day prior to an Auction Date for
the outstanding new Stock;
o if such failure to pay is cured as provided below, the applicable
dividend rate for the dividend period commencing after the
redemption date on which the Company failed to pay will be equal
to the maximum applicable dividend rate for the new Stock, as
determined on the business day before the first day of such
dividend period, and such dividend period will be a regular
dividend period, regardless of any special dividend period
election made by the Company, unless on the Auction Date for such
dividend period, Auctions for the Shares may be resumed as
provided above; and
o if such failure to pay is not cured as provided below, then:
- each subsequent dividend period will be a regular dividend
period, regardless of any special dividend period election
made by the Company, and the applicable dividend rate for the
new Stock not called for redemption for each dividend period,
commencing on the day immediately succeeding the redemption
date on which the Company failed to pay, but excluding the
dividend period, if any, following the Auction Date on which
Auctions for the new Stock may be resumed as provided above
(each a "Redemption Non-Payment Period"), will be equal to the
Non-Payment Period Rate for the new Stock, as determined on
the business day prior to the first day of each such dividend
period; and
- the applicable dividend rate for the new Stock called for
redemption for each dividend period for the new Stock
commencing after the redemption date on which the Company
failed to pay will be equal to the Non-Payment Period Rate for
the new Stock, as determined on the business day prior to the
first day of each such dividend period.
For purposes of the second and third bullets above, any failure to pay
dividends or amounts payable upon redemption with respect to the new Stock will
be deemed cured if, not later than 12:00 noon, New York City time, on the third
business day following such failure to pay, there has been paid to the auction
agent (1) all accumulated and unpaid dividends on the new Stock including the
full amount of any dividends to be paid on the period-end Dividend Payment Date
with respect to which such failure to pay occurred but excluding amounts
accumulated after such period-end Dividend Payment Date, plus additional
dividends in an amount computed by multiplying (A) the Non-Payment Period Rate
for the new Stock, as determined on the business day before such Dividend
Payment Date, by (B) a fraction, the numerator of which will be the number of
days for which such failure to pay is not cured in accordance with this
paragraph, including the day such failure to pay occurs and excluding the day
such failure to pay is cured, and the denominator of which is 360, and
multiplying the rate so obtained by the product of $100,000 and the number of
Shares then outstanding and (2) the full amount payable upon redemption of the
Shares called for redemption that have not been so redeemed, plus (except to the
extent such amount has been paid pursuant to clause (1) above) an amount
computed by multiplying (X) the Non-Payment Period Rate for the new Stock, as
determined on the business day prior to the first day of the current dividend
period, and (Y) a fraction, the numerator of which will be the number of days
for which such failure to pay is not cured in accordance with this paragraph,
including the day such failure to pay occurs and excluding the day such failure
to pay is cured, and the denominator of which is 360, and multiplying the rate
obtained against the product of $100,000 and the number of Shares called for
redemption that have not been so redeemed.
If the Company fails to pay to the auction agent on or prior to any
date set for redemption of all the Shares the full amount payable upon the
redemption of the Shares, then the applicable dividend rate for the Shares for
each dividend period or portion thereof commencing on or after the redemption
date on which the Company failed to pay will be equal to the Non-Payment Period
Rate for the Shares, as determined on the business day prior to the first day of
each such dividend period.
Changes in the Dividends Received Deduction
If, at any time prior to the date that is 18 months after February 12,
2003, and in the limited circumstances described below with respect to special
dividend periods, any amendment to the Code is enacted that has the effect of
reducing the percentage of dividends received by corporate taxpayers which may
be deducted for federal income tax purposes (currently 70%) pursuant to Section
243(a)(1) of the Code or any successor provision (the "Dividends Received
Percentage"), then the applicable dividend rate with respect to the new Stock
for the dividend period in which the effective date of such change occurs will,
to the extent such amendment applies to such dividend period, be adjusted on and
after its effective date for the remainder of such dividend period by
multiplying the applicable dividend rate, determined before any adjustment
described in this paragraph, by a factor, which will be the number determined in
accordance with the following formula (the "DRD Formula"), and rounding the
results to the nearest basis point:
For purposes of this formula, "DRP" means the adjusted Dividends
Received Percentage applicable to the relevant dividend in question; provided
that in no event will DRP be less than 50% (0.50). No amendment to the Code
other than a change in the percentage of the dividends received deduction set
forth in Section 243(a)(1) of the Code (or any successor provision) will give
rise to an adjustment described in the previous paragraph. Notwithstanding the
foregoing provisions, if, with respect to any such amendment, the Company
receives either an opinion of independent tax counsel or a private letter ruling
or similar form of guidance from the Internal Revenue Service ("IRS") to the
effect that such amendment to the Code would not apply to dividends payable on
the new Stock, then such amendment will not result in the adjustment otherwise
provided for above. The Company's calculation of the dividends payable, as so
adjusted and as certified accurate as to calculation and reasonable as to method
by the independent certified public accountants then regularly engaged by the
Company, will be final and not subject to review.
If any such amendment to the Code which reduces the Dividends Received
Percentage is enacted and becomes effective after a dividend payable on a
Dividend Payment Date has been declared but before such dividend has been paid,
the amount of dividends payable on such Dividend Payment Date will not be
increased; but instead, an amount equal to the excess, if any, of (1) the
product of the dividends paid by the Company on such Dividend Payment Date on
the new Stock and the DRD Formula (where the DRP used in the DRD Formula would
be equal to the greater of the reduced Dividends Received Percentage or 50%)
less (2) the dividends paid by the Company on such Dividend Payment Date on the
new Stock, will be payable, if declared, on the following Dividend Payment Date
to holders of the new Stock for such succeeding Dividend Payment Date, in
addition to any other amounts payable on such Dividend Payment Date.
If the applicable dividend rate is adjusted as described above, the
Company will send notice of such adjustment to each holder of new Stock and the
auction agent on or prior to the next Dividend Payment Date. Unless the context
requires otherwise, all references to dividends herein mean dividends adjusted
as described above.
