SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ]Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
IDAHO POWER COMPANY
(Name of Registrant as Specified In Its Charter)
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[Idaho Power Logo]
IDAHO POWER COMPANY
1221 West Idaho Street
P.O. Box 70
Boise, Idaho 83707-0070
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
August 7, 2002, AT BOISE, IDAHO
June 28, 2002
TO THE SHAREHOLDERS OF IDAHO POWER COMPANY:
Notice is hereby given that a Special Meeting of the Shareholders of
Idaho Power Company (the "Company") will be held on August 7, 2002 at 10:00 a.m.
local time at the Idaho Power Corporate Headquarters Building, 1221 West Idaho
Street, Boise, Idaho, to amend the Company's Restated Articles of Incorporation,
as amended, as more fully described in the attached Proxy Statement. The
amendment, which you can read in full in Annex A, relates to the Company's
Flexible Auction Series A, Serial Preferred Stock, without par value (the
"Auction Preferred Stock").
All shareholders of record of the Company at the close of business on
June 19, 2002 are entitled to notice of the meeting. IDACORP, Inc., as the
common shareholder of record of the Company, and the holders of record of shares
of 4% Preferred Stock, the 7.68% Series, Serial Preferred Stock, and the Auction
Preferred Stock at the close of business on June 19, 2002 are entitled to vote
at the meeting.
All shareholders are cordially invited to attend the Special Meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE VOTE YOUR PROXY PROMPTLY. It
is important that your shares be represented at the meeting. Please vote your
proxy, regardless of the size of your holdings, as promptly as possible. Any
shareholder voting a proxy who attends the meeting may vote in person by
revoking that proxy prior to or at the meeting.
By Order of the Board of Directors
Robert W. Stahman
Corporate Secretary
TO SHAREHOLDERS WHO RECEIVE MULTIPLE PROXIES
IF YOU OWN IDAHO POWER PREFERRED STOCK OTHER THAN THE SHARES SHOWN ON THE
ENCLOSED PROXY, YOU WILL RECEIVE A PROXY IN A SEPARATE ENVELOPE FOR EACH SUCH
HOLDING. pLEASE VOTE EACH PROXY RECEIVED.
PROXY STATEMENT
IDAHO POWER COMPANY
1221 West Idaho Street
P.O. Box 70
Boise, Idaho 83707-0070
GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy will first be
sent to shareholders on or about June 28, 2002 and are provided to the
shareholders of Idaho Power Company (the "Company") in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at a Special Meeting of Shareholders and any adjournments or postponements
thereof. The Special Meeting is scheduled to be held on August 7, 2002 at 10:00
a.m. local time at the Idaho Power Corporate Headquarters Building, 1221 West
Idaho Street, Boise, Idaho.
COST AND METHOD OF SOLICITATION
The cost of soliciting proxies will be paid by the Company. In order to
be assured that a quorum of outstanding shares entitled to vote will be
represented at the Special Meeting, proxies may be solicited by officers and
regular employees of the Company, personally or by telephone, telegraph, fax or
mail or other electronic means, without extra compensation. The Company will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for their expenses in sending proxy materials to beneficial owners.
MATTERS TO BE VOTED UPON
The Special Meeting is being held to consider an amendment (the
"Proposed Amendment") to the Restated Articles of Incorporation, as amended (the
"Charter"), to increase the percentages in the definition of "Rate Multiple,"
Default Rate" and "Late Charge" for the Flexible Auction Series A, Serial
Preferred Stock, without par value (the "Auction Preferred Stock").
RECORD DATE
The Board of Directors has fixed June 19, 2002 as the date for the
determination of shareholders of the Company entitled to vote at the Special
Meeting. Only shareholders of record at the close of business on June 19, 2002
will be entitled to vote at the meeting.
VOTING SECURITIES
The outstanding voting securities of the Company as of the record date
of the Special Meeting and entitled to vote on the Proposed Amendment are as
follows: 37,612,351 shares of common stock, $2.50 par value, held by IDACORP,
Inc., the Company's parent, each share being entitled to one vote; [_______]
shares of 4% Preferred Stock, $100 par value, each share being entitled to
twenty votes; 150,000 shares of 7.68% Series, Serial Preferred Stock, $100 par
value, each share being entitled to one vote; and 500 shares of Flexible Auction
Series A, Serial Preferred Stock, without par value, each share being entitled
to one vote. The aggregate voting power of outstanding voting securities
entitled to vote at the Special Meeting is [__________] votes.
VOTING
Shareholders of record may vote their proxies by telephone, through the
Internet or by marking, signing, dating and returning the proxy card in the
enclosed postage-prepaid envelope.
1
Shareholders whose shares are held by a bank or broker may be able to
vote by telephone or through the Internet. Follow the instructions you receive
from your bank or broker.
Shareholders voting through the Internet should understand that there
may be costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies, that must be paid by the
shareholder.
The Company has been advised by counsel that the procedures for
Internet and telephone voting are consistent with the requirements of applicable
law.
Under the Idaho Business Corporation Act, a majority of the votes
entitled to be cast on a matter by a voting group constitutes a quorum of that
voting group for action on that matter. Assuming a quorum of each voting group
is present, the following votes are required for approval of the Proposed
Amendment at the Special Meeting:
o the votes of (i) the outstanding common shares of the Company,
all of which are held by IDACORP and will be voted for the
Proposed Amendment, (ii) the outstanding shares of 4% Preferred
Stock and (iii) the outstanding shares of the 7.68% Series,
Serial Preferred Stock, all voting as one group, cast in favor
exceed the votes cast against; and
o the votes of the outstanding shares of the Auction Preferred
Stock cast in favor exceed the votes cast against.
Abstentions will have no effect on the results.
If no direction is given by a shareholder, proxies received will be
voted FOR the Proposed Amendment.
A proxy may be revoked at any time before it is voted at the meeting.
Any shareholder who attends the meeting and wishes to vote in person may revoke
his or her proxy by oral notice at that time. Otherwise, revocation of a proxy
must be mailed to the Secretary of the Company at 1221 West Idaho Street, Boise,
Idaho 83702-5627, and received prior to the meeting.
SECRET BALLOT
It is the policy of the Company that all proxies for the Special
Meeting that identify shareholders, including employees, are to be kept secret,
and no such document shall be available for examination nor shall the identity
and vote of any shareholder be disclosed to Company representatives or to any
third party. Proxies shall be returned to the independent tabulator who
receives, inspects and tabulates the proxies. Individual voted proxies and
ballots are not seen by nor reported to the Company except (i) as necessary to
meet applicable legal requirements, (ii) to allow the independent election
inspectors to certify the results of the shareholder vote, (iii) in the event of
a matter of significance where there is a proxy solicitation in opposition to
the Board of Directors, based upon an opposition proxy statement filed with the
Securities and Exchange Commission, or (iv) to respond to shareholders who have
written comments on their proxies.
AMENDMENT OF IDAHO POWER COMPANY RESTATED ARTICLES OF INCORPORATION
The Board of Directors of the Idaho Power Company unanimously
recommends that the shareholders of the Company approve the Proposed Amendment.
The Proposed Amendment relates only to the Auction Preferred Stock. The Board of
Directors approved the Proposed Amendment on June 13, 2002, subject to approval
by the shareholders.
The Proposed Amendment will increase the percentages in the definition
of Rate Multiple for the Auction Preferred Stock to the following percentages:
2
Current Proposed
Prevailing Rating Percentage Prevailing Rating Percentage
----------------- ---------- ----------------- ----------
AA/aa or Above 120% AA/aa or Above 175%
A/a 175% A/a 200%
BBB/baa 200% BBB/baa 225%
Below BBB/baa 250% Below BBB/baa 275%
The percentages used in the calculation of "Default Rate" and "Late
Charge" will also increase from 250% to 275% of the 60-day "AA" composite
commercial paper rate.
Description of the Auction Preferred Stock
The following statements are summaries of the terms of the Auction
Preferred Stock. See Annex A to the Proxy Statement for the entire terms of the
Auction Preferred Stock, including the Proposed Amendment.
The Company has outstanding 500 shares of Auction Preferred Stock. The
Auction Preferred Stock was issued and sold in November, 1991. At the option of
the Company, the term of each dividend period will be, subject to certain
exceptions and adjustments, 49 days or such longer period, not to exceed 25
years, as may be designated by the Company. Since the Auction Preferred Stock
was issued and after the initial dividend period, the dividend period has been
49 days.
Dividends may not exceed 16% per annum. Dividends on the shares are
cumulative from the date of initial issue and are payable, when and as declared
by the Board of Directors, (a) with respect to a short-term dividend period, on
each seventh Thursday following the commencement of such period, (b) with
respect to a long-term dividend period, on the day following the last day of
such period and, if occurring prior thereto, on the first day of the fourth
month after the commencement of such period and quarterly thereafter on the
first day of each succeeding third month, and (c) with respect to a seven-day
dividend period, on the seventh day following the business day next succeeding
the auction giving rise to such period, in each case subject to certain
adjustments.
