Exhibit 3.1
VIRGINIA ELECTRIC AND POWER COMPANY
ARTICLES OF AMENDMENT
ESTABLISHING
FLEXIBLE MONEY MARKET CUMULATIVE PEFERRED STOCK
(Flex MMP(R)),
2002 SERIES A
OF
VIRGINIA ELECTRIC AND POWER COMPANY
(LIQUIDATION PREFERENCE $100 PER SHARE)
Part I
1. The name of the Company is Virginia Electric and Power Company (the
"Company").
2. The Restated Articles of Incorporation, as amended (the Articles) of
the Company are hereby amended to create a series of the Company's Preferred
Stock which shall be designated the Flexible Money Market Cumulative Preferred
Stock (Flex MMP), 2002 Series A (hereinafter sometimes referred to as the Flex
MMP). In accordance with the provisions of the Articles, the distinctive
designation, preferences, limitations and relative rights of the Flex MMP are
determined and fixed as follows:
(a) The distinctive serial designation of the Flex MMP shall
be "Flexible Money Market Cumulative Preferred Stock (Flex MMP), 2002
Series A." Shares of the Flex MMP may only be purchased or transferred
in whole units of 1,000 shares each (Units) or integral multiples
thereof and the shares included in the Units may not be separately
purchased or transferred.
(b) The shares of the Flex MMP shall not be entitled to any
right of conversion or any preemptive right to acquire any other
security.
(c) The shares of the Flex MMP shall not be entitled to a
sinking fund.
(d) For the Initial Dividend Period (as defined in Part II),
the dividend rate on shares of the Flex MMP shall be the Initial
Dividend Rate (as defined in Part II). For each Dividend Period (as
defined in Part II) thereafter, the dividend rate shall be determined
according to the procedures set forth in Part II. The liquidation
preference of shares of the Flex MMP shall be as set forth in Part II,
and shares of the Flex MMP may be redeemed on the basis set forth in
Part II.
(e) There are hereby classified as the Flexible Money Market
Cumulative Preferred Stock (Flex MMP), 2002 Series A, 1,250,000 shares
(the "Shares") of the
Preferred Stock, in 1,250 Units, with each Unit consisting of 1,000
shares of the Flex MMP; not more than 1,250,000 shares of the Flex MMP
may be issued.
(f) No shares of the Flex MMP redeemed, purchased or otherwise
acquired by the Company shall be reissued, resold or otherwise
transferred by the Company as shares of the Flex MMP.
3. The shares of the Flex MMP shall have the further relative rights,
preferences and limitations set forth in Sections I through 6 of Division A of
Article III of the Articles, and the rates, dates, terms and other conditions
upon which distributions shall be payable thereon shall be as set forth in these
Articles of Amendment.
4. The designation of the Flex MMP, as herein provided, has been duly
approved, and these Articles of Amendment have been duly adopted, by the Board
of Directors of the Company on December 5, 2002. No shareholder action was
taken, or was required to be taken, in connection with the adoption of these
Articles of Amendment.
Part II
1. DEFINITIONS.
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(A). Unless the context or use indicates another or different meaning
or intent, or a term is otherwise defined in Part I, in these Articles of
Amendment the following terms have the following meanings, whether used in the
singular or plural:
"`AA' Composite Commercial Paper Rate," on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized statistical
rating organization, as such rate is made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (ii) in the event that the Federal Reserve
Bank of New York does not make available such a rate, then the arithmetic
average of the Interest Equivalent of the rate on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper Dealers, to the Auction Agent for the close of business on the
Business Day immediately preceding such date. If the Commercial Paper Dealers do
not quote a rate required to determine the "AA" Composite Commercial Paper Rate,
the "AA" Composite Commercial Paper Rate will be determined on the basis of the
quotation or quotations furnished by any Substitute Commercial Paper Dealers. If
the number of Dividend Period Days shall be (i) seven or more but fewer than 49
days, such rate shall be the Interest Equivalent of the 30-day rate on such
commercial paper; (ii) 49 or more but fewer than 70 days, such rate shall be the
Interest Equivalent of the 60-day rate on such commercial paper; (iii) 70 or
more days but fewer than 85 days, such rate shall be the arithmetic average of
the Interest Equivalent of the 60-day and 90-day rates on such commercial paper;
(iv) 85 or more days but fewer than 99 days, such rate shall be the Interest
Equivalent of the 90-day rate on such commercial paper; or (v) 99 or more days
but fewer than 183 days, such rate shall be determined by linear interpolation
between the Interest Equivalents of the 90-day rate and the 180-day rate on such
commercial paper.
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"Affected Dividend Payment Date" has the meaning set forth in paragraph
2(e).
"Affiliate" means any Person known to the Auction Agent to be
controlled by, in control of, or under common control with, the Company.
"Applicable Rate" means, with respect to any Shares for any Dividend
Period therefor, the rate per annum at which cash dividends are payable on such
Shares for such Dividend Period.
"Auction" means a periodic implementation of the Auction Procedures.
"Auction Agent" means a commercial bank, trust company or other
financial institution selected by the Company that has entered into an agreement
with the Company to follow the Auction Procedures for the purpose of determining
the Applicable Rate and to act as dividend disbursing agent and/or redemption
agent for the Shares.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 5.
"Beneficial ownership" or "beneficially own" shall have the meanings
ascribed to them under Rule 13d-3 under the Securities Exchange Act and
"beneficial owner" shall have a corollary meaning.
"Board of Directors" means the Board of Directors of the Company or, to
the extent permitted by applicable law, any duly authorized committee thereof or
any duly authorized officer of the Company.
"Broker-Dealer" means any broker-dealer, or other entity permitted by
law to perform the functions required of a Broker-Dealer in paragraph 5, that
has been selected by the Company and has entered into a Broker-Dealer Agreement
with the Auction Agent that remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent
and one or more Broker-Dealers pursuant to which each such Broker-Dealer agrees
to follow the procedures specified in paragraph 5.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Saturday, Sunday or other day on which
banks in Richmond, Virginia or New York, New York are authorized or obligated by
law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealer" or "Commercial Paper Dealers" means such
commercial paper dealer or dealers as the Company may from time to time appoint,
or, in lieu of any thereof, their respective affiliates or successors.
"Common Stock" means the common stock, without par value, of the
Company.
"Date of Original Issue" means, with respect to the Shares, the date on
which the Company originally issues such Shares.
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"Dividend Non-Payment Period" has the meaning set forth in paragraph
2(b)(iii)(B).
"Dividend Payment Date," with respect to the Shares, includes each
Initial Dividend Payment Date, Subsequent Dividend Payment Date and Period-End
Dividend Payment Date.
"Dividend Period," with respect to the Shares, includes the Initial
Dividend Period and each Subsequent Dividend Period.
"Dividend Period Days," with respect to any Dividend Period, means the
calendar days included in such Dividend Period.
"Dividends Received Percentage" means the percentage of dividends
received by corporate taxpayers which may be deducted for federal income tax
purposes pursuant to Section 243(a)(1) of the Code (or any successor provision).
"DRD Formula" means the amount derived from the following fraction:
1 - [.35(1-.70)]
1 - [.35(1-DRP)]
"DRD Gross-Up Provisions" has the meaning set forth in paragraph 2(e).
"DRP," as used in computing the DRD Formula, means the Dividends
Received Percentage, measured as a fraction, applicable to the dividend in
question; provided, however, that DRP shall in no event be less than .50.
"Existing Holder," with respect to the Shares, means a Person who is
listed as such in the Share Books.
"Holder" or "holder," with respect to any Shares, means the record
holder thereof.
"IRS" means the Internal Revenue Service.
"Initial Dividend Payment Dates," with respect to the Shares, means
each March 20, June 20, September 20 and December 20 of each year during the
Initial Dividend Period, commencing March 20, 2003.
"Initial Dividend Period," with respect to the Shares, means the period
from and including the Date of Original Issue for the Shares to but excluding
the Initial Period-End Dividend Payment Date for the Shares.