In addition, if an amendment to the Code is enacted within the
applicable time periods that reduces the Dividends Received Percentage and this
reduction retroactively applies to a Dividend Payment Date as to which the
Company previously paid dividends on the new Stock (each, an "Affected Dividend
Payment Date"), the Company will pay, if declared, additional dividends on the
immediately succeeding Dividend Payment Date (or if such amendment is enacted
after the dividend payable on such Dividend Payment Date has been declared, on
the second immediately succeeding Dividend Payment Date following the date of
enactment), to holders of the new Stock for such succeeding Dividend Payment
Date, in an amount equal to the excess, if any, of (1) the product of the
dividends paid by the Company on each Affected Dividend Payment Date and the DRD
Formula (where the DRP used in the DRD Formula would be equal to the greater of
the reduced Dividends Received Percentage and 50% (0.50), applied to each
Affected Dividend Payment Date) over (2) the dividends paid by the Company on
each Affected Dividend Payment Date. Retroactive dividends, along with all other
dividends on the new Stock, will be cumulative.
Retroactive dividends will not be paid with respect to the enactment of
any amendment to the Code if the amendment would not result in an adjustment due
to the Company having received either an opinion of counsel or tax ruling
referred to above. The Company will make only one payment of retroactive
dividends.
No adjustments in the dividends payable by the Company will be made,
and no retroactive dividends will be payable by the Company, because of any
amendment to the Code that reduces the Dividends Received Percentage that is
enacted
o during the initial dividend period and more than 18 months after
February 12, 2003, or
o on or after January 1, 2008, other than during a special dividend
period in which, at the election of the Company, the dividends
received gross-up provision will apply.
In the event that the amount of dividends payable on the new Stock is
adjusted pursuant to the DRD Formula and/or retroactive dividends are to be
paid, the Company will cause notice of each adjustment and, if applicable, any
retroactive dividends, to be sent to each holder of the new Stock.
In addition, if the Dividends Received Percentage is reduced
o on or before the date that is 18 months after February 12, 2003, or
o during any special dividend period all or a portion of which the
Company has designated as a Non-Call Period and with respect to
which (i) the dividends received gross-up provision applies and
(ii) the Company has affirmatively elected to have the right to
redeem the new Stock if it is required to pay additional dividends
under the gross-up provision
and, in either case, the Company is required to pay additional dividends under
the gross-up provision, then the Company may at its option redeem the new Stock,
in whole but not in part, at a redemption price of $102,500 per Share, plus
accumulated and unpaid dividends, whether or not declared and including any
increase in dividends payable due to changes in the Dividends Received
Percentage. See "Redemption."
Redemption
Optional Redemption. At the option of the Company, Shares may be
redeemed on or after January 1, 2008, other than during a Non-Call Period as
specified by the Company, in whole or from time to time in part, out of funds
legally available, on any Dividend Payment Date, upon at least 30 but not more
than 90 days' notice, at a redemption price per Share of $100,000, upon payment
of accumulated and unpaid dividends as described in the next sentence. The
Company will be required to declare and pay on the redemption date all
accumulated and unpaid dividends on such Shares, whether or not declared, to the
date that the Company pays or duly provides for the payment of the full amount
payable upon the Shares to be redeemed. Notwithstanding the foregoing, if any
dividends on the new Stock are in arrears, no Shares may be redeemed unless all
outstanding Shares are simultaneously redeemed and the Company may not purchase
or otherwise acquire any of the new Stock; provided, however, that the foregoing
will not prevent the purchase or acquisition of the new Stock pursuant to an
otherwise lawful purchase or exchange offer made on the same terms to holders of
all outstanding Shares.
If at any time
o on or before the date that is 18 months after February 12, 2003, or
o during any special dividend period all or a portion of which the
Company has designated as a Non-Call Period and with respect to
which (i) the dividends received gross-up provision applies and
(ii) the Company has affirmatively elected to have the right to
redeem the new Stock if it is required to pay additional dividends
under the gross-up provision,
one or more amendments to the Code are enacted that have the effect of reducing
the Dividends Received Percentage and, as a result, the amount of dividends on
the new Stock payable on any Dividend Payment Date may be adjusted upwards as
described above under "Dividends--Changes in the Dividends Received Deduction,"
the Company, at its option, may redeem all, but not less than all, of the
outstanding Shares, provided that, within 60 days of the date on which an
amendment to the Code is enacted that reduces the Dividends Received Percentage,
the Company sends notice to holders of the new Stock of such redemption. Any
redemption of the new Stock pursuant to this paragraph will take place on the
date specified in the notice, which will be not less than 30 nor more than 90
days from the date such notice is sent to holders of the new Stock. This
redemption of the new Stock will be at a redemption price of $102,500 per Share,
plus accumulated and unpaid dividends, whether or not declared and including any
increase in dividends payable due to changes in the Dividends Received
Percentage.
Redemption Procedures. If Shares are to be redeemed, the Company will
cause to be delivered or mailed within the applicable notice period specified
above, a written notice of redemption to each holder of record of Shares,
initially, the nominee of the securities depository, and the auction agent. Each
redemption notice will state
o the redemption date,
o the redemption price,
o the number of Shares to be redeemed,
o the place where Shares are to be surrendered for payment of the
redemption price,
o that dividends on the Shares will cease to accumulate on the date
that the Company pays the full amount payable upon redemption of
Shares, and
o the provision under which the redemption is being made.
No defect in the redemption notice or in the mailing thereof will affect the
validity of the redemption proceedings, except as required by applicable law. A
redemption notice will be deemed given on the day that it is delivered or mailed
in accordance with this paragraph.
If less than all of the new Stock is to be redeemed, the amount to be
redeemed will be determined by the board of directors of the Company and
communicated to the auction agent. So long as the securities depository's
nominee is the record holder of all outstanding Shares, the auction agent will
give notice to the securities depository, and the securities depository will
determine the amount to be redeemed from each DTC participant's account in
accordance with its normal procedures. If neither the securities depository nor
its nominee is the record holder of all of the Shares, the particular Shares to
be redeemed will be redeemed by lot or ratably from the holders of record of the
new Stock. Any such redemption will be made in accordance with applicable
securities laws and rules.
On or prior to a date set for redemption of Shares, the Company will be
required to pay to the auction agent sufficient funds for the payment of the
full amount payable upon redemption of such Shares.