The term of each dividend period succeeding the initial dividend period
will be a short-term dividend period or, at the Company's option, a long-term
dividend period or, if sufficient clearing bids are not made at an auction
relating to a long-term dividend period, a seven-day dividend period.
Subsequent to the initial dividend period, the dividend rate for shares
of the Auction Preferred Stock is the applicable rate per annum resulting from
the auction. If sufficient clearing bids are not made at an auction relating to
a short-term dividend period, the applicable rate will be the maximum applicable
rate for a short-term dividend period. In the event that the Company has given a
notice of long-term dividend period with respect to the next succeeding dividend
period, but sufficient clearing bids are not made in the related auction, such
next succeeding dividend period will be a seven-day dividend period, all bids
and sell orders will be rejected, and the applicable rate will be the greatest
of (a) the maximum applicable rate for a short-term dividend period, (b) the
maximum applicable rate for a long-term dividend period with the specified term
and (c) the dividend rate in effect for the dividend period during which such
auction occurs. If an auction is not held for any reason (other than a default
by the Company), the related dividend period will be a seven-day dividend period
and the applicable rate will be the maximum applicable rate for a short-term
dividend period.
The maximum applicable rate with respect to any dividend period will be
based upon the Rate Multiple in effect on the related auction date. The Rate
Multiple is determined as set forth below based on the prevailing rating of the
Auction Preferred Stock in effect at the close of business on the business day
preceding the applicable auction date.
Prevailing Rating Percentage
----------------- ----------
AA/aa or Above 120%
3
A/a 175%
BBB/baa 200%
Below BBB/baa 250%
As discussed above, the Proposed Amendment will increase these
percentages.
For purposes of the Rate Multiple, the prevailing rating is based upon
the lower of the two ratings provided by Standard & Poors and Moody's or a
substitute rating agency or agencies.
With respect to a short-term dividend period, the maximum applicable
rate that results from an auction will be the product of the Rate Multiple and
the 60-day "AA" composite commercial paper rate in effect on the related auction
date.
With respect to a long-term dividend period, the maximum applicable
rate that results from an auction will be the product of the Rate Multiple and
the reference rate in effect on the related auction date. The reference rate
will be (i) the applicable "AA" composite commercial paper rate for long-term
dividend periods with a term 50 days or more but less than 270 days, (ii) the
higher of the 270-day applicable "AA" composite commercial paper rate and the
one-year applicable Treasury rate for long-term dividend periods with a term 270
days or more but less than one year and (iii) the applicable Treasury rate for
long-term dividend periods of one year or more. The applicable Treasury rate is
the interest equivalent of the rate for direct obligations of the U.S. Treasury
having an original maturity which is equal to or next lower than the length of
such long-term dividend period.
If all outstanding shares of Auction Preferred Stock are subject to
hold orders on an auction date, the minimum applicable rate for the next
succeeding dividend period of Auction Preferred Stock will be (i) with respect
to a short-term dividend period, 59% of the 60-day "AA" composite commercial
paper rate in effect on such auction date and (ii) with respect to a long-term
dividend period, 59% of the reference rate in effect on such auction date.
In an auction, existing and potential holders of shares of Auction
Preferred Stock may place bids to purchase shares of Auction Preferred Stock if
the applicable rate for the next dividend period is not less than the rate
specified in such bid.
If sufficient clearing bids exist (that is, the number of shares of
Auction Preferred Stock subject to bids is at least equal to the number of
shares of Auction Preferred Stock subject or deemed subject to sell orders by
existing holders), the applicable rate will be the lowest rate specified in the
submitted bids that, taking into account such rate, all lower rates bid by
existing and potential holders and any hold orders, would result in existing and
potential holders owning all of the outstanding shares of Auction Preferred
Stock.
If sufficient clearing bids do not exist, then (i) if the Company has
not given a notice of long-term dividend period with respect to the next
succeeding dividend period or has given a notice of revocation with respect
thereto, the next succeeding dividend period will be a short-term dividend
period and the applicable rate for such next succeeding dividend period will be
the maximum applicable rate on the auction date for a short-term dividend period
and (ii) if the Company has given a notice of long-term dividend period with
respect to the next succeeding dividend period and has not given a notice of
revocation with respect thereto, such next succeeding dividend period will,
notwithstanding such notice of long-term dividend period, be a seven-day
dividend period, all bids and sell orders will be rejected and the applicable
rate for such next succeeding dividend period will be the greatest of (a) the
maximum applicable rate on the auction date for a short-term dividend period,
(b) the maximum applicable rate for a long-term dividend period with the
specified term and (c) the dividend rate in effect for the dividend period
during which such auction occurs.
4
Reasons for and General Effect of the Proposed Amendment
Since the date of the issuance of the Auction Preferred Stock, market
conditions have changed and investors currently demand a higher risk premium on
corporate securities. The percentages in the definition of Rate Multiple for the
Auction Preferred Stock are no longer the current market standards. The Rate
Multiple acts as an upper limit or cap on the dividend rate established through
an auction procedure. It is a percentage applied to the applicable 60-day "AA"
composite commercial paper rate and has over the last decade served as an
adequate limiting mechanism. Recently, however, the 60-day commercial paper
rates have been at historical lows. This has resulted in auction clearing rates
that are, in percentage terms, greater than historical levels and in certain
cases higher than the limits originally established for the Company's Auction
Preferred Stock.
The Company wishes to increase the Rate Multiple to meet market
expectations and ensure a more efficient market for the Auction Preferred Stock.
The Company has been informed by its investment bankers that as a
result of the increase in the risk premium required by investors, it is
necessary for the Company to increase the maximum applicable rate. As noted
above, the Rate Multiple determines the maximum applicable rate investors will
receive in the event sufficient clearing bids are not received in an auction. By
increasing the maximum applicable rate, the Company increases the risk premium
offered to investors and increases the probability of receiving sufficient
clearing bids. If the Company does not increase the percentages in the
definition of Rate Multiple, there will be an increase in the possibility that
sufficient clearing bids will not exist in upcoming auctions. As a result, the
Company will be required to pay the maximum applicable rate.
In addition, the market perceives a failure to receive sufficient
clearing bids in an auction as an indication that sufficient clearing bids will
not be received in subsequent auctions. The Company seeks to dispel such a
perception and ensure a market for the Auction Preferred Stock. In doing so, the
Company hopes to decrease the possibility that the dividend rate will be set at
the maximum applicable rate.
The Proposed Amendment will also affect the liquidity of the Auction
Preferred Stock. The transferability of the shares is largely dependent on
receiving sufficient clearing bids in an auction, because the shares may only be
transferred in an auction. If sufficient clearing bids do not exist in an
auction, existing holders may not be able to sell their shares. By increasing
the potential to receive sufficient clearing bids, the Company is increasing the
possibility that an existing holder, if desired, will be able to transfer its
shares in an auction.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSED AMENDMENT.
OTHER BUSINESS
The Company's Bylaws limit the business to be transacted at a special
meeting of the shareholders to the purposes set forth in the notice of such
special meeting. The Board of Directors does not intend to bring before this
Special Meeting any matters other than the Proposed Amendment referred to in the
Notice of Special Meeting and this Proxy Statement.
PRINCIPAL SHAREHOLDERS
The following table presents certain information regarding shareholders
who are known to the Company to be the beneficial owners of more than 5 percent
of any class of voting securities as of June 19, 2002:
5
Name and Address of Amount and Nature of Percent of
Class of Stock Beneficial Owner Beneficial Ownership Class
-------------- ---------------- -------------------- -----
Common Stock IDACORP, Inc./1 37,612,351 100%
1221 West Idaho Street
Boise, Idaho 83702
- ----------------------------
1 As a result of the formation of the holding company, IDACORP became the
holder of all issued and outstanding shares of the Company's common stock
on October 1, 1998.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of the Company's
preferred stock beneficially owned on June 19, 2002 by the directors and
executive officers of the Company:
Name of Amount of Percent of
Class of Stock Beneficial Owner Beneficial Ownership Class
-------------- ---------------- -------------------- -----
Preferred Stock Rotchford L. Barker - *
Preferred Stock Roger L. Breezley - *
Preferred Stock John B. Carley - *
Preferred Stock Christopher L. Culp, Ph.D. - *
Preferred Stock Jack K. Lemley - *
Preferred Stock Evelyn Loveless 27 *
Preferred Stock Gary G. Michael - *
Preferred Stock Jon H. Miller - *
Preferred Stock Peter S. O'Neill - *
Preferred Stock Jan B. Packwood - *
Preferred Stock Robert A. Tinstman - *
Preferred Stock J. Lamont Keen - *
Preferred Stock Darrel T. Anderson - *
Preferred Stock James C. Miller - *
Preferred Stock Robert W. Stahman - *
Preferred Stock All Directors and Executive Officers of the 27 *
Company as a group (22 persons)
- ----------------------------
* Less than one percent.
All directors and executive officers have sole voting and investment
power for the shares held by them.
Because the Auction Preferred Stock is not ordinarily a voting
security, no public filings have been made by any beneficial holders of more
than 5 percent of the shares of the Auction Preferred Stock. The Company
believes, however, that certain investment banking firms, including Bear
Stearns, Merrill Lynch, CS First Boston, Morgan Stanley Dean Witter and
PaineWebber, may, from time to time, acquire more than 5 percent of the Auction
Preferred Stock.