"Initial Dividend Rate," with respect to the Shares, means $5.50 per
annum for the Initial Dividend Period for the Shares.
"Initial Period-End Dividend Payment Date," with respect to the Shares,
means December 20, 2007.
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"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Maximum Applicable Rate" has the meaning set forth in paragraph
5(a)(vi).
"Minimum Holding Period" means, at the time of reference thereto, the
minimum holding period then required for corporate taxpayers to be entitled to
the dividends received deduction set forth in Section 243(a)(1) of the Code.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Non-Call Period," with respect to the Shares, means a specified
portion or the entirety of a Special Dividend Period for the Shares during which
the Shares shall not be subject to Optional Redemption, as selected by the
Company pursuant to a Notice of Special Dividend Period.
"Non-Payment Period" includes any Dividend Non-Payment Period and
Redemption Non-Payment Period.
"Non-Payment Period Rate," with respect to the Shares, means 275% of
the Reference Rate applicable to such Shares.
"Notice of Redemption" means a written notice of redemption given
pursuant to paragraph 4.
"Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii).
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii).
"Optional Redemption" means an optional redemption of Shares by the
Company pursuant to paragraph 4(a)(i) or 4(a)(ii).
"Optional Redemption Date" means the Dividend Payment Date selected by
the Company for an Optional Redemption, which is at least 30 days but not more
than 90 days after delivery of a Notice of Redemption with respect to such
Optional Redemption.
"Outstanding" means, as of any date, (i) with respect to the Shares,
the Shares theretofore issued by the Company except, without duplication, (A)
any Shares theretofore cancelled, or delivered to the Auction Agent for
cancellation, or redeemed by the Company, or as to which a Notice of Redemption
shall have been given and the full amount payable upon such redemption shall
have been deposited in trust by the Company with irrevocable payment
instructions given pursuant to paragraph 4(c), provided that Shares as to which
a Notice of Redemption has been given by the Company shall be deemed to be not
Outstanding for purposes of any Auction for such Shares held subsequent to the
date of such Notice of Redemption and (B) any Shares as to which the Company or
any Affiliate shall be an Existing Holder or beneficial owner and (ii) with
respect to shares of other Preferred Stock, has the equivalent meaning.
"Parity Preferred" means, with respect to the Shares, each other
Outstanding series of Preferred Stock the holders of which, together with the
Holders of the Shares, shall be entitled to
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the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up of the Company, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority of one over the other.
"Participant" means a participant of the Securities Depository that
will act on behalf of an Existing Holder, a beneficial owner, or a Potential
Holder or potential beneficial owner of one or more Shares.
"Period-End Dividend Payment Dates" include the Initial Period-End
Dividend Payment Date and each Subsequent Period-End Dividend Payment Date.
"Person" means and includes an individual, a partnership, a Company, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Potential Holder" means any Person who is not an Existing Holder but
who may be interested in acquiring Shares, or who is an Existing Holder but who
wishes to acquire additional Shares.
"Preferred Stock" means any Preferred Stock of the Company, including
the Shares, that the Board of Directors has authority to issue under the
Articles.
"Redemption Non-Payment Period" has the meaning set forth in paragraph
2(b)(iv)(C)(1).
"Reference Rate" means, (i) with respect to a Dividend Period of 49
days to 183 days, the applicable "AA" Composite Commercial Paper Rate, (ii) with
respect to a Dividend Period of 184 days to 364 days, the applicable U.S.
Treasury Bill Rate, (iii) with respect to a Dividend Period of one year to ten
years, the applicable U.S. Treasury Note Rate, and (iv) with respect to a
Dividend Period in excess of ten years, the applicable U.S. Treasury Bond Rate.
"Regular Dividend Period" means a Subsequent Dividend Period consisting
of 49 days as the same may be adjusted from time to time pursuant to paragraph
2(b)(i) in connection with the requirement of, or a change of law altering the
requirements of, the Minimum Holding Period, but in no event exceeding 98 days.
"Retroactive Dividends" has the meaning set forth in Section 2(e).
"S&P" means Standard & Poor's Ratings Services or its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Depository" means The Depository Trust Company or any
successor Company or other entity elected by the Company as securities
depository for the Shares that agrees to follow the procedures required to be
followed by such securities depository in connection with the Shares.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Share Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders, based on notices from the Company, from Existing Holders and
from any Participant or Broker-Dealer of any Existing Holder.
"Shares" means the shares of Preferred Stock, liquidation preference
$100 per share, plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared), designated as the "Flexible Money Market
Cumulative Preferred Stock (Flex MMP), 2002 Series A" of the Company.
"Special Dividend Period" means a Subsequent Dividend Period consisting
of at least 49 days as selected by the Company pursuant to a Notice of Special
Dividend Period, to the extent that such selection by the Company shall be
available pursuant hereto and subject to adjustment from time to time pursuant
to paragraph 2(b)(i) in connection with the requirements of, or a change of law
altering requirements of, the Minimum Holding Period.
"Subsequent Dividend Payment Date" has the meaning set forth in
paragraph 2(b)(i).
"Subsequent Dividend Period" has the meaning set forth in paragraph
2(c)(i).
"Subsequent Period-End Dividend Payment Date," with respect to each
Subsequent Dividend Period, means the Business Day immediately succeeding the
last day of such Subsequent Dividend Period.
"Substitute Commercial Paper Dealer" or "Substitute Commercial Paper
Dealers" means such substitute Commercial Paper Dealer or substitute Commercial
Paper Dealers as the Company may from time to time appoint or, in lieu of any
thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization and two nationally
recognized statistical rating organizations, respectively, each term as defined
for purposes of Rule 436(g)(2) under the Securities Act, selected by the Company
after consultation with each Broker-Dealer, to act as the substitute rating
agency or substitute rating agencies, as the case may be, to determine the
credit ratings of the Shares.
"Sufficient Clearing Bids" has the meaning as defined in paragraph
5(a).
"Transfer Agent" means an commercial bank, trust company, other
financial institution or other Company selected by the Company that has entered
into an agreement with the Company to act as transfer agent and registrar for
the Shares.
"U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent
of the rate on the actively traded Treasury Bill with a maturity most nearly
comparable to the length of the related Dividend Period, as such rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
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the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on
any date means the Interest Equivalent of the yield as calculated by reference
to the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"U.S. Treasury Bond Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Bond
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Note with a maturity most nearly comparable to the length of the
related Dividend Period, as such bid price quotation is published on the
Business Day immediately preceding such date by the Federal Reserve Bank of New
York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report
for such Business Day, or (ii) if such yield as so calculated is not available,
the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average of
the bid price quotations of the actively traded, current coupon Treasury Note
with a maturity most nearly comparable to the length of the related Dividend
Period, as determined by the bid price quotations as of any time on the Business
Day immediately preceding such date, obtained from at least three recognized
primary U.S. Government securities dealers selected by the Auction Agent.
2. DIVIDENDS.
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(a) The holders of Shares shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor,
cumulative cash dividends at the Applicable Rate determined as set forth in
paragraph 2(c), payable on the respective Dividend Payment Dates for the Shares.
(b)
(i) Dividends on Shares shall accumulate (whether or not
earned or declared) at the Applicable Rate for such Shares from the
Date of Original Issue and shall be payable, when, as and if declared
by the Board of Directors, out of funds legally available therefor, on
each Initial Dividend Payment Date for the Shares and on the Initial
Period-End Dividend Payment Date for the Shares.
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Following the Initial Period-End Dividend Payment Date for the Shares,
dividends on the Shares will be payable on each Subsequent Period-End
Dividend Payment Date, and in addition, (A) with respect to any
Subsequent Dividend Period of 100 days to 190 days, on the 91st day,
(B) with respect to any Subsequent Dividend Period of 191 days to 281
days, on the 91st and 182nd days, (C) with respect to any Subsequent
Dividend Period of 282 days to 364 days, on the 91st, 182nd and 273rd
days, and (D) with respect to any Subsequent Dividend Period of one
year or longer, on March 20, June 20, September 20 and December 20 of
each year (each such date referred to in clause (A) through (D) above
being herein referred to as a "Subsequent Dividend Payment Date").