If the Company gives or causes to be given a redemption notice, timely
pays to the auction agent a sum sufficient to redeem the new Stock as to which
such redemption notice has been given and gives the auction agent irrevocable
instructions and authority to pay the full amount payable on redemption to the
holders, then on the date of such payment, all rights of the holders of the new
Stock to be redeemed, as such, will terminate (except the right of the holders
to receive the full amount payable upon redemption thereof upon surrender of the
certificate or certificates therefor, but without interest), and such new Stock
will no longer be deemed to be outstanding for any purpose (including, without
limitation, the right of holders to vote on any matter or to participate in any
subsequent Auction for the outstanding new Stock). In addition, any new Stock as
to which a redemption notice has been given by the Company will be deemed to be
not outstanding for purposes of any Auction for the new Stock held after the
date of such redemption notice. The Company will be entitled to receive from
time to time from the auction agent the income, if any, derived from the
investment of monies or other assets paid to it, to the extent that such income
is not required to pay the redemption price, and the holders will not have any
claim to such income. Any funds so paid to the auction agent which are unclaimed
at the end of six years from the redemption date will be returned to the
Company, after which the holders may look only to the Company for payment of the
redemption price.
So long as all of the outstanding Shares are held of record by a
nominee of the securities depository, the amounts payable upon redemption of the
new Stock will be paid to the securities depository on the redemption date. The
normal procedures of the securities depository currently provide for it to
distribute amounts payable upon redemption to DTC participants, who, in turn,
are to distribute such funds to the persons for whom they are acting as agent.
The Auction
General. The applicable dividend rate for the new Stock for each
dividend period commencing on and after January 1, 2008 will be equal to the
rate per annum that has resulted from implementation of the auction procedures
set forth in Exhibit B. If, however, the Company should fail to pay the full
amount of all accumulated and unpaid dividends on the new Stock on any Dividend
Payment Date or the redemption price of any new Stock called for redemption, the
applicable dividend rate for the new Stock will be determined as described under
"Dividends--Determination of Dividend Rate."
As used herein, an existing holder of any new Stock means a person who
is presently listed as the beneficial owner of such Shares in the records of the
auction agent. The auction agent may rely upon, as evidence of the identities of
the existing holders of the new Stock, a list of the owners of the new Stock
provided by the Company or the broker-dealers, the results of Auctions and
notices from any existing holder, the DTC participant of any existing holder or
the broker-dealer of any existing holder with respect to such existing holder's
transfer of the new Stock to another person. References herein to existing
holders and potential holders will, unless the context otherwise requires, be
deemed to include beneficial owners and potential beneficial owners acting
through their broker-dealers.
The auction agent will be required to register a transfer of the new
Stock from an existing holder to another person only if (1) such transfer is
pursuant to an Auction or (2) the auction agent has been notified in writing (A)
by such existing holder, the DTC participant of such existing holder or the
broker-dealer of such existing holder of such transfer or (B) by the
broker-dealer of any person that purchased such new Stock in an Auction of the
failure of such new Stock to be transferred as a result of such Auction. The
auction agent is not required to accept any such notice of transfer delivered
prior to an Auction unless it is received by the auction agent by 3:00 p.m., New
York City time, on the business day prior to the Auction.
Auction Dates. For each dividend period commencing on or after January
1, 2008, an Auction to determine the applicable dividend rate for the new Stock
for a particular dividend period for the new Stock will be held on the business
day immediately preceding the start of that regular or special dividend period
(the "Auction Date"). The term "business day" means a day on which the New York
Stock Exchange is open for trading and which is not a Saturday, Sunday or other
day on which banks in New York, New York are authorized or obligated by law to
close. Both the Auction Date and the first day of the related dividend period,
also a period-end Dividend Payment Date, must be business days but need not be
consecutive calendar days. For example, in most cases, if the date or day that
would normally be an Auction Date is not a business day, then such Auction Date
will be the next preceding day that is a business day even though such
period-end Dividend Payment Date remains the same. See "Dividends" for
information concerning the circumstances under which a Dividend Payment Date may
fall on a date other than a date that would normally be such Dividend Payment
Date.
The first Auction Date for the Shares will be December 31, 2007.
EXHIBIT B
AUCTION PROCEDURES
The terms not defined below are defined in Exhibit A.
I. Definitions
(A) "'AA'Composite Commercial Paper Rate," on any date of
determination, means (i) the Interest Equivalent of the rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa"
by Moody's or the equivalent of such rating by another nationally recognized
statistical rating organization, as such rate is made available on a discount
basis or otherwise by the Federal Reserve Bank of New York for the business day
immediately preceding such date, or (ii) in the event that the Federal Reserve
Bank of New York does not make available such a rate, then the arithmetic
average of the Interest Equivalent of the rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper Dealers, to the Auction Agent for the close of business on the
business day immediately preceding such date. If the Commercial Paper Dealer
does not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate will be determined on the basis
of the quotation or quotations furnished by any substitute Commercial Paper
Dealer or substitute Commercial Paper Dealers. If the number of dividend period
days shall be (i) seven or more but fewer than 49 days, such rate shall be the
Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day
rate on such commercial paper; (iii) 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the Interest Equivalent of the
60-day and 90-day rates on such commercial paper; (iv) 85 or more days but fewer
than 99 days, such rate shall be the Interest Equivalent of the 90-day rate on
such commercial paper; or (v) 99 or more days but fewer than 183 days, such rate
shall be determined by linear interpolation between the Interest Equivalents of
the 90-day rate and the 180-day rate on such commercial paper.
(B) "Applicable Rate" means, with respect to any Shares for any
dividend period therefor, the rate per annum at which cash dividends are payable
on such Shares for such dividend period.
(C) "Auction Agent" means The Bank of New York, its successors and
assigns, or such other bank or trust company appointed to such capacity by the
Company.
(D) "Available Shares" has the meaning specified in paragraph (IV)(A)
below.
(E) "Bid" has the meaning specified in paragraph (II)(A) below.
(F) "Bidder" has the meaning specified in paragraph (II)(A) below.
(G) "Commercial Paper Dealer" means Lehman Brothers Inc. or its
successors.
(H) "Hold Order" has the meaning specified in paragraph (II)(A) below.