6
FINANCIAL AND OTHER INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance with the Exchange Act, the Company files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; or 233 Broadway, New York, New York 10279. Copies of such material
can be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Reports, proxy materials and other
information that the Company files are also available at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company's financial statements and related information included in
the Annual Report on Form 10-K for the year ended December 31, 2001, the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 and Current
Reports on Form 8-K dated March 26, 2002, April 25, 2002, May 16, 2002 and May
31, 2002, each as filed with the Commission, are hereby incorporated by
reference. All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the date of the Special Meeting (or any adjournment or
postponement thereof) shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part of this Proxy Statement from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference in this Proxy Statement will be deemed to be
modified or superseded for purposes of this Proxy Statement to the extent that a
statement contained in this Proxy Statement or in any other subsequently filed
document that is deemed to be incorporated by reference in this Proxy Statement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
The Company will provide without charge to each person to whom a proxy
statement is delivered, on written or oral request of such person and by first
class mail or other equally prompt means within one business day of the request,
a copy of any or all of the information that has been incorporated by reference
in this Proxy Statement, other than exhibits to such documents. Requests should
be directed to: Corporate Secretary, Idaho Power Company, 1221 West Idaho
Street, Boise, Idaho 83707-0070, telephone: (208) 388-2200.
INDEPENDENT AUDITORS
No representative of Deloitte & Touche LLP, the Company's independent
auditors, is expected to be present at the Special Meeting unless prior to the
day of the Special Meeting the Corporate Secretary has received written notice
from a shareholder entitled to vote addressed to the Corporate Secretary at
Idaho Power Company, 1221 West Idaho Street, P.O. Box 70, Boise, Idaho
83707-0070, that such shareholder will attend the Special Meeting and wishes to
ask questions of a representative of Deloitte & Touche LLP.
2003 JOINT ANNUAL MEETING OF SHAREHOLDERS
Nominations for Director may be made only by the Board of Directors or
by a shareholder entitled to vote who has delivered written notice to the
Secretary of the Company not earlier than 90 days, and not later than 60 days,
prior to the first anniversary of the annual meeting held on May 16, 2002.
Rule 14a-4 of the Securities and Exchange Commission's proxy rules
allows a company to use discretionary voting authority to vote on matters coming
before an annual meeting of shareholders, if the company does not have notice of
the matter at least 45 days before the date corresponding to the date on which
the company first mailed its proxy materials for prior year's annual meeting of
shareholders or the
7
date specified by an advance notice provision in the company's bylaws. The
Bylaws of the Company contain such an advance notice provision. Under the
Bylaws, no business may be brought before an annual meeting of the shareholders
except as specified in the notice of the meeting or as otherwise properly
brought before the meeting by or at the direction of the Board or by a
shareholder entitled to vote who has delivered written notice to the Secretary
of the Company not earlier than 90 days, and not later than 60 days, prior to
the first anniversary of the annual meeting on May 16, 2002.
For the 2003 Joint Annual Meeting of Shareholders, expected to be held
on May 15, 2003, the Company's shareholders must submit such nominations or
proposals to the Secretary of the Company no earlier than February 14, 2003 and
no later than March 17, 2003.
The requirements referred to above are separate and apart from the
Commission's requirements that a shareholder must meet in order to have a
shareholder proposal included in the proxy statement under Rule 14a-8. For the
2003 Joint Annual Meeting of Shareholders expected to be held on May 15, 2003,
any shareholder who wishes to submit a proposal for inclusion in the joint proxy
materials pursuant to Rule 14a-8 must submit such proposal to the Secretary of
the Company on or before December 9, 2002.
It is requested that each shareholder who cannot attend the meeting
vote his or her proxy or proxies without delay.
8
ANNEX A
TEXT OF PARAGRAPH (e) OF ARTICLE 6.C.3. OF THE RESTATED ARTICLES OF
INCORPORATION, AS AMENDED, OF IDAHO POWER COMPANY, AS MODIFIED BY THE PROPOSED
AMENDMENT.
e. Flexible Auction Series A, Serial Preferred Stock, Without Par
Value. There is hereby created the third series of the Corporation's Serial
Preferred Stock, Without Par Value, which shall be designated as the Flexible
Auction Series A, Serial Preferred Stock, Without Par Value (hereafter in this
paragraph (e) referred to as the "Auction Preferred Stock"), which consists of
500 shares. The rights and preferences of the shares of said series, in those
respects in which the shares thereof may vary from shares of other series, shall
be as follows:
PART I
(i) As used in this paragraph (e) the following terms shall have the following
meanings, whether used in the singular or plural, unless the context or use
indicates another or different meaning or intent:
"Applicable 'AA' Composite Commercial Paper Rate", as of any date
and with respect to any Long-Term Dividend Period, shall mean (a) in
the case of any Long-Term Dividend Period having a term less than 70
days, the interest equivalent of the 60-day rate, (b) in the case of
any Long-Term Dividend Period having a term 70 days or more but less
than 85 days, the arithmetic average of the interest equivalent of the
60-day and 90-day rates, (c) in the case of any Long-Term Dividend
Period having a term 85 days or more but less than 120 days, the
interest equivalent of the 90-day rate, (d) in the case of any
Long-Term Dividend Period having a term 120 days or more but less than
148 days, the arithmetic average of the interest equivalent of the
90-day and 180-day rates, (e) in the case of any Long-Term Dividend
Period having a term 148 days or more but less than 210 days, the
interest equivalent of the 180-day rate, (f) in the case of any
Long-Term Dividend Period having a term 210 days or more but less than
238 days, the arithmetic average of the interest equivalent of the
180-day and 270-day rates, and (g) in the case of any Long-Term
Dividend Period having a term 238 or more days, the interest
equivalent of the 270-day 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 either or both of such ratings by such
agencies or such rating by another rating agency, as 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 in the event
that the Federal Reserve Bank of New York does not make available any
such rate, then the arithmetic average of such rates, as quoted on a
discount basis or otherwise by the Commercial Paper Dealers, to the
Trust Company for the close of business on the Business Day next
preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the "AA" Composite Commercial Paper Rate,
the "AA" Composite Commercial Paper Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining
Commercial Paper Dealer and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Corporation to
provide such rate or rates not being supplied by any Commercial Paper
Dealer or Commercial Paper Dealers, as the case may be, or, if the
Corporation does not select any such Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer. For the purpose of this definition, any
arithmetic average shall be rounded to the nearest one-thousandth
(.001) of one percent.
"Applicable Rate" means the rate per annum in effect from time to
time at which dividends on the Auction Preferred Stock are payable
during Dividend Periods subsequent to the initial Dividend Period, as
provided in paragraph (ii)(B) below.
1
"Applicable Treasury Rate" as of any date and with respect to
Auction Preferred Stock with a Long-Term Dividend Period of one year
or more, means the interest equivalent of the rate for direct
obligations of the United States Treasury having an original maturity
which is equal to, or next lower than, the length of such Long-Term
Dividend Period, as published weekly by the Federal Reserve Board in
"Federal Reserve Statistical Release H.15(519)-Selected Interest
Rates", or any successor publication by the Federal Reserve Board
within five Business Days preceding such date. In the event that the
Federal Reserve Board does not publish such weekly per annum interest
rate, or if such release is not yet available, the Applicable Treasury
Rate will be the arithmetic average of the secondary market bid rates
as of approximately 3:30 p.m., New York City time, on the Business Day
next preceding such date, of the U.S. Government Securities Dealers
obtained by the Trust Company (or, under certain circumstances, the
Corporation) for the issue of direct obligations of the United States
Treasury, in an aggregate principal amount of at least $1,000,000,
with a remaining maturity equal to, or next lower than, the length of
such Long-Term Dividend Period. If any U.S. Government Securities
Dealer does not quote a rate required to determine the Applicable
Treasury Rate, the Applicable Treasury Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining U.S.
Government Securities Dealer or any Substitute U.S. Government
Securities Dealer or Substitute U.S. Government Securities Dealers
selected by the Corporation to provide such rate or rates not being
supplied by any U.S. Government Securities Dealer or U.S. Government
Securities Dealers, as the case may be, or, if the Corporation does
not select any such Substitute U.S. Government Securities Dealer or
Substitute U.S. Government Securities Dealers, by the remaining U.S.
Government Securities Dealer; provided, that in the event the
Corporation is unable to cause such quotations to be furnished to the
Trust Company (or, if applicable, the Corporation) by such sources,
the Corporation may cause the Applicable Treasury Rate to be furnished
to the Trust Company (or, if applicable, the Corporation) by such
alternative source or sources as the Corporation in good faith deems
to be reliable. For the purpose of this definition, any arithmetic
average shall be rounded to the nearest one-thousandth (.001) of one
percent.
"Auction" means each periodic implementation of the Auction
Procedures.
"Auction Date" means the Business Day next preceding the first
day of each Dividend Period after the initial Dividend Period.
"Auction Procedures" means the procedures for conducting Auctions
set forth in Part II.