Notwithstanding the foregoing, if any Dividend Payment Date is not a
Business Day then such Dividend Payment Date shall be the immediately
succeeding Business Day.
Notwithstanding the foregoing, if any date on which dividends on the
Shares would be payable as described in the immediately preceding
paragraph is a day that would result in the number of Dividend Period
Days in the then current Dividend Period for the Shares not being at
least equal to the then current Minimum Holding Period, then dividends
with respect to such Dividend Period shall be payable on the first
Business Day following such date on which dividends would be so payable
that results in the number of Dividend Period Days in such Dividend
Period being at least equal to the Minimum Holding Period or, if
earlier, the 98th day of such Dividend Period. Moreover,
notwithstanding the foregoing, in the event of a change in law altering
the Minimum Holding Period, the Board of Directors shall adjust, if
necessary, the number of Dividend Period Days in each Regular Dividend
Period and the minimum number of days of each Special Dividend Period
commencing after the date of such change in law to equal or exceed the
Minimum Holding Period, provided that the number of Dividend Period
Days in a Regular Dividend Period shall not exceed by more than nine
days the length of the Minimum Holding Period and shall be evenly
divisible by seven, as adjusted pursuant hereto, and shall in no event
exceed 98 days.
Upon any change in the number of Dividend Period Days in any then
current Dividend Period or in the number of days in a Regular Dividend
Period or the minimum duration of a Special Dividend Period as a result
of a change in the Minimum Holding Period, the Company will mail notice
of such change to all holders of record of Shares. Although any
particular Dividend Payment Date for the Shares may not occur on the
day of the week or the date originally scheduled as a Dividend Payment
Date for the Shares because of the adjustments set forth above, each
succeeding Dividend Payment Date for the Shares shall occur, subject to
such adjustments, on the day of the week or the date originally
scheduled as a Dividend Payment Date for the Shares as if each
preceding Dividend Payment Date had occurred on such day of the week or
date.
(ii) On or prior to any Dividend Payment Date for the Shares,
the Company shall pay to the Auction Agent sufficient funds for the
payment in full of all accumulated dividends with respect to the Shares
payable on such Dividend Payment Date. Each dividend shall be paid to
the holder or holders of the Shares as they appear on the Stock Books
of the Company on the record date fixed by the Company's Board of
Directors prior to the applicable Dividend Payment Date.
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Dividends in arrears in respect of Shares for any past Dividend Period
may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the holder or holders of record of such
Shares as they appear on the Stock Books on a record date fixed by the
Board of Directors. Any dividend payment made on the Shares shall be
applied, without duplication, in the following order of priority:
FIRST, in or toward payment of all accumulated dividends with respect
to such earliest Dividend Period for such Shares for which dividends
have not been paid; and
SECOND, in or toward payment of all then accumulated dividends with
respect to each succeeding Dividend Period for such Shares for which
dividends have not been paid.
(iii) If the Company fails to pay to the Auction Agent on or
prior to any Period-End Dividend Payment Date for the Shares the full
amount of all accumulated and unpaid dividends payable on the Shares on
such Period-End Dividend Payment Date, then:
(A) if such failure to pay is cured as provided
below, the Applicable Rate for the Shares for the Dividend
Period commencing on the period-End Dividend Payment Date on
which the Company failed to pay shall be equal to the dividend
rate determined on the Auction Date immediately preceding such
Period-End Dividend Payment Date; and
(B) if such failure to pay is not cured as provided
below, then, for the period (the "Dividend Non-Payment
Period") commencing on and including such Period-End Dividend
Payment Date and ending on and including the Business Day on
which, by 12:00 noon, New York City time, all unpaid cash
dividends shall have been deposited with the Auction Agent or
otherwise made available for payment to the applicable Holders
in same day funds (provided that, at least two Business Days
but no more than 30 days prior to such Business Day, the
Company shall have given the Auction Agent, the Securities
Depository and the applicable Holders written notice of such
deposit or availability):
(1) each Subsequent Dividend Period shall be
a Regular Dividend Period (regardless of any Special
Dividend Period election made by the Company) and
Auctions for the Shares shall be suspended and shall
not resume, in each case until all accumulated and
unpaid dividends on the Shares for all past Dividend
Periods shall have been paid to the Auction Agent,
not later than the second Business Day immediately
preceding an Auction Date for the Shares; and
(2) the Applicable Rate for the Shares
during such Dividend Non-Payment Period shall be
equal to Non-Payment Period Rate for the Shares.
(iv) If the Company fails to pay to the Auction Agent on or
prior to any date set for redemption of less than all of the Shares the
full amount payable upon redemption of the Shares called for
redemption, then:
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(A) Auctions for the Shares shall be suspended and
shall not resume until all amounts payable upon the redemption
of the Shares called for redemption shall have been paid to
the Auction Agent not later than the second Business Day
immediately preceding an Auction Date for the Outstanding
Shares;
(B) If such failure to pay is cured as provided
below, the Applicable Rate for the Shares for the Dividend
Period commencing after the redemption date on which the
Company failed to pay shall be equal to the Maximum Applicable
Rate for the Shares (as determined on the Business Day
immediately preceding the first day of such Dividend Period)
and such Dividend Period shall be a Regular Dividend Period
(regardless of any Special Dividend Period election made by
the Company), unless on the Auction Date for such Dividend
Period, Auctions for the Shares may be resumed as provided in
clause (A) above; and
(C) If such failure to pay is not cured as provided
below, then:
(1) Each Subsequent Dividend Period shall be
a Regular Dividend Period regardless of any Special
Dividend Period election made by the Company) and the
Applicable Rate for the Shares not called for
redemption for each Dividend Period, commencing on
the date immediately succeeding the redemption date
on which the Company failed to pay, to but excluding
the Dividend Period, if any, next succeeding the
Auction Date on which Auctions for the Shares may be
resumed as provided in clause (A) above (the
"Redemption Non-Payment Period"), shall be equal to
the Non-Payment Period Rate for the Shares (as
determined on the Business Day immediately preceding
the first day of each such Dividend Period); and
(2) the Applicable Rate for the Shares
called for redemption for each Dividend Period for
the Shares commencing on the date immediately
succeeding the redemption date on which the Company
failed to pay shall be equal to the Non-Payment
Period Rate for the Shares (as determined on the
Business Day immediately preceding the first day of
each such Dividend Period).
For purposes of paragraphs 2(b)(iii) and 2(b)(iv), any such
failure to pay with respect to the Shares shall be deemed
cured if, not later than 12:00 noon, New York City time, on
the third Business Day immediately succeeding such failure to
pay, there shall have been paid to the Auction Agent (i) all
accumulated and unpaid dividends on the Shares including the
full amount of any dividends to be paid on the Period-End
Dividend Payment Date with respect to which such failure to
pay occurred but excluding amounts accumulated after such
Period-End Dividend Payment Date, plus additional dividends in
an amount computed by multiplying (A) the Non-Payment Period
Rate for the Shares (as determined on the Business Day
immediately preceding such Dividend Payment Date) by (B) a
fraction, the numerator of which shall be the number of days
in respect of which such failure to pay is not cured in
accordance herewith (including the day such
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failure to pay occurs and excluding the day such failure to
pay is cured) and the denominator of which is 360, and
multiplying the rate so obtained by the product of $100 and
the number of Shares then Outstanding and (ii) the full amount
payable upon redemption of the Shares called for redemption
that have not been so redeemed, plus (except to the extent
such amount has been paid pursuant to paragraph 2(b)(iv)
above) an amount computed by multiplying (X) the Non-Payment
Period Rate for the Shares (as determined on the Business Day
immediately preceding the first day of the current Dividend
Period), by (Y) a fraction, the numerator of which shall be
the number of days for which such failure to pay is not cured
in accordance herewith (including the day such failure to pay
occurs and excluding the day such failure to pay is cured) and
the denominator of which is 360, and multiplying the rate so
obtained against the product of $100 and the number of Shares
called for redemption that have not been so redeemed.