(I) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(J) "Maximum Applicable Dividend Rate" for any subsequent dividend
period will be the Applicable Percentage of the Reference Rate. The "Applicable
Percentage" will be determined based on the lower of the credit rating or
ratings assigned on such date to the Shares by Moody's and S&P (or if Moody's or
S&P or both shall not make such rating available, the equivalent of either or
both of such ratings by a Substitute Rating Agency or two Substitute Rating
Agencies or, in the event that only one such rating shall be available, such
rating) as follows:
Applicable
Percentage of
Reference Rate
Credit Rating
Moody's S&P
"Aa3" or above "AA-" or above 150%
"A3" to "A1" "A-" to "A+" 175%
"Baa3" to "Baa1" "BBB-" to "BBB+" 200%
Below "Baa3" Below "BBB-" 250%
provided, however, that, if at 9:00 A.M., New York City time, on any Auction
Date, (i) the rating of any Shares by Moody's shall be on the "Corporate Credit
Watch List" of Moody's with a designation of "downgrade" or "uncertain" or (ii)
the rating of any Shares by S&P shall be on the "Credit Watch" of S&P with a
designation of "negative implications" or "developing" or (iii) if Moody's or
S&P, or both, shall not make such a rating available, and the rating of any
Shares by any Substitute Rating Agency shall be on the substantial equivalent of
clause (i) or (ii) above, then the Maximum Applicable Dividend Rate for the
Shares to which such Auction Date relates will be determined pursuant to an
Applicable Percentage based on the credit rating that is one level lower (for
example from "A3" to "Baa1" for Moody's or from "BBB+" to "BBB" for S&P).
The Company shall take all reasonable action necessary to enable
Moody's and S&P (and, as appropriate, any Substitute Rating Agency or Substitute
Rating Agencies) to provide a rating for the Shares. If neither S&P nor Moody's
shall make such a rating available, the Company, after consultation with the
broker-dealers or their affiliates and successors, shall select a nationally
recognized statistical rating organization or two nationally recognized
statistical rating organizations to act as a Substitute Rating Agency or
Substitute Rating Agencies, as the case may be.
(K) "Non-Payment Period" includes any Dividend Non-Payment Period and
Redemption Non-Payment Period.
(L) "Order" has the meaning specified in paragraph (II)(A) below.
(M) "Participant" means a participant of the securities depository that
will act on behalf of an existing holder, a beneficial owner, or a potential
holder or potential beneficial owner of one or more Shares.
(N) "Reference Rate" means, (i) with respect to a dividend period of 49
days to 183 days, the applicable "AA" Composite Commercial Paper Rate, (ii) with
respect to a dividend period of 184 days to 364 days, the applicable U.S.
Treasury Bill Rate, (iii) with respect to a dividend period of one year to ten
years, the applicable U.S. Treasury Note Rate, and (iv) with respect to a
dividend period in excess of ten years, the applicable U.S. Treasury Bond Rate.
(O) "Sell Order" has the meaning specified in paragraph (II)(A) below.
(P) "Submission Deadline" means 1:00 P.M., New York City time, on any
Auction Date or such other time on the Auction Date as may be specified by the
Auction Agent from time to time as the time by which each broker-dealer must
submit to the Auction Agent in writing all Orders obtained by it for the Auction
to be conducted on such Auction Date.
(Q) "Submitted Bid" has the meaning specified in paragraph (II)(A)
below.
(R) "Submitted Hold Order" has the meaning specified in paragraph
(II)(A) below.
(S) "Submitted Order" has the meaning specified in paragraph (II)(A)
below.
(T) "Submitted Sell Order" has the meaning specified in paragraph
(II)(A) below.
(U) "Subsequent Period-End Dividend Payment Date," with respect to each
subsequent dividend period, means the business day immediately succeeding the
last day of such subsequent dividend period.
(V) "Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization and two nationally
recognized statistical rating organizations, respectively, each term as defined
for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended,
selected by the Company after consultation with each broker-dealer, to act as
the substitute rating agency or substitute rating agencies, as the case may be,
to determine the credit ratings of the Shares.
(W) "Sufficient Clearing Bids" has the meaning specified in paragraph
(II)(A) below.
(X) "U.S. Treasury Bill Rate" on any date means (i) the Interest
Equivalent of the rate on the actively traded Treasury Bill with a maturity most
nearly comparable to the length of the related dividend period, as such rate is
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such business day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Bill Rate on such date. "Alternate Treasury
Bill Rate" on any date means the Interest Equivalent of the yield as calculated
by reference to the arithmetic average of the bid price quotations of the
actively traded Treasury Bill with a maturity most nearly comparable to the
length of the related dividend period, as determined by bid price quotations as
of any time on the business day immediately preceding such date, obtained from
at least three recognized primary U.S. Government securities dealers selected by
the Auction Agent.
(Y) "U.S. Treasury Bond Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Bond with a maturity most nearly comparable to the
length of the related dividend period, as such bid price quotation is published
on the business day immediately preceding such date by the Federal Reserve Bank
of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such business day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Bond Rate on such date. "Alternate Treasury
Bond Rate" on any date means the yield as calculated by reference to the
arithmetic average of the bid price quotations of the actively traded, current
coupon Treasury Bond with a maturity most nearly comparable to the length of the
related dividend period, as determined by the bid price quotations as of any
time on the business day immediately preceding such date, obtained from at least
three recognized primary U.S. Government securities dealers selected by the
Auction Agent.
(Z) "U.S. Treasury Note Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related dividend period, as such bid price quotation is published
on the business day immediately preceding such date by the Federal Reserve Bank
of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities
report for such business day, or (ii) if such yield as so calculated is not
available, the Alternate Treasury Note Rate on such date. "Alternate Treasury
Note Rate" on any date means the yield as calculated by reference to the
arithmetic average of the bid price quotations of the actively traded, current
coupon Treasury Note with a maturity most nearly comparable to the length of the
related dividend period, as determined by the bid price quotations as of any
time on the business day immediately preceding such date, obtained from at least
three recognized primary U.S. Government securities dealers selected by the
Auction Agent.
(AA) "Winning Bid Rate" has the meaning specified in paragraph (II)(A)
below.