"Business Day" means a day on which the New York Stock Exchange
is open for trading and which is not a day on which banking
institutions in New York City are authorized or required by law or
executive order to close.
"Charter" means the Corporation's Restated Articles of
Incorporation, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Goldman, Sachs & Co. and
Shearson Lehman Brothers Inc. or, in lieu thereof, their respective
successors or affiliates.
"Corporation" means Idaho Power Company, a corporation of the
State of Idaho, or its successors.
"Date of Original Issue" means the date on which the Corporation
originally issues the Auction Preferred Stock.
"Default Rate" has the meaning set forth in paragraph (ii) (B)
below.
"Dividend Payment Date" has the meaning set forth in paragraph
(ii)(A)(6) below.
2
"Dividend Period" has the meaning set forth in paragraph
(ii)(A)(7) below.
"Dividend Period Days" has the meaning set forth in paragraph
(ii)(A)(5) below.
"Dividend Quarter" has the meaning set forth in paragraph
(ii)(A)(6) below.
"dividend rate" means the rate per annum in effect from time to
time at which dividends on the Auction Preferred Stock are payable as
provided in paragraphs (ii)(A) and (B) below.
"Dividends-Received Deduction" has the meaning set forth in
paragraph (ii)(A)(4) below.
"Existing Holder" of any shares of Auction Preferred Stock means
a person who has signed a Master Purchaser's Letter and is listed as
the beneficial owner of such shares of Auction Preferred Stock in the
records of the Trust Company.
"initial Dividend Payment Date" means the date specified in
paragraph (ii)(A)(7) below.
"initial Dividend Period" has the meaning set forth in paragraph
(ii)(A)(7) below.
"interest equivalent" means the equivalent yield on a 360-day
basis of a discount-basis security to an interest-bearing security.
"Late Charge" has the meaning set forth in paragraph (ii)(B)
below.
"Long-Term Dividend Period" means any Dividend Period designated
by the Corporation pursuant to paragraph (ii)(A)(8) below which may be
any period greater than 49 days and consisting of a number of days
evenly divisible by seven (or such number of days as shall result from
the adjustment set forth in paragraph (ii)(A)(5) below) but not
exceeding 25 years.
"Master Purchaser's Letter" means a letter from a prospective
purchaser of Auction Preferred Stock in which such prospective
purchaser agrees to certain conditions.
"Maximum Applicable Rate" means (a) in the case of a Short-Term
Dividend Period, a per annum rate equal to the Rate Multiple
multiplied by the 60-day "AA" Composite Commercial Paper Rate in
effect on the related Auction Date and (b) in the case of a Long-Term
Dividend Period, a per annum rate equal to the Rate Multiple
multiplied by the Reference Rate in effect on the related Auction
Date, but, in either case, such rate shall not exceed 16% per annum.
"Minimum Holding Period" has the meaning set forth in paragraph
(ii)(A)(4) below.
"Moody's" means Moody's Investors Service, Inc., or its
successor, so long as such agency (or successor) is in the business of
rating securities of the type of the Auction Preferred Stock.
"Normal Dividend Payment Date" has the meaning set forth in
paragraph (ii)(A)(1) below.
"Notice of Long-Term Dividend Period" has the meaning set forth
in paragraph (ii)(A)(8) below.
"Notice of Revocation" has the meaning set forth in paragraph
(ii)(A)(8) below.
"Rate Multiple", when used with respect to shares of Auction
Preferred Stock on an Auction Date, means the percentage, determined
as set forth below, based on the prevailing rating of the Auction
Preferred Stock in effect at the close of business on the Business Day
immediately preceding such Auction Date:
3
Prevailing Rating Rate Multiple
AA/aa or Above............................... 175%
A/a.......................................... 200%
BBB/baa...................................... 225%
Below BBB/baa................................ 275%
For purposes of this definition, the "prevailing rating" of
Auction Preferred Stock shall be (a) AA/aa or Above, if the Auction
Preferred Stock has a rating of AA- or better by S&P and aa3 or better
by Moody's, or the equivalent of both of such ratings by such agencies
or a substitute rating agency or substitute rating agencies selected
as provided below, (b) if not AA/aa or Above, then A/a, if the Auction
Preferred Stock has a rating of A- or better by S&P and a3 or better
by Moody's or the equivalent of both of such ratings by such agencies
or a substitute rating agency or substitute rating agencies selected
as provided below, (c) if not AA/aa or Above or A/a, then BBB/baa, if
the Auction Preferred Stock has a rating of BBB- or better by S&P and
baa3 or better by Moody's or the equivalent of both of such ratings by
such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (d) if not AA/aa or Above,
A/a or BBB/baa, then Below BBB/baa. For purposes of the foregoing, the
"prevailing rating" of the Auction Preferred Stock will be based upon
the lower of two ratings provided by S&P and Moody's or a substitute
rating agency or agencies. The Corporation shall take all reasonable
action necessary to enable S&P and Moody's to provide a rating for the
Auction Preferred Stock. If either or both of S&P or Moody's shall not
make such a rating available, the Corporation shall select a
nationally recognized statistical rating organization (as that term is
used in the rules and regulations of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) or
two nationally recognized statistical rating organizations to act as
substitute rating agency or substitute rating agencies, as the case
may be.
"Reference Rate" means, as of any date and with respect to any
Long-Term Dividend Period having a term of (a) 50 days or more and
less than 270 days, the Applicable "AA" Composite Commercial Paper
Rate, (b) 270 days or more and less than one year, the higher of the
270-day Applicable "AA" Composite Commercial Paper Rate and the
one-year Applicable Treasury Rate and (c) one year or more, the
Applicable Treasury Rate.
"S&P" means Standard & Poor's Corporation, or its successor, so
long as such agency (or successor) is in the business of rating
securities of the type of the Auction Preferred Stock.
"Securities Depository" means The Depository Trust Company,
together with any successor securities depository selected by the
Corporation which agrees to follow the procedures required to be
followed by such securities depository in connection with shares of
Auction Preferred Stock.
"Seven-Day Dividend Period" means a Dividend Period arising under
the circumstances set forth in paragraph (ii)(A)(9) below.
"Short-Term Dividend Period" has the meaning set forth in
paragraph (ii)(A)(7) below.
"60-day 'AA' Composite Commercial Paper Rate", as of any date and
with respect to any Short-Term Dividend Period, means (a) the interest
equivalent of the 60-day 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 either or both of such ratings by such agencies
or another rating agency, as such 60-day 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 (b) 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 60-day rate on commercial paper placed on behalf of
such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper
4
Dealers to the Trust Company for the close of business on the Business
Day immediately preceding such date. If any Commercial Paper Dealer
does not quote a rate required to determine the 60-day "AA" Composite
Commercial Paper Rate, the 60-day "AA" Composite Commercial Paper Rate
shall be determined on the basis of the quotation or quotations
furnished by the remaining Commercial Paper Dealer and any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being
supplied by any Commercial Paper Dealer or Commercial Paper Dealers,
as the case may be, or, if the Corporation does not select any such
Substitute Commercial Paper Dealer or Substitute Commercial Paper
Dealers, by the remaining Commercial Paper Dealer. If the Board of
Directors of the Corporation, however, shall adjust the number of
Dividend Period Days, in the event of a change in the Minimum Holding
Period, then (a) if the Dividend Period Days shall be fewer than 70
days, such rate shall be the interest equivalent of the 60-day rate on
such commercial paper, (b) if the Dividend Period Days shall be 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 and (c) if the Dividend Period Days shall be 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. For the
purpose of this definition, any arithmetic average shall be rounded to
the nearest one-thousandth (.001) of one percent.
"Substitute Commercial Paper Dealer" means any commercial paper
dealer, the principal office of which is located in New York City,
that is a nationally recognized leading dealer in the domestic
commercial paper market, provided that no such dealer may be the
Corporation or an affiliate of the Corporation.
"Substitute U.S. Government Securities Dealer" means any dealer
in United States Treasury obligations, the principal office of which
is located in New York City, that is a nationally recognized leading
dealer in the market for United States Treasury obligations, provided
that no such dealer may be the Corporation or an affiliate of the
Corporation.
"Trust Company" means Bankers Trust Company, together with any
successor bank or trust company or other entity entering into an
agreement similar to that between Bankers Trust Company and the
Corporation.
"U.S. Government Securities Dealer" means Goldman, Sachs & Co.
and Shearson Lehman Brothers Inc., or, in lieu thereof, their
respective affiliates or successors.
(ii) Dividends. (A) The rate of dividend on shares of the Auction
Preferred Stock is hereby fixed and determined at the dividend rate from time to
time in effect as provided in subparagraph (B) of this paragraph (ii).