If the Company fails to pay the Auction Agent on or prior to
any date for redemption of all the Shares the full amount
payable upon such redemption of the Shares, then the
Applicable Rate for the Shares for each Dividend Period or
portion thereof commencing on or after the redemption date on
which the Company failed to pay shall be equal to the
Non-Payment Period Rate for the Shares (as determined on the
Business Day immediately preceding the first day of each such
Dividend Period).
(c)
(i) During the Initial Dividend Period, the Applicable Rate
for the Shares shall be the Initial Dividend Rate. Commencing on the
Initial Period-End Dividend Payment Date for the Shares, the Applicable
Rate for the Shares for the period commencing on and including the
Initial Period-End Dividend Payment Date and ending on and including
the calendar day immediately preceding the immediately succeeding
Subsequent Period-End Dividend Payment Date and for each period
thereafter commencing on and including each Subsequent Period-End
Dividend Payment Date and ending on and including the calendar day
immediately preceding to the immediately succeeding Subsequent
Period-End Dividend Payment Date (each such period being herein
referred to as a "Subsequent Dividend Period"), shall be equal to the
rate per annum that results from implementation of the Auction
Procedures with respect to Shares as the Auction Agent advises the
Company following the conclusion of the Auction for such Shares.
Each Subsequent Dividend Period shall be a Regular Dividend Period
unless the Company has duly selected a Special Dividend Period with
respect thereto pursuant to paragraph 2(c)(iii) and such selection is
available hereunder. In the event that Sufficient Clearing Bids have
not been made in any Auction under paragraph 5, then the immediately
succeeding Subsequent Dividend Period shall automatically be a Regular
Dividend Period regardless of whether the Company has elected a Special
Dividend Period.
In the event that an Auction for any Subsequent Dividend Period with
respect to the Shares is not held for any reason (other than as a
result of the existence and continuance
12
of a Non-Payment Period), such Subsequent Dividend Period next
succeeding the originally scheduled Auction shall automatically be a
Regular Dividend Period and the Applicable Rate for such Subsequent
Dividend Period shall be equal to the Maximum Applicable Rate on the
business Day immediately preceding the commencement of such Subsequent
Dividend Period.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate, and
each Dividend Period, commencing after the first day of, and during, a
Non-Payment Period shall be a Regular Dividend Period regardless of any
election made by the Company for a Special Dividend Period relating
thereto.
(ii) During the Initial Dividend Period and any Special
Dividend Period in excess of 364 days in duration, the amount of
dividends accumulated and payable, if declared, on each Share for each
period that begins on a Dividend Payment Date and ends on the day
immediately preceding the immediately succeeding Dividend Payment Date
shall be computed by (A) multiplying the Applicable Rate for such
Dividend Period by 25% and (B) multiplying $100 by the rate so
obtained.
The amount of dividends accumulated and payable, if declared, on each
Share on any Dividend Payment Date with respect to any Regular Dividend
Period and any period during the Initial Dividend Period and any
Special Dividend Period in excess of 364 days that is not set forth in
clause (A) above will be computed by (X) multiplying the Applicable
Rate for such Dividend Period by a fraction, the numerator of which is
the actual number of days in the portion of such Dividend Period prior
to such Dividend Payment Date as to which dividends have not been paid
and the denominator of which is 360, and (Y) multiplying $100 by the
rate so obtained.
(iii) The Company may, at its option and to the extent
permitted by law, by written notice (a "Notice of Special Dividend
Period") to the Auction Agent and each Holder of the Shares, request
that the next succeeding Dividend Period for the Shares be a number of
days, at least as long as the Minimum Holding Period, specified in such
notice, provided that such Notice of Special Dividend Period shall be
null and void if Sufficient Clearing Bids have not been made in the
relevant Auction and the Company may not again give a Notice of Special
Dividend Period for the Shares (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an
Auction with respect to the Shares. Such Notice of Special Dividend
Period shall be delivered or sent by the Company, by first-class mail,
postage prepaid, to each Holder of the Shares, not less than 10 days
nor more than 60 days prior to the Auction for the relevant Subsequent
Dividend Period. A Notice of Special Dividend Period with respect to
the Shares will specify (A) the Company's determination of the length
of the Special Dividend Period (which shall be equal to or longer than
the Minimum Holding Period), (B) in the case of any Special Dividend
Period in excess of 99 days in duration, any Subsequent Dividend
Payment Date or Dates other than the Subsequent Period-End Dividend
Payment Date for such Special Dividend Period, (C) if the Company has
elected that the Shares will be subject to a Non-Call Period during
such Special Dividend Period, a statement to that effect, (D) if the
Company has specified that all or any portion of the Special Dividend
Period will be a Non-Call Period and has elected that the DRD
13
Gross-Up Provisions shall apply during such Special Dividend Period, a
statement to that effect, and (E) if the Company has made the election
specified in clause (D) and has affirmatively elected to have the right
to redeem the Shares during such Special Dividend Period in accordance
with paragraph 4(a)(ii), a statement to that effect. If the Company has
given a Notice of Special Dividend Period, the Company may withdraw
such election by giving telephonic and written notice of its revocation
(a "Notice of Revocation") to each Holder of the Shares by no later
than 3:00 P.M., New York City time, on the Business Day immediately
preceding the date of the Auction with respect to which such Notice of
Special Dividend Period and Notice of Revocation were delivered, and in
such event such election by the Company of a Special Dividend Period
shall be of no force and effect. The Company shall deliver, or cause to
be delivered, physically, by telecopier or by other written electronic
communication, copies of each Notice of Special Dividend Period and
each Notice of Revocation to the Auction Agent at the same time such
notices are transmitted to the Holders of the Shares. In the event that
the Company has effectively revoked its election of a Special Dividend
Period for the Shares as described above, the next succeeding Dividend
Period for the Shares shall be a Regular Dividend Period. No defect in
a Notice of Special Dividend Period or in the mailing thereof shall
affect the validity of any change in any Dividend Period.
(d)
(i) Except as provided in these Articles of Amendment, Holders
shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends, as herein
provided, on any Shares, and no interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment on any
Shares that may be in arrears.
(ii) So long as any Shares are Outstanding, no dividend (other
than a dividend in Common Stock and other than as provided in paragraph
2(d)(iii)) shall be declared or made upon any Parity Preferred, the
Common Stock or any other shares of capital stock of the Company
ranking junior to the Shares as to dividends or upon liquidation, nor
shall any Parity Preferred, Common Stock or any other shares of capital
stock of the Company ranking junior to the Shares as to dividends or
upon liquidation, be redeemed, purchased or otherwise acquired for any
consideration (nor shall any funds be paid to, or made available for, a
sinking fund for the redemption of any shares of such stock) by the
Company (except by conversion into or exchange for Common Stock or
shares of capital stock of the Company ranking junior to the Shares as
to dividends or upon liquidation) unless, in each case, the full
cumulative dividends on the Outstanding Shares shall have been or
contemporaneously are, paid, or declared and a sum sufficient for the
payment thereof has been or is set apart for such payment.
(e) If, at any time prior to the date that is 18 months after the Date
of Original Issue, any amendment to the Code shall have been enacted that has
the effect of changing the Dividends Received Percentage, then the Applicable
Rate with respect to such Shares for the Dividend Period in which the effective
date of such amendment to the Code occurs will, to the extent that such
amendment applies to such Dividend Period, be adjusted on and after such
effective date for the remainder of such Dividend Period by multiplying the
Applicable Rate (determined before such adjustment) by the DRD Formula and
rounding the result to the nearest basis point. No amendment to the Code, other
than a change in the percentage of the dividends
14
received deduction set forth in Section 243(a)(1) of the Code or any successor
provision which is enacted prior to 18 months after the Date of Original Issue,
will give rise to an adjustment. Notwithstanding the foregoing provisions, in
the event that, with respect to any such amendment, the Company shall receive
either (1) an unqualified opinion of independent recognized tax counsel based
upon the legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation or (2) a private letter
ruling or similar form of assurance from the IRS, in either case to the effect
that such an amendment would not apply to dividends payable on the Shares, then
any such amendment shall not result in the adjustment provided for pursuant to
the DRD Formula. The Company's calculation of the dividends payable, as so
adjusted and as certified accurate as to calculation and reasonable as to method
by the independent certified public accountants then regularly engaged by the
Company, shall be final and not subject to review. Notwithstanding the
foregoing, in no event shall the Applicable Rate for any Dividend Period, if and
as adjusted from time to time as set forth above, be more than the Maximum
Applicable Rate as of the Date of Original Issue of the Shares or the date of
the preceding Auction, as the case may be.