II. Orders by Existing Holders and Potential Holders
(A) Beneficial owners and potential beneficial owners may only
participate in Auctions through their broker-dealers. Broker-Dealers will submit
the Orders of their respective customers who are beneficial owners and potential
beneficial owners to the Auction Agent, designating themselves (unless otherwise
permitted by the Company) as existing holders in respect of Shares subject to
Orders submitted or deemed submitted to them by beneficial owners and as
potential holders in respect of Shares subject to Orders submitted to them by
potential beneficial owners. A broker-dealer may also hold Shares in its own
account as a beneficial owner or wish to purchase Shares for its own account as
a potential beneficial owner. A broker-dealer may thus submit Orders to the
Auction Agent as a beneficial owner or a potential beneficial owner and
therefore participate in an Auction as an existing holder or potential holder on
behalf of both itself and its customers.
Prior to the Submission Deadline on each Auction Date:
(1) each existing holder may submit to its broker-dealer
information by telephone or otherwise as to:
(a) the number of Shares, if any, held by such
existing holder which such existing holder desires to continue
to hold without regard to the Applicable Rate for the next
succeeding subsequent dividend period;
(b) the number of Shares, if any, held by such
existing holder which such existing holder desires to continue
to hold, provided that the Applicable Rate for the next
succeeding subsequent dividend period shall not be less than
the rate per annum specified by such existing holder; and/or
(c) the number of Shares, if any, held by such
existing holder which such existing holder offers to sell
without regard to the Applicable Rate for the next succeeding
subsequent dividend period; and
(2) each broker-dealer will contact potential holders by
telephone or otherwise to determine whether such potential holders
desire to submit Bids in which such potential holders will indicate the
number of Shares, if any, which each such potential holder offers to
purchase, provided that the Applicable Rate for the next succeeding
subsequent dividend period shall not be less than the rate per annum
specified in such Bids.
For the purposes hereof, the communication by an existing holder
pursuant to clause (1) above or by a potential holder pursuant to clause (2)
above to a broker-dealer, or the communication by a broker-dealer acting for its
own account to the Auction Agent, of information referred to in clause (1) or
(2) of this paragraph (II)(A) is hereinafter referred to as an "Order" and each
existing holder and each potential holder placing an Order, including a
broker-dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (1)(a) of this paragraph (II)(A) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (1)(b) or (2)
of this paragraph (II)(A) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (1)(c) of this paragraph
(II)(A) is hereinafter referred to as a "Sell Order." Inasmuch as a
broker-dealer participates in an Auction as an existing holder or a potential
holder only to represent the interests of its customers or itself, the
provisions herein relating to the consequences of an Auction for existing
holders and potential holders also apply to the underlying beneficial ownership
interests represented thereby.
(B) (1) A Bid by an existing holder shall constitute an irrevocable
offer to sell:
(a) the number of Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less
than the rate per annum specified in such Bid; or
(b) such number or a lesser number of Shares to be
determined as set forth in paragraph (V)(A)(4) if the
Applicable Rate determined on such Auction Date shall be equal
to the rate per annum specified therein; or
(c) a lesser number of Shares to be determined as set
forth in paragraph (V)(B)(3) if such specified rate per annum
shall be higher than the Maximum Applicable Dividend Rate and
Sufficient Clearing Bids do not exist.
(2) A Sell Order by an existing holder shall constitute
an irrevocable offer to sell:
(a) the number of Shares specified in such Sell
Order; or
(b) such number or a lesser number of Shares to be
determined as set forth in paragraph (V)(B)(3) if Sufficient
Clearing Bids do not exist.
(3) A Bid by a potential holder shall constitute an
irrevocable offer to purchase:
(a) the number of Shares specified in such Bid if the
Applicable Rate determined on such Auction Date shall be
higher than the rate per annum specified in such Bid; or
(b) such number or a lesser number of Shares to be
determined as set forth in paragraph (V)(A)(5) if the
Applicable Rate determined on such Auction Date shall be equal
to the rate per annum specified therein.
III. Submission of Orders by Broker-Dealers to Auction Agent
(A) Each broker-dealer shall submit in writing or through the Auction
Agent's auction processing system to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such broker-dealer for the
Auction to be conducted on such Auction Date, designating itself (unless
otherwise permitted by the Company) as an existing holder or a potential holder
in respect of Shares subject to such Orders, and specifying with respect to each
Order:
(1) the name of the Bidder placing each Order (which shall be
the broker-dealer unless otherwise permitted by the Company);
(2) the aggregate number of Shares that are the subject of
such Order;
(3) to the extent that such Bidder is an existing holder:
(a) the number of Shares, if any, subject to any Hold
Order placed by such existing holder;
(b) the number of Shares, if any, subject to any Bid
placed by such existing holder and the rate per annum
specified in such Bid; and
(c) the number of Shares, if any, subject to any Sell
Order placed by such existing holder; and
(4) to the extent such Bidder is a potential holder, the rate
per annum specified in such potential holder's Bid.
(B) If any rate per annum specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(C) If an Order or Orders covering in the aggregate all of the Shares
held by an existing holder are not submitted to the Auction Agent prior to the
Submission Deadline for any reason (including the failure of a broker-dealer to
contact any existing holder or to submit an Order covering such existing
holder's Order or Orders), the Auction Agent shall deem a Hold Order (in the
case of an Auction relating to a regular dividend period) or a Sell Order (in
the case of an Auction relating to a special dividend period) to have been
submitted on behalf of such existing holder covering the number of Shares held
by such existing holder and not subject to Orders submitted to the Auction
Agent.