(1) Dividends on the shares of Auction Preferred Stock shall
accumulate from the Date of Original Issue. Dividends in respect of a
Short-Term Dividend Period shall be payable commencing on the initial
Dividend Payment Date and thereafter, except as provided in clause (2)
below, on each seventh Thursday following the preceding Dividend
Payment Date. Dividends in respect of a Seven-Day Dividend Period,
occurring in connection with an Auction (whether or not held) pursuant
to clause (9) below, shall be payable, except as provided below in
clause (2), on the seventh day following the Business Day next
succeeding the day on which such Auction occurs (or was to have
occurred). Dividends in respect of a Long-Term Dividend Period shall
be payable, except as provided in clause (3) below, on the day
following the last day of such Long-Term Dividend Period and, if
occurring prior thereto, on the first day of the fourth month after
the commencement of such Long-Term Dividend Period and quarterly
thereafter on the first day of each succeeding third month. Each day
on which dividends on shares of Auction Preferred Stock would be
payable as determined as set forth in this clause (1) but for
adjustments set forth below in this paragraph (ii)(A) is referred to
herein as a "Normal Dividend Payment Date".
5
(2) In the case of dividends payable in respect of a Short-Term
Dividend Period or a Seven-Day Dividend Period, if:
(I) (x) the Securities Depository shall continue to make
available to its members and participants the amounts due as
dividends on shares of Auction Preferred Stock in next-day funds
on the dates on which such dividends are payable and (y) a Normal
Dividend Payment Date is not a Business Day, or the day next
succeeding such Normal Dividend Payment Date is not a Business
Day, then dividends shall be payable on the first Business Day
preceding such Normal Dividend Payment Date that is next
succeeded by a Business Day; or
(II) (x) the Securities Depository shall make available to
its members and participants the amounts due as dividends on
shares of Auction Preferred Stock in immediately available funds
on the dates on which such dividends are payable (and the
Securities Depository shall have so advised the Trust Company)
and (y) a Normal Dividend Payment Date is not a Business Day,
then dividends shall be payable on the first Business Day
following such Normal Dividend Payment Date.
(3) In the case of dividends payable in respect of a Long-Term
Dividend Period, if:
(I) (x) the Securities Depository shall continue to make
available to its members and participants the amounts due as dividends
on shares of Auction Preferred Stock in next-day funds on the dates on
which such dividends are payable and (y) a Normal Dividend Payment
Date is not a Business Day, or the day next succeeding such Normal
Dividend Payment Date is not a Business Day, then dividends shall be
payable on the first Business Day following such Normal Dividend
Payment Date that is next succeeded by a Business Day; or
(II) (x) the Securities Depository shall make available to its
members and participants the amounts due as dividends on shares of
Auction Preferred Stock in immediately available funds on the dates on
which such dividends are payable (and the Securities Depository shall
have so advised the Trust Company) and (y) a Normal Dividend Payment
Date is not a Business Day, then dividends shall be payable on the
first Business Day following such Normal Dividend Payment Date.
(4) Notwithstanding clauses (1), (2) and (3) above, if the date
on which dividends on shares of Auction Preferred Stock would be
payable as determined as set forth in clause (1), (2) or (3) above is
a day that would result in the number of days between successive
Auction Dates (determined by excluding the first Auction Date and
including the second Auction Date) not being at least equal to the
then current minimum holding period (currently set forth in Section
246(c) of the Code) (the "Minimum Holding Period") required for
taxpayers to be entitled to the Dividends-Received Deduction on
preferred stock ("Dividends-Received Deduction"), then, except in the
case of a Seven-Day Dividend Period, dividends on such shares shall be
payable, if subclause (I) of either of clause (2) or (3) would be
applicable, on the first Business Day following such date on which
dividends would be so payable that is next succeeded by a Business Day
or, if subclause (II) of either of clause (2) or (3) would be
applicable, on the first Business Day following such day on which
dividends would be so payable, that in either case results in the
number of days between such successive Auction Dates (determined as
set forth in this clause (4)) being at least equal to the then current
Minimum Holding Period.
(5) Notwithstanding clauses (1), (2), (3) and (4) above, in the
event of a change in law altering the Minimum Holding Period, the
Board of Directors of the Corporation may adjust the period of time
between Dividend Payment Dates so as to adjust uniformly the number of
days (such number of days without giving effect to the adjustments
referred to in clauses (2) and (3), being herein referred to as
"Dividend Period Days") in Dividend Periods commencing after the date
of such change in law to equal or exceed the then current Minimum
Holding Period, provided
6
that the number of Dividend Period Days shall not exceed by more than
nine days the length of such then current Minimum Holding Period and
shall be evenly divisible by seven, and the maximum number of Dividend
Period Days, as adjusted pursuant to this clause (5), in no event
shall exceed 98 days. This clause (5) shall not apply to a Seven-Day
Dividend Period except to the extent that the Minimum Holding Period,
as altered, exceeds the aggregate number of Dividend Period Days in
such Seven Day Dividend Period and the next preceding Dividend Period.
Upon any such change in the number of Dividend Period Days as a result
of a change in law, the Corporation will give notice through the Trust
Company of such change to all Existing Holders of Auction Preferred
Stock.
(6) Each date on which dividends on Auction Preferred Stock shall
be payable as determined as set forth above shall be referred to
herein as a "Dividend Payment Date". If applicable, the period from
the preceding Dividend Payment Date to the next Dividend Payment Date
during a Long-Term Dividend Period is herein referred to as a
"Dividend Quarter". Although any particular Dividend Payment Date may
not occur on the originally scheduled Normal Dividend Payment Date
because of the foregoing adjustments, each succeeding Dividend Payment
Date shall be, subject to such adjustments, the date determined as set
forth in clause (1) above as if each preceding Dividend Payment Date
had occurred on the respective originally scheduled Normal Dividend
Payment Date.
(7) The initial Dividend Payment Date for the Auction Preferred
Stock shall be January 9, 1992 (the "initial Dividend Payment Date")
and the initial Dividend Period shall have a number of Dividend Period
Days equal to the number of days from (and including) the Date of
Original Issue to (but excluding) the initial Dividend Payment Date
(the "initial Dividend Period"). After the initial Dividend Period,
each subsequent Dividend Period shall (except for the adjustments
described in clauses (2), (3) and (4) above) be 49 days (each such
49-day period, subject to any adjustment as a result of a change in
law lengthening the Minimum Holding Period as described in clause (5)
above, being herein referred to as a "Short-Term Dividend Period"),
unless as described in clause (8) below, the Corporation exercises its
right to specify that any such subsequent Dividend Period will be a
Long-Term Dividend Period and unless, as provided in clause (9) below,
any Dividend Period shall be a Seven-Day Dividend Period (each such
Short-Term Dividend Period, Long-Term Dividend Period and Seven-Day
Dividend Period, together with the initial Dividend Period, being
referred to herein as a "Dividend Period"). After the initial Dividend
Period, each successive Dividend Period shall commence on the Dividend
Payment Date following the preceding Dividend Period and shall end (I)
in the case of a Short-Term Dividend Period or a Seven-Day Dividend
Period, on and include the day preceding the next Dividend Payment
Date and (II) in the case of a Long-Term Dividend Period, on the last
day of the Long-Term Dividend Period specified by the Corporation in
the related Notice of Long-Term Dividend Period.
(8) On or prior to the tenth day but not more than 45 days prior
to an Auction Date, the Corporation may, at its sole option, by
telephonic and written notice (a "Notice of Long-Term Dividend
Period") to the Trust Company and the Securities Depository, designate
any Dividend Period as a Long-Term Dividend Period. Any Notice of
Long-Term Dividend Period may be revoked by the Corporation in its
sole discretion on or prior to the third Business Day prior to the
related Auction Date by telephonic and written notice (a "Notice of
Revocation") to the Trust Company and the Securities Depository. If
the Corporation does not give a Notice of Long-Term Dividend Period
with respect to the next succeeding Dividend Period, or gives a Notice
of Revocation with respect thereto, such next succeeding Dividend
Period (subject to the exception stated in clause (9)(II) below) shall
be a Short-Term Dividend Period.
(9) In the event that (I) the Corporation has given a Notice of
Long-Term Dividend Period with respect to the next succeeding Dividend
Period, but Sufficient Clearing Bids are not made in the related
Auction, such next succeeding Dividend Period will, notwithstanding
such Notice of Long-Term Dividend Period, commence on the Dividend
Payment Date next succeeding the relevant Auction Date and end on the
day preceding the next succeeding
7
Dividend Payment Date, which, subject to adjustment as provided above,
will be the seventh day thereafter (such seven day Dividend Period
being herein referred to as a "Seven-Day Dividend Period") and (II) an
Auction is not held on an Auction Date for any reason other than the
discontinuation of Auctions due to the failure of the Corporation to
pay the full amount of any dividends to be paid on any Dividend
Payment Date or the full redemption price for any share of Auction
Preferred Stock called for redemption on any redemption date, and any
such failure shall not have been cured within three Business Days
thereafter, the next succeeding Dividend Period shall be a Seven-Day
Dividend Period. The Dividend Period next succeeding a Seven-Day
Dividend Period shall be a Short-Term Dividend Period unless an
Auction is not held on the Auction Date included within such Seven-Day
Dividend Period for the reasons specified in clause (9)(II) above, in
which case the next succeeding Dividend Period shall be a Seven-Day
Dividend Period.