If any such amendment to the Code which reduces the Dividends Received
Percentage is enacted and becomes effective after a dividend payable on a
Dividend Payment Date has been declared but before such dividend has been paid,
the amount of dividends payable on such Dividend Payment Date shall not be
increased; but instead, an amount equal to the excess, if any, of (x) the
product of the dividends paid by the Company on such Dividend Payment Date and
the DRD Formula (where the DRP used in the DRD Formula would be equal to the
greater of the reduced Dividends Received Percentage or 50%) less (y) the
dividends paid by the Company on such Dividend Payment Date, will be payable (if
declared) on the next succeeding Dividend Payment Date to Holders of the Shares
for such succeeding Dividend Payment Date, in addition to any other amounts
payable on such Dividend Payment Date.
If the Applicable Rate shall have been adjusted pursuant to the
provisions of this paragraph 2(e) (the "DRD Gross-Up Provisions"), the Company
shall send notice of such adjustment to each Holder of the Shares and the
Auction Agent on or prior to the next succeeding Dividend Payment Date for the
Shares.
Unless otherwise required by the context, any reference in these
Articles of Amendment to dividends shall mean dividends adjusted pursuant to the
DRD Gross-Up Provisions. The DRD Gross-Up Provisions shall apply at any time
prior to the date ending 18 months after the Date of Original Issue. After such
date, the DRD Gross-Up Provisions shall not apply to any Regular Dividend Period
and shall only apply to any Special Dividend Period for the Shares if so
specified by the Board of Directors in the applicable Notice of Special Dividend
Period.
In addition, if any such amendment to the Code is enacted that reduces
the Dividends Received Percentage and such reduction retroactively applies to a
Dividend Payment Date as to which the Company previously paid dividends on the
Shares (each, an "Affected Dividend Payment Date"), the Company will pay (if
declared) additional dividends (the "Retroactive Dividends") on the immediately
succeeding Dividend Payment Date (or if such amendment is enacted after the
dividend payable on such Dividend Payment Date has been declared, on the second
immediately succeeding Dividend Payment Date following the date of enactment),
to Holders of the Shares for such succeeding Dividend Payment Date, in an amount
equal to the excess, if any, of (x) the product of the dividends paid by the
Company on each Affected
15
Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula
would be equal to the greater of the reduced Dividends Received Percentage and
50%, applied to each Affected Dividend Payment Date) over (y) the dividends paid
by the Company on each Affected Dividend Payment Date.
Retroactive Dividends will not be paid in respect of the enactment of
any amendment to the Code if such amendment would not result in an adjustment
due to the Company having received either an opinion of counsel or tax ruling
referred to above. The Company will only make one payment of Retroactive
Dividends.
No adjustments in the dividends payable by the Company will be made,
and no Retroactive Dividends will be payable by the Company, because of any
amendment to the Code effective at any time after 18 months following the Date
of Original Issue that reduces the Dividends Received Percentage.
In the event that the amount of dividends payable per share of the
Shares shall be adjusted pursuant to the DRD Formula and/or Retroactive
Dividends are to be paid, the Company will cause notice of each such adjustment
and, if applicable, any Retroactive Dividends, to be sent to each Holder of the
Shares.
(f) No fractional Share shall be issued.
3. LIQUIDATION PREFERENCE.
----------------------
The amount payable upon the Shares in the event of voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be $100
per share ($100,000 per Unit) plus an amount equivalent to the accrued and
unpaid dividends thereon, if any, to the date of such voluntary or involuntary
dissolution, liquidation or winding up.
4. REDEMPTION.
----------
(a) The Shares shall be redeemable by the Company as provided below:
(i) Upon giving a Notice of Redemption with respect to an
Optional Redemption to the Auction Agent, the Securities Depository and
each holder of record of the Shares, the Company at its option may
redeem the Shares, in whole or from time to time in part, out of funds
legally available therefor, at a redemption price per Share of $100, on
an Optional Redemption Date; provided that the Board of Directors shall
have declared and shall pay on the redemption date all accumulated and
unpaid dividends in respect of such Shares through the redemption date
(whether earned or declared); and provided, further, that subject to
Section 5(a)(ii) below, no Share may be redeemed at the option of the
Company during (A) the Initial Dividend Period for the Shares or (B) a
Non-Call Period to which such Shares are subject. Pursuant to such
right of Optional Redemption, the Company may elect to redeem all or
less than all of the Shares without redeeming the remaining Shares.
Notwithstanding the foregoing, the Company may not give a Notice of
Redemption relating to, or redeem pursuant to, an Optional Redemption
as described in this paragraph 4(a)(i) if any dividend on any Share is
in arrears unless all Outstanding Shares are simultaneously redeemed.
So long as any dividend on any Share
16
in arrears remains unpaid, the Company shall not purchase or otherwise
acquire any Shares; provided that the foregoing shall not prevent the
purchase or acquisition of Shares pursuant to an otherwise lawful
purchase or exchange offer made on the same terms to the holders of all
Outstanding Shares.
(ii) If at any time prior to the date that is 18 months after
the Date of Original Issue, or, during any Special Dividend Period, all
or a portion of which the Company has designated as a Non-Call Period
and, with respect to which (i) the DRD Gross-Up Provisions apply and
(ii) the Company has affirmatively elected to have the right to redeem
the shares if it is required to pay additional dividends under the DRD
Gross-Up Provisions, if designated by the Company and specified in the
applicable Special Dividend Period Notice, one or more amendments to
the Code are enacted that reduce the Dividends Received Percentage,
and, as a result, the amount of dividends on the Shares payable on any
Dividend Payment Date may be adjusted upwards pursuant to paragraph
2(e) hereof, the Company at its option may redeem all, but not less
than all, of the Outstanding Shares, provided that, within 60 days of
the date on which an amendment to the Code is enacted that reduces the
Dividends Received Percentage, the Company sends notice to the holders
of the Shares of such redemption. Any redemption of the Shares pursuant
to this paragraph 4(a)(ii) will take place on the date specified in the
notice, which will be not less than 30 nor more than 90 days from the
date such notice is sent to the holders of the Shares. Any such
redemption of the Shares will be at a redemption price of $102.50 per
Share ($102,500 per Unit), plus all accumulated and unpaid dividends
(whether or not declared and including any increase in dividends
payable due to changes in the Dividends Received Percentage).
(b) In the event that less than all the Outstanding Shares are to be
redeemed and there is more than one Holder, the number of Shares to be redeemed
shall be determined by the Board of Directors and communicated to the Auction
Agent; and, if the Securities Depository or its nominee is the Holder of all
such Shares, the Securities Depository will determine the number of Shares to be
redeemed from the account of each Participant. Each Participant will determine
the number of Shares to be redeemed from the account of each Holder for which it
acts as agent and, if neither the Securities Depository nor its nominee is the
Holder of all such Shares, the particular Shares to be redeemed shall be
selected by the Company ratably or by lot, provided that adjustments may be made
by the Company with respect to the number of Shares to be redeemed from each
Holder to avoid redemption of fractional Units.
(c) Whenever Shares are to be redeemed pursuant to an Optional
Redemption, the Notice of Redemption shall be delivered or mailed by first-class
mail, postage prepaid, not less than 30 nor more than 90 days prior to the date
fixed for such Optional Redemption, to each Holder of such Shares to be redeemed
and the Auction Agent.