(D) If one or more Orders on behalf of an existing holder covering in
the aggregate more than the number of Shares held by such existing holder are
submitted to the Auction Agent, such Order shall be considered valid as follows
and in the following order of priority:
(1) any Hold Order submitted on behalf of such existing holder
shall be considered valid up to and including the number of Shares held
by such existing holder; provided that if more than one Hold Order is
submitted on behalf of such existing holder and the number of Shares
subject to such Hold Orders exceeds the number of Shares held by such
existing holder, the number of Shares subject to each of such Hold
Orders shall be reduced pro rata so that such Hold Orders, in the
aggregate, will cover exactly the number of Shares held by such
existing holder;
(2) (a) any Bids submitted on behalf of such existing holder
shall be considered valid, up to and including the excess of the number
of Shares held by such existing holder over the number of Shares
subject to any Hold Order referred to in paragraph (III)(D)(1) above;
(b) if more than one Bid submitted on behalf of such existing holder
specifies the same rate per annum and together they cover more than the
remaining number of Shares that can be the subject of valid Bids after
application of paragraph (III)(D)(1) above and of subclause (a) of this
paragraph (III)(D)(2) to any Bid or Bids specifying a lower rate or
rates per annum, the number of Shares subject to each of such Bids
shall be reduced pro rata so that such Bids, in the aggregate, cover
exactly such remaining number of Shares; and (c) subject to subclauses
(a) and (b) above, if more than one Bid submitted on behalf of such
existing holder specifies different rates per annum, such Bids shall be
considered valid in the ascending order of their respective rates per
annum and in any such event the number of Shares, if any, subject to
Bids not valid under this paragraph (III)(D)(2) shall be treated as the
subject of a Bid by a potential holder; and
(3) any Sell Order shall be considered valid up to and
including the excess of the number of Shares held by such existing
holder over the number of Shares subject to Hold Orders referred to in
paragraph (III)(D)(1) and valid Bids referred to in paragraph
(III)(D)(2); provided that if more than one Sell Order is submitted on
behalf of any existing holder and the number of Shares subject to such
Sell Orders is greater than such excess, the number of Shares subject
to each of such Sell Orders shall be reduced pro rata so that such Sell
Orders, in the aggregate, cover exactly the number of Shares equal to
such excess.
(E) If more than one Bid is submitted on behalf of any potential
holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of Shares specified.
(F) Any Order submitted by an existing holder or a potential holder to
its broker-dealer, and any Order submitted by a broker-dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
IV. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate
(A) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted by the
broker-dealers (each such Order as submitted or deemed submitted by a
broker-dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as
a "Submitted Order") and shall determine:
(1) the excess of the total number of Shares over the number
of Shares that are the subject to Submitted Hold Orders (such excess
being hereinafter referred to as the "Available Shares");
(2) from the Submitted Orders whether the number of Shares
that are the subject of Submitted Bids by potential holders specifying
one or more rates per annum equal to or lower than the Maximum
Applicable Dividend Rate exceeds or is equal to the sum of:
(a) the number of Shares that are the subject of
Submitted Bids by existing holders specifying one or more
rates per annum higher than the Maximum Applicable Dividend
Rate, and
(b) the number of Shares that are subject to
Submitted Sell Orders (if such excess or such equality exists
(other than because the number of Shares in clause (a) above
and this clause (b) are each zero because all Shares are the
subject of Submitted Hold Orders), such Submitted Bids by
potential holders being hereinafter referred to collectively
as "Sufficient Clearing Bids"); and
(3) if Sufficient Clearing Bids exist, the lowest rate per
annum specified in the Submitted Bids (the "Winning Bid Rate") that,
if:
(a) each Submitted Bid from existing holders
specifying the Winning Bid Rate and all other Submitted Bids
from existing holders specifying lower rates per annum were
rejected, thus entitling such existing holders to continue to
hold the Shares that are the subject of such Submitted Bids,
and
(b) each Submitted Bid from potential holders
specifying the Winning Bid Rate and all other Submitted Bids
from potential holders specifying lower rates per annum were
accepted, thus entitling the potential holders to purchase the
Shares that are the subject of such Submitted Bids,
would result in the number of Shares subject to all Submitted Bids
specifying the Winning Bid Rate or a lower rate per annum being at
least equal to the Available Shares.
(B) Promptly after the Auction Agent has made the determinations
pursuant to paragraph (IV)(A), the Auction Agent shall advise the Company of the
Maximum Applicable Dividend Rate and, based on such determinations, the
Applicable Rate for the next succeeding dividend period as follows:
(1) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding subsequent dividend period shall be equal
to the Winning Bid Rate;
(2) if Sufficient Clearing Bids do not exist (other than
because all of the Shares are the subject of Submitted Hold Orders),
that the subsequent dividend period next succeeding the Auction shall
automatically be a regular dividend period and the Applicable Rate for
such next succeeding subsequent dividend period shall be equal to the
Maximum Applicable Dividend Rate; or
(3) if all of the Shares are the subject of Submitted Hold
Orders, that the subsequent dividend period next succeeding the Auction
shall automatically be a regular dividend period and the Applicable
Rate for such next succeeding subsequent dividend period shall be equal
to 59% of the Reference Rate in effect on the date of such Auction.
V. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares
Based on the determinations made pursuant to paragraph (IV)(A), the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(A) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph (V)(C) and paragraph (V)(D), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(1) the Submitted Sell Orders of existing holders shall be
accepted and the Submitted Bid of each of the existing holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such existing holder to sell the
Shares that are the subject of such Submitted Sell Order or Submitted
Bid;
(2) the Submitted Bid of each of the existing holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such existing holder to continue
to hold the Shares that are the subject of such Submitted Bid;
(3) the Submitted Bid of each of the potential holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted, thus requiring each such potential holder to
purchase the Shares subject to such Submitted Bid;
(4) the Submitted Bid of each of the existing holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be rejected, thus entitling each such existing holder to continue to
hold the Shares that are the subject of such Submitted Bid, unless the
number of Shares subject to all such Submitted Bids shall be greater
than the excess (the "Remaining Excess") of the Available Shares over
the number of Shares subject to Submitted Bids described in paragraph
(V)(A)(2) and paragraph (V)(A)(3), in which event the Submitted Bids of
each such existing holder shall be accepted, and each such existing
holder shall be required to sell Shares, but only in an amount equal to
the difference between (1) the number of Shares then held by such
existing holder subject to such Submitted Bid and (2) the number of
Shares obtained by multiplying (x) the number of Remaining Excess of
the Available Shares by (y) a fraction the numerator of which shall be
the number of Shares held by such existing holder subject to such
Submitted Bid and the denominator of which shall be the sum of the
number of Shares subject to such Submitted Bids made by all such
existing holders that specified a rate per annum equal to the Winning
Bid Rate; and
(5) the Submitted Bid of each of the potential holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be accepted but only in an amount equal to the number of Shares
obtained by multiplying (x) the difference between the Available Shares
and the number of Shares subject to Submitted Bids described in
paragraph (V)(A)(2), paragraph (V)(A)(3) and paragraph (V)(A)(4) by (y)
a fraction the numerator of which shall be the number of Shares subject
to such Submitted Bid and the denominator of which shall be the sum of
the number of Shares subject to such Submitted Bids made by all such
potential holders that specified rates per annum equal to the Winning
Bid Rate.