(10) Dividends on the Auction Preferred Stock, if any and to the
extent declared, shall be paid on each Dividend Payment Date in funds
legally available on such date. The Corporation shall by the close of
business on the Business Day prior to each Dividend Payment Date
deposit with the Trust Company funds sufficient to pay dividends then
payable on such Dividend Payment Date with irrevocable instructions to
the Trust Company to make such payment to the holder or holders of
record.
(11) Each dividend shall be payable to the holder or holders of
record of the Auction Preferred Stock as of the close of business on
the Business Day immediately preceding the applicable Dividend Payment
Date. So long as the shares of Auction Preferred Stock are 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.
(B) The dividend rate on the Auction Preferred Stock may not under any
circumstances exceed 16% per annum. The dividend rate on the Auction Preferred
Stock (1) for the initial Dividend Period shall be 4.60% per annum and (2) for
each subsequent Dividend Period shall be the Applicable Rate for such Dividend
Period. The "Applicable Rate" for each such Dividend Period shall be the rate
per annum determined pursuant to Part II below. Notwithstanding the foregoing,
(I) the Applicable Rate on the Auction Preferred Stock during any Seven-Day
Dividend Period shall be (x) if such Seven-Day Dividend Period occurs pursuant
to paragraph (ii)(A)(9)(I) above, the greatest of (aa) the Maximum Applicable
Rate on the Auction Date for a Short-Term Dividend Period, (bb) the Maximum
Applicable Rate on the Auction Date for a Long-Term Dividend Period having a
term equal to the term specified in the Notice of Long-Term Dividend Period
given in respect of such Auction Date and (cc) the Applicable Rate in effect for
the Dividend Period during which such Auction Date occurred, and (y) if such
Seven-Day Dividend Period occurs pursuant to paragraph (ii)(A)(9)(II) above, the
Maximum Applicable Rate for a Short-Term Dividend Period determined as of the
Auction Date next preceding such Seven-Day Dividend Period; and (II) in the
event and during the continuance of any failure of the Corporation to pay the
full amount of any dividends or the full amount of any redemption price, (x)
until such time as the full amount due (including any Late Charge for up to 5
days with respect to each Dividend Payment Date or redemption date with respect
to which such failure occurred, as described in this subparagraph (B) below)
shall have been paid to the Trust Company, Auctions shall be discontinued, (y)
if such dividends or redemption price were to be paid in respect of a Long-Term
Dividend Period, such Long-Term Dividend Period shall cease and a Short-Term
Dividend Period shall be deemed to have commenced on the Dividend Payment Date
or the redemption date, as the case may be, in respect of which such failure
occurred and (z) the Applicable Rate for each Dividend Period (including without
limitation a Short-Term Dividend Period which occurs pursuant to subclause (y)
above) commencing on or after any such Dividend Payment Date or redemption date,
as the case may be, shall be equal to the Default Rate for such Dividend Period.
The foregoing shall continue until there shall occur a Dividend Payment Date at
least one Business Day prior to which the full amount of any dividends payable
on each Dividend Payment Date, and the full amount of any redemption price then
due (including in each case any Late Charge for up to five days with respect to
each Dividend Payment Date or redemption date in respect of which such failure
occurred, as described in the next succeeding paragraph), shall have been paid
to the Trust Company, and thereupon Auctions shall resume on the terms stated
herein for the Dividend Periods
8
commencing with such Dividend Payment Date. With respect to any such failure,
the "Default Rate" shall be the higher of 275% of the 60-day "AA" Composite
Commercial Paper Rate, determined as of the date of such failure, and (I) if the
Corporation has failed timely to pay dividends in respect of a Short-Term
Dividend Period, a Long-Term Dividend Period or a Seven-Day Dividend Period, the
dividend rate in effect for the Short-Term Dividend Period, Long-Term Dividend
Period or Seven-Day Dividend Period, as the case may be, in respect of which
such failure occurred, or (II) if the Corporation has failed timely to pay the
redemption price of shares called for redemption, the dividend rate in effect
for the Dividend Period immediately preceding the applicable redemption date.
Any failure referred to in this subparagraph (B) above with respect to
the shares of Auction Preferred Stock shall be deemed to be cured if as of 12:00
noon, New York City time, on the third Business Day next succeeding any such
failure, the Corporation shall have paid to the Trust Company (1) in the case of
a failure to pay dividends, the full amount of the dividends to be paid for the
Dividend Period with respect to which such failure occurred, plus a Late Charge
in an amount equal to the product of (I) 275% of the 60-day "AA" Composite
Commercial Paper Rate on the date of occurrence of such failure, (II) a
fraction, the numerator of which shall be the number of days during which such
failure exists and is not cured in accordance with this sentence (including the
day such failure occurs and excluding the day such failure is cured) (but not to
exceed 5 days) and the denominator of which shall be 360, and (III) the full
amount of the dividends originally required to be paid for the Dividend Period
as to which such failure occurred (a "Late Charge"), or (2) in the case of a
failure to pay the redemption price, the full amount of the aggregate redemption
price for the shares of Auction Preferred Stock that have been called for
redemption, plus accumulated and unpaid dividends from the date of redemption to
the date of such cure, plus an amount equal to the product of (I) 275% of the
60-day "AA" Composite Commercial Paper Rate on the Business Day on which the
Corporation was required to pay the aggregate redemption price to the Trust
Company, (II) a fraction, the numerator of which shall be the number of days
during which such failure exists and is not cured in accordance with this
sentence (including the day such failure occurs and excluding the day such
failure is cured) (but not to exceed 5 days) and the denominator of which shall
be 360, and (III) the aggregate stated value of the shares of Auction Preferred
Stock called for redemption. Upon any such cure, Auctions shall be resumed on
the Auction Date on or after the date such cure was effected on the terms stated
herein for Dividend Periods commencing after such Auction Date.
The amount of dividends per share of the Auction Preferred Stock
payable for each Dividend Period (or for each Dividend Quarter during any
Long-Term Dividend Period) shall be computed by multiplying the Applicable Rate
for each Dividend Period by a fraction, the numerator of which shall be the
number of days in the Dividend Period (or Dividend Quarter) (calculated by
counting the first day thereof and the last day thereof) such share was
outstanding and the denominator of which shall be 360 and multiplying the amount
so obtained by $100,000.
(iii) Redemption. Shares of the Auction Preferred Stock shall be
redeemable at the option of the Corporation in whole or in part on the last
Dividend Payment Date in respect of any Dividend Period at a redemption price of
$100,000 per share, plus, in each case, unpaid accumulated dividends, if any, to
the date of redemption.
If the Corporation calls shares of the Auction Preferred Stock for
redemption, such shares called for redemption will not be included in the
Auction that would normally take place on the Business Day preceding the
redemption date.
(iv) Liquidation. The amount payable upon shares of the Auction
Preferred Stock in the event of voluntary or involuntary liquidation is $100,000
per share (to be referred to as the "Stated Value") plus unpaid accumulated
dividends, if any.
In the event of any preferential payments, the Auction Preferred Stock
shall be entitled pro rata to such preferential payments.
9
(v) Sinking Fund. There is no sinking fund for the redemption or
purchase of shares of the Auction Preferred Stock.
(vi) Conversion. Shares of the Auction Preferred Stock are not, by
their terms, convertible or exchangeable.
10
PART II
(a) Certain Definitions. Capitalized terms not defined in this Part II
shall have the respective meanings specified in Part I above. As used in this
Part II, the following terms shall have the following meanings, unless the
context otherwise requires:
(i) "Affiliate" shall mean any Person known to the Trust Company
to be controlled by, in control of or under common control with the
Corporation.
(ii) "Agent Member" shall mean the member of or participant in
the Securities Depository that will act on behalf of a Bidder and is
identified as such in such Bidder's Master Purchaser's Letter.
(iii) "Auction" shall mean the periodic implementation of the
procedures set forth in this Part II.
(iv) "Auction Date" shall mean the Business Day next preceding
the first day of each Dividend Period after the initial Dividend
Period.
(v) "Auction Preferred" shall mean shares of Flexible Auction
Series A, Serial Preferred Stock of the Corporation subject to an
Auction on any Auction Date.
(vi) "Available Auction Preferred" shall have the meaning
specified in section (d)(i) below.
(vii) "Bid" shall have the meaning specified in section (b)(i)
below.
(viii) "Bidder" shall have the meaning specified in section
(b)(i) below.
(ix) "Bid Excess" shall have the meaning specified in section
(c)(iv)(B)(1) below.
(x) "Broker-Dealer" shall mean any broker-dealer or other entity
permitted by law to perform the functions required of a Broker-Dealer
in this Part II that has been selected by the Corporation to perform
such functions and has entered into a Broker-Dealer Agreement with the
Trust Company that remains effective.
(xi) "Broker-Dealer Agreement" shall mean an agreement between
the Trust Company and a Broker-Dealer pursuant to which such
Broker-Dealer agrees to follow the procedures specified in this Part
II.
(xii) "Existing Holder" when used with respect to shares of
Auction Preferred shall mean a Person who has signed a Master
Purchaser's Letter and is listed as the beneficial owner of such
shares of Auction Preferred in the records of the Trust Company.
(xiii) "Hold Order" shall have the meaning specified in section
(b)(i) below.