The Notice of Redemption shall set forth (i) the redemption date, (ii)
the amount of the redemption price, (iii) the aggregate number of Shares to be
redeemed, (iv) the place where Shares are to be surrendered for payment of the
redemption price, (v) a statement that dividends on the Shares to be redeemed
shall cease to accumulate on such date that the Company pays the full amount
payable upon redemption of such Shares, and (vi) the provision of these Articles
of Amendment pursuant to which such redemption is being made. A Notice of
Redemption, once
17
given, is irrevocable. No defect in the Notice of Redemption or in the
mailing thereof shall affect the validity of the redemption proceedings, except
as required by applicable law.
If the Company gives or causes to be given a Notice of Redemption,
timely pays to the Auction Agent a sum sufficient to redeem the Shares as to
which such Notice of Redemption has been given and gives the Auction Agent
irrevocable instructions and authority to pay the full amount payable on
redemption of such Shares to the Holders of such Shares, then on the date of
such payment, all rights of the Holders of the Shares to be redeemed, as such,
will terminate (except the right of the Holders of such Shares to receive the
full amount payable upon redemption thereof upon surrender of the certificate or
certificates therefor, but without interest) and such Shares will no longer be
deemed to be Outstanding for any purpose (including, without limitation, the
right of Holders of such Shares to vote on any matter or to participate, with
respect to such Shares, in any subsequent Auction for the Units). In addition,
any Shares as to which a Notice of Redemption has been given by the Company will
be deemed to be not Outstanding for purposes of any Auction for the Shares held
subsequent to the date of such Notice of Redemption. The Company will be
entitled to receive from time to time from the Auction Agent the income, if any,
derived from the investment of monies or other assets paid to it (to the extent
that such income is not required to pay the redemption price of the Shares to be
redeemed), and the holders of any Shares to be redeemed will not have any claim
to such income.
(d) So long as the Shares are held of record by the nominee of the
Securities Depository, the amounts payable upon an Optional Redemption shall be
paid to such nominee of the Securities Depository on the Optional Redemption
Date for the Shares.
5. AUCTION PROCEDURES.
------------------
(a) CERTAIN DEFINITIONS.
--------------------
As used in this paragraph 5, the following terms shall have the
following meanings, unless the context otherwise requires:
(i) "Auction Date" means the last Business Day preceding the
first day of each Subsequent Dividend Period.
(ii) "Available Units" has the meaning specified in paragraph
5(d)(i) below.
(iii) "Bid" has the meaning specified in paragraph 5(b)(i)
below.
(iv) "Bidder" has the meaning specified in paragraph 5(b)(i)
below.
(v) "Hold Order" has the meaning specified in paragraph
5(b)(i) below.
(vi) "Maximum Applicable Rate" for any Subsequent Dividend
Period will be the Applicable Percentage of the Reference Rate. The
"Applicable Percentage" will be determined based on the lower of the
credit rating or ratings assigned on such date to
18
the Shares by Moody's and S&P (or if Moody's or S&P, or both, shall not
make such a rating available, the equivalent of either or both of such
ratings by a Substitute Rating Agency or two Substitute Rating Agencies
or, in the event that only one such rating shall be available, such
rating) as follows:
Credit Ratings
- --------------------------- -------------------------- -------------------------
Moody's S&P Applicable Percentage of
Reference Rate
- --------------------------- -------------------------- -------------------------
"Aa3" or above AA- or above 150%
- --------------------------- -------------------------- -------------------------
"A3" to "A1" A- to A+ 200%
- --------------------------- -------------------------- -------------------------
"Baa3 to "Baa1" BBB- to BBB+ 250%
- --------------------------- -------------------------- -------------------------
Below "Baa3" Below BBB- 275%
- --------------------------- -------------------------- -------------------------
provided, however, that, if at 9:00 A.M., New York City time, on any Auction
Date, (i) the rating of any Shares by Moody's shall be on the "Corporate Credit
Watch List" of Moody's with a designation of "downgrade" or "uncertain," (ii)
the rating of any Shares by S&P shall be on the "Credit Watch" of S&P with a
designation of "negative implications" or "developing" or (iii) if Moody's or
S&P, or both, shall not make such a rating available, the rating of any Shares
by any Substitute Rating Agency shall be on the substantial equivalent of clause
(i) or (ii) above, then the Maximum Applicable Rate for the Shares to which such
Auction Date relates will be determined pursuant to an Applicable Percentage
based on the credit rating that is one level lower in the above table (for
example, from "A3" to "Baa1" for Moody's, or from "BBB+" to "BBB" for S&P).
The Company shall take all reasonable action necessary to enable
Moody's and S&P (and, as appropriate, any Substitute Rating Agency or Substitute
Rating Agencies) to provide a rating for the Shares. If neither S&P nor Moody's
shall make such a rating available, the Company, after consultation with the
Broker-Dealers or their affiliates and successors, shall select a nationally
recognized statistical rating organization or two nationally recognized
statistical rating organizations to act as a Substitute Rating Agency or
Substitute Rating Agencies, as the case may be. If a Substitute Rating Agency or
Substitute Rating Agencies are not available, the applicable rating shall be the
highest rating last published by Moody's, S&P or such Substitute Rating Agency
or Substitute Rating Agencies.
(vii) "Order" has the meaning specified in paragraph 5(b)(i)
below.
(viii) "Sell Order" has the meaning specified in paragraph
5(b)(i) below.
(ix) "Submission Deadline" means 1:00 P.M., New York City
time, on any Auction Date or such other time on the Auction Date as may
be specified by the Auction Agent from time to time as the time by
which each Broker-Dealer must submit to the Auction Agent in writing
all Orders obtained by it for the Auction to be conducted on such
Auction Date.
19
(x) "Submitted Bid" has the meaning specified in paragraph
5(d)(i) below.
(xi) "Submitted Hold Order" has the meaning specified in
paragraph 5(d)(i) below.
(xii) "Submitted Order" has the meaning specified in
paragraph 5(d)(i) below.
(xiii) "Submitted Sell Order" has the meaning specified in
paragraph 5(d)(i) below.
(xiv) "Sufficient Clearing Bids" has the meaning specified in
paragraph 5(d)(i) below.
(xv) "Winning Bid Rate" has the meaning specified in
paragraph 5(d)(i) below.
(b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS.
-------------------------------------------------
(i) Beneficial owners and potential beneficial owners may only
participate in Auctions through their Broker-Dealers. Broker-Dealers
will submit the Orders of their respective customers who are beneficial
owners and potential beneficial owners to the Auction Agent,
designating themselves (unless otherwise permitted by the Company) as
Existing Holders in respect of Units subject to Orders submitted or
deemed submitted to them by beneficial owners and as Potential Holders
in respect of Units subject to Orders submitted to them by potential
beneficial owners. A Broker-Dealer may also hold Units in its own
account as a beneficial owner or wish to purchase Units for its own
account as a potential beneficial owner. A Broker-Dealer may thus
submit Orders to the Auction Agent as a beneficial owner or a potential
beneficial owner and therefore participate in an Auction as an Existing
Holder or Potential Holder on behalf of both itself and its customers.
Prior to the Submission Deadline on each Auction Date:
(A) each Existing Holder may submit to its Broker-Dealer information
by telephone or otherwise as to:
(1) the number of Units, if any, held by such Existing Holder
which such Existing Holder desires to continue to hold without regard
to the Applicable Rate for the next succeeding Subsequent Dividend
Period;
(2) the number of Units, if any, held by such Existing Holder
which such Existing Holder desires to continue to hold, provided that
the Applicable Rate for the next succeeding Subsequent Dividend Period
shall not be less than the rate per annum specified by such Existing
Holder; and/or
20
(3) the number of Units if any, held by such Existing Holder
which such Existing Holder offers to sell without regard to the
Applicable Rate for the next succeeding Subsequent Dividend Period; and
(B) each Broker-Dealer will contact Potential Holders by telephone or
otherwise to determine whether such Potential Holders desire to submit Bids in
which such Potential Holders will indicate the number of Units, if any, which
each such Potential Holder offers to purchase, provided that the Applicable Rate
for the next succeeding Subsequent Dividend Period shall not be less than the
rate per annum specified in such Bids.