(B) If Sufficient Clearing Bids have not been made (other than because
all of the Shares are subject to Submitted Hold Orders), subject to the
provisions of paragraph (V)(C), Submitted Orders shall be accepted or rejected
as follows in the following order of priority and all other Submitted Bids shall
be rejected:
(1) the Submitted Bid of each existing holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Dividend Rate shall be rejected, thus entitling such existing holder to
continue to hold the Shares that are the subject of such Submitted Bid;
(2) the Submitted Bid of each potential holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Dividend Rate shall be accepted, thus requiring such potential holder
to purchase the Shares that are the subject of such Submitted Bid; and
(3) the Submitted Bids of each existing holder specifying any
rate per annum that is higher than the Maximum Applicable Dividend Rate
shall be accepted and the Submitted Sell Orders of each existing holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of Shares then held by such existing
holder subject to such Submitted Bid or Submitted Sell Order and (2)
the number of Shares obtained by multiplying (x) the difference between
the Available Shares and the aggregate number of Shares subject to
Submitted Bids described in paragraph (V)(B)(1) and paragraph (V)(B)(2)
by (y) a fraction the numerator of which shall be the number of Shares
held by such existing holder subject to such Submitted Bid or Submitted
Sell Order and the denominator of which shall be the number of Shares
subject to all such Submitted Bids and Submitted Sell Orders.
(C) If, as a result of the procedures described in paragraph (V)(A) or
paragraph (V)(B), any existing holder would be entitled or required to sell, or
any potential holder would be entitled or required to purchase, a fraction of a
Share on any Auction Date, the Auction Agent shall, in such manner as it shall
determine in its sole discretion, round up or down the number of Shares to be
purchased or sold by any existing holder or potential holder on such Auction
Date so that each Share purchased or sold by each existing holder or potential
holder on such Auction Date shall be a whole Share.
(D) If, as a result of the procedures described in paragraph (V)(A),
any potential holder would be entitled or required to purchase less than a whole
Share on any Auction Date, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, allocate Shares for purchase among potential
holders so that only whole Shares are purchased on such Auction Date by any
potential holder, even if such allocation results in one or more of such
potential holders not purchasing any Shares on such Auction Date.
(E) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each broker-dealer that submitted Bids or Sell Orders
on behalf of existing holders or potential holders, the aggregate number of
Shares to be purchased and the aggregate number of the Shares to be sold by such
potential holders and existing holders and, to the extent that such aggregate
number of Shares to be purchased and such aggregate number of Shares to be sold
differ, the Auction Agent shall determine to which other broker-dealer or
broker-dealers acting for one or more purchasers such broker-dealer shall
deliver, or from which other broker-dealer or broker-dealers acting for one or
more sellers such broker-dealer shall receive, as the case may be, Shares.
VI. Suspension of Auction During Non-Payment Period
Upon occurrence and during the continuance of a Non-Payment Period with
respect to the Shares that has not been duly cured by the Company pursuant to
paragraph 2(b), Auctions of the Shares shall be suspended and shall not resume
in each case until (A) in the case of a Dividend Non-Payment Period, all
accumulated and unpaid dividends on such Shares for all past dividend periods
shall have been paid to the Auction Agent, or (B) in the case of a Redemption
Non-Payment Period in connection with an optional redemption of less than all of
the Shares, all amounts payable upon such optional redemption of such Shares
shall have been paid to the Auction Agent, in each case by 12:00 noon, New York
City time, on the relevant Auction Date with respect to the Shares, provided
that, at least two business days but no more than 30 days prior to such Auction
Date, the Company shall have given the Auction Agent, the securities depository
and the applicable holders of record written notice of such deposit or
availability.
VII. Miscellaneous
The Company may interpret the provisions of the auction procedures to
resolve any inconsistency or ambiguity, remedy any formal defect or make any
other change or modification that does not substantially adversely affect the
rights of existing holders of Shares. An existing holder (A) may sell, transfer
or otherwise dispose of Shares only pursuant to a Bid or Sell Order in
accordance with the procedures described in these auction procedures through a
broker-dealer, except that transfers of Shares may also be effected through
means other than pursuant to Auctions provided that each such transfer shall be
in a minimum quantity of one Share or in multiples thereof and shall be valid
and accepted by the Auction Agent only if such existing holder or its
broker-dealer or Participant, as applicable, shall have advised the Auction
Agent in writing of such transfer by 3:00 P.M., New York City time, on the
business day next preceding the Auction Date with respect to the Shares, and (B)
except as otherwise required by law, shall have the ownership of the Shares held
by it maintained in book-entry form by the securities depository in the account
of its Participant, which in turn will maintain records of such existing
holder's beneficial ownership. Neither the Company nor any affiliate shall
submit an Order in any Auction. Any existing holder that is an affiliate shall
not sell, transfer or otherwise dispose of Shares to any person other than the
Company. All of the outstanding Shares shall be represented by one or more
certificates registered in the name of the nominee of the securities depository
unless otherwise required by law or unless there is no securities depository. If
there is no securities depository, at the Company's option and upon its receipt
of such documents as it deems appropriate, such Shares may be registered in the
stock register in the name of the existing holder thereof and such existing
holder thereupon will be entitled to receive certificates therefor and required
to deliver certificates therefor upon transfer or exchange thereof.
EXHIBIT C
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the
procedures expected to be followed in connection with the settlement of each
Auction. Capitalized terms used herein shall have the respective meanings
specified in Exhibit A or Exhibit B hereto, as the case may be.