(xiv) "Master Purchaser's Letter" shall mean a letter addressed
to the Corporation, the Trust Company, a Broker-Dealer and others in
which a Person agrees, among other things, to offer to purchase,
purchase, offer to sell and/or sell shares of Auction Preferred as set
forth in this Part II.
(xv) "Order" shall have the meaning specified in section (b)(i)
below.
11
(xvi) "Outstanding" shall, for purposes of this Part II, mean, as
of any date, shares of Auction Preferred theretofore issued by the
Corporation except, without duplication, (A) any shares of Auction
Preferred theretofore cancelled or delivered to the Trust Company for
cancellation, or redeemed by the Corporation, (B) any shares of
Auction Preferred as to which the Corporation or any Affiliate thereof
(other than an Affiliate which is a Broker-Dealer) shall be an
Existing Holder and (C) any shares of Auction Preferred represented by
any certificate in lieu of which a new certificate has been executed
and delivered by the Corporation.
(xvii) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a
joint venture or other entity or a government or any agency or
political subdivision thereof.
(xviii) "Potential Holder" shall mean any Person, including any
Existing Holder, (A) who shall have executed a Master Purchaser's
Letter and (B) who may be interested in acquiring shares of Auction
Preferred (or, in the case of an Existing Holder, additional shares of
Auction Preferred).
(xix) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns, or any other securities
depository selected by the Corporation which agrees to follow the
procedures required to be followed by such securities depository in
connection with shares of Auction Preferred.
(xx) "Sell Excess" shall have the meaning specified in section
(c)(iv)(C)(i) below.
(xxi) "Sell Order" shall have the meaning specified in section
(b)(i) below.
(xxii) "Submission Deadline" shall mean 1:00 p.m., New York City
time, on any Auction Date or such other time on any Auction Date by
which Broker-Dealers are required to submit Orders to the Trust
Company as specified by the Trust Company from time to time.
(xxiii) "Submitted Bid" shall have the meaning specified in
section (d)(i) below.
(xxiv) "Submitted Hold Order" shall have the meaning specified in
section (d)(i) below.
(xxv) "Submitted Order" shall have the meaning specified in
section (d)(i) below.
(xxvi) "Submitted Sell Order" shall have the meaning specified in
section (d)(i) below.
(xxvii) "Sufficient Clearing Bids" shall have the meaning
specified in section (d)(i) below.
(xxviii) "Winning Bid Rate" shall have the meaning specified in
section (d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of
Auction Preferred held by such Existing Holder which such
Existing Holder desires to continue to hold without regard
to the Applicable Rate for the next succeeding Dividend
Period;
(2) the number of Outstanding shares, if any, of
Auction Preferred that such Existing Holder desires to sell,
provided that the Applicable Rate for the
12
next succeeding Dividend Period shall be less than the rate
per annum specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of
Auction Preferred held by such Existing Holder which such
Existing Holder offers to sell without regard to the
Applicable Rate for the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Holders
that shall be maintained by such Broker-Dealer in good faith for
the purpose of conducting a competitive Auction, shall contact
Potential Holders, including Persons that are not Existing
Holders, on such list to determine the number of shares, if any,
of Auction Preferred that each such Potential Holder offers to
purchase, provided that the Applicable Rate for the next
succeeding Dividend Period shall not be less than the rate per
annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of the
information referred to in this section (b)(i) is hereinafter referred to as an
"Order" and each Existing Holder and each Potential Holder placing an Order is
hereinafter referred to as a "Bidder"; an Order containing the information
referred to in clause (A)(1) of this section (b)(i) is hereinafter referred to
as a "Hold Order"; an Order containing the information referred to in clause
(A)(2) or (B) of this section (b)(i) is hereinafter referred to as a "Bid"; and
an Order containing the information referred to in clause (A)(3) of this section
(b)(i) is hereinafter referred to as a "Sell Order".
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of Auction
Preferred 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;
(2) the number of Outstanding shares of Auction
Preferred specified in such Bid or a lesser number of
Outstanding shares of Auction Preferred to be determined as
set forth in section (e)(i)(D) if the Applicable Rate
determined on such Auction Date shall be equal to the rate
per annum specified in such Bid; or
(3) the number of Outstanding shares of Auction
Preferred specified in such Bid or a lesser number of
Outstanding shares of Auction Preferred to be determined as
set forth in section (e)(ii)(C) if the rate per annum
specified in such Bid shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of Auction
Preferred specified in such Sell Order; or
(2) the number of Outstanding shares of Auction
Preferred specified in such Sell Order or a lesser number of
Outstanding shares of Auction Preferred to be determined as
set forth in section (e)(ii)(C) if Sufficient Clearing Bids
do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
13
(1) the number of Outstanding shares of Auction
Preferred 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
(2) the number of Outstanding shares of Auction
Preferred specified in such Bid or a lesser number of
Outstanding shares of Auction Preferred to be determined as
set forth in section (e)(i)(E) if the Applicable Rate
determined on such Auction Date shall be equal to the rate
per annum specified in such Bid.
(iii) On each Auction Date, the Trust Company will determine the
60-day "AA" Composite Commercial Paper Rate or the Reference Rate, as
the case may be, and the Maximum Applicable Rate and will notify each
Broker-Dealer of each such rate not later than 9:30 a.m., New York
City time on such Auction Date (or such other time on such Auction
Date as specified by the Trust Company).
(c) Submission of Orders by Broker-Dealers to Trust Company.
(i) Each Broker-Dealer shall submit in writing to the Trust
Company prior to the Submission Deadline on each Auction Date all
Orders obtained by such Broker-Dealer and shall specify with respect
to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of shares of Auction Preferred that
are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of shares, if any, of Auction Preferred
subject to any Hold Order placed by such Existing Holder;
(2) the number of shares, if any, of Auction Preferred
subject to any Bid placed by such Existing Holder and the
rate specified in such Bid; and
(3) the number of shares, if any, of Auction Preferred
subject to any Sell Order placed by such Existing Holder;
and
(D) to the extent that such Bidder is a Potential Holder,
the rate and the number of shares of Auction Preferred specified
in such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Trust Company shall
round such rate up to the next higher one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding
shares of Auction Preferred held by an Existing Holder is not
submitted to the Trust Company prior to the Submission Deadline, the
Trust Company shall deem a Hold Order to have been submitted on behalf
of such Existing Holder covering the number of Outstanding shares of
Auction Preferred held by such Existing Holder and not subject to
Orders submitted to the Trust Company.
(iv) If one or more Orders covering in the aggregate more than
the number of Outstanding shares of Auction Preferred held by an
Existing Holder are submitted to the Trust Company, such Orders shall
be considered valid as follows and in the following order of priority:
14
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including the number
of Outstanding shares of Auction Preferred 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 of
Auction Preferred subject to such Hold Orders exceeds the number
of Outstanding shares of Auction Preferred held by such Existing
Holder, the number of shares of Auction Preferred subject to such
Hold Orders shall be reduced pro rata so that such Hold Orders
shall cover the number of Outstanding shares of Auction Preferred
held by such Existing Holder.
(B) (1)(1) any Bid shall be considered valid up to and
including the excess (the "Bid Excess") of the number of
Outstanding shares of Auction Preferred held by such Existing
Holder over the number of shares of Auction Preferred subject to
Hold Orders referred to in section (c)(iv)(A); and
(2) subject to clause (1) above, if more than one Bid
with the same rate is submitted on behalf of such Existing
Holder and the number of Outstanding shares of Auction
Preferred subject to such Bids is greater than the Bid
Excess, the number of shares of Auction Preferred subject to
such Bids shall be reduced pro rata so that such Bids shall
cover the number of shares of Auction Preferred equal to the
Bid Excess; and
(3) subject to clause (1) above, if more than one Bid
with different rates is submitted on behalf of such Existing
Holder, such Bids shall be considered valid in the ascending
order of their respective rates up to and including the Bid
Excess, and in any such event the number, if any, of such
Outstanding shares subject to Bids not valid under this
clause (B) shall be treated as the subject of a Bid by a
Potential Holder; and
(C) (1) (1) any Sell Order shall be considered valid up to
and including the excess (the "Sell Excess") of the number of
Outstanding shares of Auction Preferred held by such Existing
Holder over the number of shares of Auction Preferred subject to
Hold Orders referred to in section (c)(iv)(A) and Bids referred
to in section (c)(iv)(B); and
(2) subject to clause (1) above, if more than one Sell
Order is submitted on behalf of such Existing Holder and the
number of Outstanding shares of Auction Preferred subject to
such Sell Orders is greater than the Sell Excess, the number
of shares of Auction Preferred subject to such Sell Orders
shall be reduced pro rata so that such Sell Orders shall
cover the number of shares of Auction Preferred equal to the
Sell Excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate and
number of shares of Auction Preferred therein specified.