For the purposes hereof, the communication by an Existing Holder
pursuant to clause (A) above or by a Potential Holder pursuant to clause (B)
above to a Broker-Dealer, or the communication by a Broker-Dealer acting for its
own account to the Auction Agent, of information referred to in clause (A) or
(B) of this paragraph 5(b)(i) is hereinafter referred to as an "Order" and each
Existing Holder and each Potential Holder placing an Order, including a
Broker-Dealer acting in such capacity for its own account, is hereinafter
referred to as a "Bidder"; an Order containing the information referred to in
clause (A)(1) of this paragraph 5(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 paragraph 5(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
5(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a
Broker-Dealer participates in an Auction as an Existing Holder or a Potential
Holder only to represent the interests of its customers or itself, the
provisions herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also apply to the underlying beneficial ownership
interests represented thereby.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Units specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less
than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Units to be
determined as set forth in paragraph 5(e)(i)(D) if the
Applicable Rate determined on such Auction Date shall be equal
to the rate per annum specified therein; or
(3) a lesser number of Units to be determined as set
forth in paragraph 5(e)(ii)(C) if such specified rate per
annum 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 Units specified in such Sell Order;
or
(2) such number or a lesser number of Units to be
determined as set forth in paragraph 5(e)(ii)(C) if Sufficient
Clearing Bids do not exist.
21
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Units 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) such number or a lesser number of Units to be
determined as set forth in paragraph 5(e)(i)(E) if the
Applicable Rate determined on such Auction Date shall be equal
to the rate per annum specified therein.
(c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
--------------------------------------------------------
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's auction processing system to the Auction Agent prior to
the Submission Deadline on each Auction Date all Orders obtained by
such Broker-Dealer for the Auction to be conducted on such Auction
Date, designating itself (unless otherwise permitted by the Company) as
an Existing Holder or a Potential Holder in respect of Units subject to
such Orders, and specifying with respect to each Order:
(A) the name of the Bidder placing each Order (which
shall be the Broker-Dealer unless otherwise permitted by the
Company);
(B) the aggregate number of Units that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing
Holder:
(1) the number of Units, if any, subject to any Hold
Order placed by such Existing Holder;
(2) the number of Units, if any, subject to any Bid
placed by such Existing Holder and the rate per annum
specified in such Bid; and
(3) the number of Units, if any, subject to any Sell
Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder,
the rate per annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid
contains more than three figures to the right of the decimal
point, the Auction Agent shall round such rate up to the next
highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering in the aggregate
all of the Units held by an Existing Holder are not submitted
to the Auction Agent prior to the Submission Deadline for any
reason (including the failure of a Broker-Dealer to contact
any Existing Holder or to submit an Order covering such
Existing Holder's Order or Orders), the Auction Agent shall
deem a Hold Order (in the
22
case of an Auction relating to a Regular Dividend Period) or a
Sell Order (in the case of an Auction relating to a Special
Dividend Period) to have been submitted on behalf of such
Existing Holder covering the number of Units held by such
Existing Holder and not subject to Orders submitted to the
Auction Agent.
(iv) If one or more Orders on behalf of an Existing
Holder covering in the aggregate more than the number of Units
held by such Existing Holder are submitted to the Auction
Agent, such Order shall be considered valid as follows and in
the following order of priority:
(A) any Hold Order submitted on behalf of such
Existing Holder shall be considered valid up to and including
the number of Units 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 Units subject to such
Hold Orders exceeds the number of Units held by such Existing
Holder, the number of Units subject to each of such Hold
Orders shall be reduced pro rata so that such Hold Orders, in
the aggregate, will cover exactly the number of Units held by
such Existing Holder;
(B) (I) any Bids submitted on behalf of such Existing
Holder shall be considered valid up to and including the
excess of the number of Units held by such Existing Holder
over the number of Units subject to any Hold Order referred to
in paragraph 5(c)(iv)(A) above; (II) if more than one Bid
submitted on behalf of such Existing Holder specifies the same
rate per annum and together they cover more than the remaining
number of Units that can be the subject of valid Bids after
application of paragraph 5(c)(iv)(A) above and of subclause
(I) of this paragraph 5(c)(iv)(B) to any Bid or Bids
specifying a lower rate or rates per annum, the number of
Units subject to each of such Bids shall be reduced pro rata
so that such Bids, in the aggregate, cover exactly such
remaining number of Units; and (III) subject to subclauses (I)
and (II) above, if more than one Bid submitted on behalf of
such Existing Holder specifies different rates per annum, such
Bids shall be considered valid in the ascending order of their
respective rates per annum and in any such event the number of
Units, if any, subject to Bids not valid under this paragraph
5(c)(iv)(B) shall be treated as the subject of a Bid by a
Potential Holder; and
(C) any Sell Order shall be considered valid up to
and including the excess of the number of Units held by such
Existing Holder over the number of Units subject to Hold
Orders referred to in paragraph 5(c)(iv)(A) and valid Bids
referred to in paragraph 5(c)(iv)(B); provided that if more
than one Sell Order is submitted on behalf of any Existing
Holder and the number of Units subject to such Sell Orders is
greater than such excess, the number of Units subject to each
of such Sell Orders shall be reduced pro rata so that such
Sell Orders, in the aggregate, cover exactly the number of
Units equal to such 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 per annum and number of Units specified.
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(vi) Any Order submitted by a Existing Holder or a
Potential Holder to its Broker-Dealer, and any Order submitted by a
Broker-Dealer to the Auction Agent, prior to the Submission Deadline on
any Auction Date, shall be irrevocable.
(d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID
RATE AND APPLICABLE RATE.
------------------------
(i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted or deemed
submitted by the Broker-Dealers (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually
as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell
Order", as the case may be, or as a "Submitted Order") and shall
determine:
(A) the excess of the total number of Units over the
number of Units that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available
Units");
(B) from the Submitted Orders whether the number of
Units that are the subject of Submitted Bids by Potential
Holders specifying one or more rates per annum equal to or
lower than the Maximum Applicable Rate exceeds or is equal to
the sum of:
(1) the number of Units that is the subject of
Submitted Bids by Existing Holders specifying one or more
rates per annum higher than the Maximum Applicable Rate, and
(2) the number of Units that is subject to Submitted
Sell Orders (if such excess or such equality exists (other
than because the number of Units in clause (1) above and this
clause (2) are each zero because all of the Units 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 per annum specified in the Submitted Bids (the "Winning
Bid Rate") that, if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Existing Holders specifying lower rates per annum were
rejected, thus entitling such Existing Holders to continue to
hold the Units 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 per annum were
accepted, thus entitling the Potential Holders to purchase the
Units that are the subject of such Submitted Bids,
24
would result in the number of Units subject to all Submitted
Bids specifying the Winning Bid Rate or a lower rate per annum
being at least equal to the Available Units.
(ii) Promptly after the Auction Agent has made the
determinations pursuant to paragraph 5(d)(i), the Auction Agent shall
advise the Company 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 Subsequent Dividend Period shall be equal
to the Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Units are the subject of Submitted Hold Orders),
that the Subsequent Dividend Period next succeeding the Auction shall
automatically be a Regular Dividend Period and the Applicable Rate for
such next succeeding Subsequent Dividend Period shall be equal to the
Maximum Applicable Rate; or
(C) if all of the Units are the subject of Submitted Hold
Orders, that the Subsequent Dividend Period next succeeding the Auction
shall automatically be a Regular Dividend Period and the Applicable
Rate for such next succeeding Subsequent Dividend Period shall be equal
to 59% of the Reference Rate in effect on the date of such Auction.
(e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED
SELL ORDERS AND ALLOCATION OF UNITS.