I. On each Auction Date, the Auction Agent shall notify by
telephone or through the Auction Agent's auction processing system the
broker-dealers that participated in the Auction held on such Auction
Date and submitted an Order on behalf of any existing holder or
potential holder of:
(A) the Applicable Rate fixed for the next succeeding
dividend period;
(B) whether Sufficient Clearing Bids existed for the
determination of the Applicable Rate;
(C) if such broker-dealer (a "Seller's
Broker-Dealer") submitted a Bid or a Sell Order on behalf of
an existing holder, the number of Shares, if any, to be sold
by such existing holder;
(D) if such broker-dealer (a "Buyer's Broker-Dealer")
submitted a Bid on behalf of a potential holder, the number of
Shares, if any, to be purchased by such potential holder;
(E) if the aggregate number of Shares to be sold by
all existing holders on whose behalf such broker-dealer
submitted a Bid or a Sell Order exceeds the aggregate number
of Shares to be purchased by all potential holders on whose
behalf such broker-dealer submitted a Bid, the name or names
of one or more Buyer's Broker-Dealers (and the name of the
Participant, if any, of each such Buyer's Broker-Dealer)
acting for one or more purchasers of such excess number of
Shares and the number of such Shares to be purchased from one
or more existing holders on whose behalf such broker-dealer
acted by one or more potential holders on whose behalf each of
such Buyer's Broker-Dealers acted;
(F) if the aggregate number of Shares to be purchased
by all potential holders on whose behalf such broker-dealer
submitted a Bid exceeds the aggregate number of Shares to be
sold by all existing holders on whose behalf such
broker-dealer submitted a Bid or a Sell Order, the name or
names of one or more Seller's Broker-Dealers (and the name of
the Participant, if any, of each such Seller's Broker-Dealer)
acting for one or more sellers of such excess number of Shares
and the number of such Shares to be sold to one or more
potential holder on whose behalf such broker-dealer acted by
one or more existing holders on whose behalf each of such
Seller's Broker-Dealers acted; and
(G) the Auction Date of the next succeeding Auction
with respect to the Shares.
II. On each Auction Date, each broker-dealer that submitted an
Order on behalf of any existing holder or potential holder shall:
(A) in the case of a broker-dealer that is a Buyer's
Broker-Dealer, instruct each potential holder on whose behalf
such broker-dealer submitted a Bid that was accepted, in whole
or in part, to instruct such potential holder's Participant to
pay to such broker-dealer (or its Participant) through the
securities depository the amount necessary to purchase the
number of Shares to be purchased pursuant to such Bid against
receipt of such Shares and advise such potential holder of the
Applicable Rate for the next succeeding dividend period;
(B) in the case of a broker-dealer that is a Seller's
Broker-Dealer, instruct each existing holder on whose behalf
such broker-dealer submitted a Sell Order that was accepted,
in whole or in part, or a Bid that was accepted, in whole or
in part, to instruct such existing holder's Participant to
deliver to such broker-dealer (or its Participant) through the
securities depository the number of Shares to be sold pursuant
to such Order against payment therefor and advise any such
existing holder that will continue to hold Shares at the
Applicable Rate for the next succeeding dividend period;
(C) advise each existing holder on whose behalf such
broker-dealer submitted a Hold Order of the Applicable Rate
for the next succeeding dividend period;
(D) advise each existing holder on whose behalf such
broker-dealer submitted an Order of the Auction Date for the
next succeeding Auction; and
(E) advise each potential holder on whose behalf such
broker-dealer submitted a Bid that was accepted, in whole or
in part, of the Auction Date for the next succeeding Auction.
III. On the basis of the information provided to it pursuant
to (I) above, each broker-dealer that submitted a Bid or a Sell Order
on behalf of a potential holder or an existing holder shall, in such
manner and at such time or times as in its sole discretion it may
determine, allocate any funds received by it pursuant to (II)(A) above
and any Shares received by it pursuant to (II)(B) above among the
potential holders, if any, on whose behalf such broker-dealer submitted
Bids, the existing holders, if any, on whose behalf such broker-dealer
submitted Bids that were accepted or Sell Orders, and any broker-dealer
or broker-dealers identified to it by the Auction Agent pursuant to
(I)(E) or (I)(F) above.
IV. On each Auction Date:
(A) each potential holder and existing holder shall
instruct its Participant as provided in (II)(A) or (B) above,
as the case may be;
(B) each Seller's Broker-Dealer which is not a
Participant of the securities depository shall instruct its
Participant to (1) pay through the securities depository to
the Participant of the existing holder delivering Shares to
such broker-dealer pursuant to (II)(B) above the amount
necessary to purchase such Shares against receipt of such
Shares, and (2) deliver such Shares through the securities
depository to a Buyer's Broker-Dealer (or its Participant)
identified to such Seller's Broker-Dealer pursuant to (I)(E)
above against payment therefor; and
(C) each Buyer's Broker-Dealer which is not a
Participant of the securities depository shall instruct its
Participant to (1) pay through the securities depository to a
Seller's Broker-Dealer (or its Participant) identified
pursuant to (I)(F) above the amount necessary to purchase the
Shares to be purchased pursuant to (II)(A) above against
receipt of such Shares, and (2) deliver such Shares through
the securities depository to the Participant of the purchaser
thereof against payment therefor.
V. On the first business day after the Auction Date:
(A) each Bidder's Participant referred to in (IV)(A)
above shall instruct the securities depository to execute the
transactions described in (II)(A) or (B) above, and the
securities depository shall execute such transactions;
(B) each Seller's Broker-Dealer or its Participant
shall instruct the securities depository to execute the
transactions described in (IV)(B) above, and the securities
depository shall execute such transactions; and
(C) each Buyer's Broker-Dealer or its Participant
shall instruct the securities depository to execute the
transactions described in (IV)(C) above, and the securities
depository shall execute such transactions.
VI. If an existing holder selling Shares in an Auction fails
to deliver such Shares (by authorized book-entry), a broker-dealer may
deliver to the potential holder on behalf of which it submitted a Bid
that was accepted a number of whole Shares that is less than the number
of Shares that otherwise was to be purchased by such potential holder.
In such event, the number of Shares to be so delivered shall be
determined solely by such broker-dealer. Delivery of such lesser number
of Shares shall constitute good delivery. Notwithstanding the foregoing
terms of this paragraph (VI), any delivery or non-delivery of Shares
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until
the Auction Agent shall have been notified of such delivery or
non-delivery in accordance with the provisions of the auction agent
agreement and the broker-dealer agreements.