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction
Date, the Trust Company shall assemble all Orders submitted or deemed
submitted to it 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:
(A) the excess of the total number of Outstanding shares of
Auction Preferred over the number of Outstanding shares of
Auction Preferred that are the
15
subject of Submitted Hold Orders (such excess being hereinafter
referred to as the "Available Auction Preferred");
(B) from the Submitted Orders whether the number of
Outstanding shares of Auction Preferred that are the subject of
Submitted Bids by Potential Holders specifying one or more rates
equal to or lower than the Maximum Applicable Rate exceeds or is
equal to the sum of:
(x) the number of Outstanding shares of Auction
Preferred that are the subject of Submitted Bids by Existing
Holders specifying one or more rates higher than the Maximum
Applicable Rate; and
(y) the number of Outstanding shares of Auction
Preferred that are subject to Submitted Sell Orders
(if such excess or such equality exists (other than because
the number of shares of Auction Preferred in clauses (x) and
(y) is each zero because all of the Outstanding shares of
Auction Preferred are the subject of Submitted Hold Orders),
such Submitted Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate
specified in the Submitted Bids (the "Winning Bid Rate") which
if:
(1) each Submitted Bid from Existing Holders specifying
the Winning Bid Rate and all other Submitted Bids from
Existing Holders specifying lower rates were rejected, thus
entitling such Existing Holders to continue to hold such
shares of Auction Preferred that are the subject of such
Submitted Bids; and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates were accepted,
thus requiring the Potential Holders to purchase the shares
of Auction Preferred that are the subject of such Submitted
Bids,
would result in such Existing Holders continuing to hold an
aggregate number of Outstanding shares of Auction Preferred that,
when added to the number of Outstanding shares of Auction
Preferred to be purchased by such Potential Holders, would equal
not less than the Available Auction Preferred.
(ii) Promptly after the Trust Company has made the determinations
pursuant to section (d)(i), the Trust Company shall advise the
Corporation of the Maximum Applicable Rate and, based on such
determinations, the Applicable Rate for the next succeeding Dividend
Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Dividend Period shall be equal to
the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding shares of Auction Preferred are
the subject of Submitted Hold Orders), then (a) if the
Corporation has not given a Notice of Long-Term Dividend Period
with respect to the next succeeding Dividend Period or has given
Notice of Revocation with respect thereto, then the Applicable
Rate for such next succeeding Dividend Period will be the Maximum
Applicable Rate on the Auction Date for a Short-Term Dividend
Period and (b) if the Corporation has given a Notice of Long-Term
Dividend Period with respect to the next succeeding Dividend
Period and has not given a Notice of Revocation with respect
16
thereto, then such next succeeding Dividend Period will,
notwithstanding such Notice of Long-Term Dividend Period, be a
Seven Day Dividend Period, and the Applicable Rate for such next
succeeding Dividend Period will be the greatest of (1) the
Maximum Applicable Rate on the Auction Date for a Short-Term
Dividend Period, (2) the Maximum Applicable Rate on the Auction
Date for a Long-Term Dividend Period having a number of Dividend
Period Days equal to the number of Dividend Period Days specified
in such Notice of Long-Term Dividend Period, and (3) the dividend
rate in effect for the Dividend Period during which such Auction
occurred; or
(C) if all of the Outstanding shares of Auction Preferred
are the subject of Submitted Hold Orders, then the Applicable
Rate for the next succeeding Dividend Period shall (1) in the
case of a Short-Term Dividend Period, be equal to 59% of the
60-day "AA" Composite Commercial Paper Rate in effect on such
Auction Date; and (2) in the case of a Long-Term Dividend Period,
59% of the Reference Rate in effect on such Auction Date.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Existing Holders shall continue to hold shares
of Auction Preferred that are the subject of Submitted Hold Orders and, based on
the determinations made pursuant to section (d)(i), the Submitted Bids and
Submitted Sell Orders shall be accepted or rejected and the Trust Company shall
take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of section (e)(iii), 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:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to
sell the shares of Auction Preferred that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate that is lower than the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue
to hold the shares of Auction Preferred that are the subject of
such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders
specifying any rate that is lower than the Winning Bid Rate shall
be accepted;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate that is equal to the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to
hold the shares of Auction Preferred that are the subject of such
Submitted Bid, unless the number of Outstanding shares of Auction
Preferred subject to all such Submitted Bids shall be greater
than the number of shares of Auction Preferred ("remaining
shares") equal to the excess of the Available Auction Preferred
over the number of shares of Auction Preferred subject to
Submitted Bids described in sections (e)(i)(B) and (e)(i)(C), 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 of Auction Preferred, but only in an amount equal to
the difference between (1) the number of Outstanding shares of
Auction Preferred then held by such Existing Holder subject to
such submitted Bid and (2) the number of shares of Auction
Preferred obtained by multiplying (x) the number of remaining
shares by (y) a fraction, the numerator of which shall be the
number of Outstanding shares of Auction Preferred held by such
Existing Holder subject to such Submitted Bid and the denominator
of which shall be the sum of the number of Outstanding shares of
Auction Preferred subject to such Submitted Bids made by all such
Existing Holders that specified a rate equal to the Winning Bid
Rate; and
17
(E) the Submitted Bid of each of the Potential Holders
specifying a rate that is equal to the Winning Bid Rate shall be
accepted, but only in an amount equal to the number of shares of
Auction Preferred obtained by multiplying the difference between
the Available Auction Preferred and the number of shares of
Auction Preferred subject to Submitted Bids described in sections
(e)(i)(B), (e)(i)(C) and (e)(i)(D) by a fraction, the numerator
of which shall be the number of Outstanding shares of Auction
Preferred subject to such Submitted Bid and the denominator of
which shall be the sum of the number of Outstanding shares of
Auction Preferred subject to such Submitted Bids made by all such
Potential Holders that specified rates equal to the Winning Bid
Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of Auction Preferred are subject
to Submitted Hold Orders), subject to the provisions of sections
(e)(iii) and (e)(iv), Submitted Orders shall be accepted or rejected
as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any
rate that is equal to or lower than the Maximum Applicable Rate
shall be rejected, thus entitling such Existing Holder to
continue to hold the shares of Auction Preferred that are the
subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying
any rate that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to
purchase the shares of Auction Preferred that are the subject of
such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying
any rate that is higher than the Maximum Applicable 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 Outstanding shares of
Auction Preferred then held by such Existing Holder subject to
such Submitted Bid or Submitted Sell Order and (2) the number of
shares of Auction Preferred obtained by multiplying (x) the
difference between the Available Auction Preferred and the
aggregate number of shares of Auction Preferred subject to
Submitted Bids described in sections (e)(ii)(A) and (e)(ii)(B) by
(y) a fraction, the numerator of which shall be the number of
Outstanding shares of Auction Preferred held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the number of Outstanding
shares of Auction Preferred subject to all such Submitted Bids
and Submitted Sell Orders.
(iii) If, as a result of the procedures described in section
(e)(i) or (e)(ii), 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 of Auction Preferred on any Auction
Date, the Trust Company shall, in such manner as, in its sole
discretion, it shall determine, round up or down the number of shares
of Auction Preferred to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that the number of shares
purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be whole shares of Auction Preferred.
(iv) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of Auction Preferred are subject
to Submitted Hold Orders) in an Auction relating to a Long-Term
Dividend Period, all Submitted Bids and all Submitted Sell Orders
shall be rejected, thus requiring each Existing Holder to continue to
hold the shares of Auction Preferred held by such Existing Holder
immediately prior to such Auction.
(v) If all of the Outstanding shares of Auction Preferred are the
subject of Submitted Hold Orders, all Submitted Bids shall be
rejected.
18
(vi) Based on the results of each Auction, the Trust Company
shall determine the aggregate number of shares of Auction Preferred to
be purchased and the aggregate number of shares of Auction Preferred
to be sold by Potential Holders and Existing Holders on whose behalf
each Broker-Dealer submitted Bids or Sell Orders, and, with respect to
each Broker-Dealer, to the extent that such aggregate number of shares
to be purchased and such aggregate number of shares to be sold differ,
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 of
Auction Preferred.
(f) Miscellaneous. The Board of Directors may interpret the provisions
of this Part II to resolve any inconsistency or ambiguity which may arise or be
revealed in connection with the Auction Procedures provided for herein and their
interpretation shall be binding. An Existing Holder (A) may sell, transfer or
otherwise dispose of shares of Auction Preferred only pursuant to a Bid or Sell
Order in accordance with the procedures described in this Part II to or through
a Broker-Dealer or to a Person that has delivered a signed copy of a Master
Purchaser's Letter to the Trust Company, provided that in the case of all
transfers other than pursuant to Auctions such Existing Holder, its
Broker-Dealer or its Agent Member advises the Trust Company of such transfer,
and (B) shall have the beneficial ownership of the shares of Auction Preferred
held by it maintained in book-entry form by the Securities Depository in the
account of its Agent Member, which in turn will maintain records of such
Existing Holder's beneficial ownership. The Company and its Affiliates shall not
submit any Order in any Auction except as set forth in the next sentence. Any
Broker-Dealer that is an affiliate of the Company may submit Orders in Auctions
but only if such Orders are not for its own account, except that if such
affiliated Broker-Dealer holds shares of Auction Preferred for its own account,
it must submit a Sell Order in the next Auction with respect to such shares of
Auction Preferred.
(g) Headings of Subdivisions. The headings of the various subdivisions
of this Part II are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
19