------------------------------------
Based on the determinations made pursuant to paragraph 5(d)(i) the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the
Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to
the provisions of paragraph 5(e)(iii) and paragraph 5(e)(iv), 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 per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell the
Units that are the subject of such Submitted Sell Order or Submitted
Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to continue
to hold the Units that are the subject of such Submitted Bid;
25
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted, thus requiring each such Potential Holder to
purchase the Units subject to such Submitted Bid;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue to
hold the Units that are the subject of such Submitted Bid, unless the
number of Units subject to all such Submitted Bids shall be greater
than the excess (the "Remaining Excess") of the Available Units over
the number of Units subject to Submitted Bids described in paragraph
5(e)(i)(B) and paragraph 5(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 Units, but only in an amount equal to
the difference between (1) the number of Units then held by such
Existing Holder subject to such Submitted Bid and (2) the number of
Units obtained by multiplying (x) the number of Remaining Excess of the
Available Units by (y) a fraction the numerator of which shall be the
number of Units held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the number of
Units subject to such Submitted Bids made by all such Existing Holders
that specified a rate per annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate shall
be accepted but only in an amount equal to the number of Units obtained
by multiplying (x) the difference between the Available Units and the
number of Units subject to Submitted Bids described in paragraph
5(e)(i)(B), paragraph 5(e)(i)(C) and paragraph 5(e)(i)(D) by (y) a
fraction the numerator of which shall be the number of Units subject to
such Submitted Bid and the denominator of which shall be the sum of the
number of Units subject to such Submitted Bids made by all such
Potential Holders that specified rates per annum equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other
than because all of the Units are subject to Submitted Hold Orders),
subject to the provisions of paragraph 5(e)(iii), 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 per annum that is equal to or lower than the Maximum Applicable
Rate shall be rejected, thus entitling such Existing Holder to continue
to hold the Units that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to
purchase the Units that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any
rate per annum 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
26
equal to the difference between (1) the number of Units then held by
such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and (2) the number of Units obtained by multiplying (x) the
difference between the Available Units and the aggregate number of
Units subject to Submitted Bids described in paragraph 5(e)(ii)(A) and
paragraph 5(e)(ii)(B) by (y) a fraction the numerator of which shall be
the number of Units held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and the denominator of which
shall be the number of Units subject to all such Submitted Bids and
Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph
5(e)(i) or paragraph 5(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 Unit on any Auction Date, the Auction
Agent shall, in such manner as it shall determine in its sole
discretion, round up or down the number of Units to be purchased or
sold by any Existing Holder or Potential Holder on such Auction Date so
that each Unit purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be a whole Unit.
(iv) If, as a result of the procedures described in paragraph
5(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole Unit on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, allocate
Units for purchase among Potential Holders so that only whole Units are
purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not
purchasing any Units on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent
shall determine, with respect to each Broker-Dealer that submitted Bids
or Sell Orders on behalf of Existing Holders or Potential Holders, the
aggregate number of Units to be purchased and the aggregate number of
the Units to be sold by such Potential Holders and Existing Holders
and, to the extent that such aggregate number of Units to be purchased
and such aggregate number of Units to be sold differ, the Auction Agent
shall determine to which other Broker-Dealer or Broker-Dealers acting
for one or more purchasers such Broker-Dealer shall deliver, or from
which other Broker-Dealer or Broker-Dealers acting for one or more
sellers such Broker-Dealer shall receive, as the case may be, Units.
(f) SUSPENSION OF AUCTION DURING NON-PAYMENT PERIOD.
------------------------------------------------
Upon occurrence and during the continuance of a Non-Payment
Period with respect to the Shares that has not been duly cured by the
Company pursuant to paragraph 2(b), Auctions of the Units shall be
suspended and shall not resume in each case until (A) in the case of a
Dividend Non-Payment Period, all accumulated and unpaid dividends on
such Shares for all past Dividend Periods shall have been paid to the
Auction Agent, or (B) in the case of a Redemption Non-Payment Period in
connection with an Optional Redemption of less than all of the Shares,
all amounts payable upon such Optional Redemption of such Shares shall
have been paid to the Auction Agent, in each case by 12:00 noon, New
York City time, on the relevant Auction Date with respect to the Units,
provided that, at least two Business Days but no more than 30 days
prior to such Auction
27
Date, the Company shall have given the Auction Agent, the Securities
Depository and the applicable holders of record written notice of such
deposit or availability.
(g) MISCELLANEOUS.
--------------
The Company may interpret the provisions of this paragraph 5
to resolve any inconsistency or ambiguity, remedy any formal defect or
make any other change or modification that does not substantially
adversely affect the rights of Existing Holders of Shares. An Existing
Holder (A) may sell, transfer or otherwise dispose of Shares only
pursuant to a Bid or Sell Order in accordance with the procedures
described in this paragraph 5 through a Broker-Dealer, except that
transfers of Shares may also be effected through means other than
pursuant to Auctions provided that each such transfer shall be in a
minimum quantity of one Unit or in multiples thereof and shall be valid
and accepted by the Auction Agent only if such Existing Holder or its
Broker-Dealer or Participant, as applicable, shall have advised the
Auction Agent in writing of such transfer by 3:00 P.M. on the Business
Day next preceding the Auction Date with respect to the Units, and (B)
except as otherwise required by law, shall have the ownership of the
Shares held by it maintained in book-entry form by the Securities
Depository in the account of its Participant, which in turn will
maintain records of such Existing Holder's beneficial ownership.
Neither the Company nor any Affiliate shall submit an Order in any
Auction. Any Existing Holder that is an Affiliate shall not sell,
transfer or otherwise dispose of Shares to any Person other than the
Company. All of the Outstanding Shares shall be represented by one or
more certificates registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there
is no Securities Depository. If there is no Securities Depository, at
the Company's option and upon its receipt of such documents as it deems
appropriate, such Shares may be registered in the stock register in the
name of the Existing Holder thereof and such Existing Holder thereupon
will be entitled to receive certificates therefor and required to
deliver certificates therefor upon transfer or exchange thereof.
6. MISCELLANEOUS.
--------------
The Board of Directors may interpret the provisions hereof to
resolve any inconsistency or ambiguity which may arise or be revealed
and if such inconsistency or ambiguity reflects an inaccurate provision
hereof, the Board of Directors may, in appropriate circumstances,
authorize the filing of an instrument to correct or resolve such
inaccurate provision.
7. NOTICES.
--------
All notices or communications to the Company, unless otherwise
specified in the Bylaws of the Company or these Articles of Amendment,
shall be sufficiently given if in writing and delivered or mailed by
first-class mail, postage prepaid, to Dominion Virginia Power, 120
Tredegar Street, Pump House, 2nd Floor, Richmond, Virginia 23219,
attention: Treasury Department. Notice to the Company shall be deemed
given on the earlier of the date received or the date seven days after
such notice is mailed.
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8. SECURITIES DEPOSITORY; STOCK CERTIFICATES.
-------------------------------------------
(a) If there is a Securities Depository, one or more
certificates for all of the Shares shall be issued to the Securities
Depository and registered in the name of the Securities Depository or
its nominee. Additional certificates may be issued as necessary to
represent Shares. All such certificates shall bear a legend to the
effect that such certificates are issued subject to the provisions
restricting the transfer of Shares contained in these Articles of
Amendment. Except as provided in paragraph (b) below, the Securities
Depository or its nominee will be the holder, and no Existing Holder
shall receive certificates representing its ownership interest in such
Shares.
(b) If the Applicable Rate applicable to the Shares shall be
the Non-Payment Period Rate or there is no Securities Depository, the
Company may at its option issue one or more new certificates with
respect to such Shares (without the legend referred to in paragraph (a)
above) registered in the names of the Existing Holders or their
nominees.
29
Dated: December 6, 2002 VIRGINIA ELECTRIC AND POWER COMPANY
By:
s/G. Scott Hetzer
-----------------------------------
Senior Vice President and Treasurer
30