<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-3701
------
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Washington 91-0462470
- - ------------------------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1411 East Mission Avenue, Spokane, Washington 99202-2600
- - ------------------------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 509-489-0500
----------------------------------
</TABLE>
None
- - ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
At May 1, 1994, 53,250,123 shares of Registrant's Common Stock, no par value
(the only class of common stock), were outstanding.
<PAGE> 2
THE WASHINGTON WATER POWER COMPANY
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Income - Three Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - March 31, 1994
and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Capitalization - March 31, 1994
and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . 6
Schedule of Information by Business Segments - Three Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . 11
Part II. Other Information:
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
- - ------------------------------------------------------------------------------
For the Three Months Ended March 31
Thousands of Dollars
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . $190,871 $212,978
-------- --------
OPERATING EXPENSES:
Operations and maintenance . . . . . . . . . . . . . 97,968 106,401
Administrative and general . . . . . . . . . . . . . 13,511 12,482
Depreciation and amortization . . . . . . . . . . . . 14,298 13,993
Taxes other than income taxes . . . . . . . . . . . . 13,146 12,692
-------- --------
Total operating expenses . . . . . . . . . . . . . 138,923 145,568
-------- --------
INCOME FROM OPERATIONS . . . . . . . . . . . . . . . . . 51,948 67,410
-------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense . . . . . . . . . . . . . . . . . . 12,322 12,566
Interest capitalized and AFUCE . . . . . . . . . . . (1,390) (578)
Other (income) deductions-net . . . . . . . . . . . . (1,329) (1,095)
-------- --------
Total interest expense and other income-net . . . 9,603 10,893
-------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 42,345 56,517
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 15,654 20,486
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . 26,691 36,031
DEDUCT-Preferred stock dividend requirements . . . . . . 2,070 2,099
-------- --------
INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . . . . . $ 24,621 $ 33,932
======== ========
Average common shares outstanding (thousands) . . . . . . 52,911 51,071
EARNINGS PER SHARE OF COMMON STOCK . . . . . . . . . . . $0.46 $0.66
Dividends paid per common share . . . . . . . . . . . . . $0.31 $0.31
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
The Washington Water Power Company
- - ------------------------------------------------------------------------------
Thousands of Dollars
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
---------- ------------
<S> <C> <C>
ASSETS:
PROPERTY:
Utility plant in service-net . . . . . . . . . . . . . . . . . . $1,680,715 $1,667,778
Construction work in progress . . . . . . . . . . . . . . . . . . 62,601 55,191
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,743,316 1,722,969
Less: Accumulated depreciation and amortization . . . . . . . . 478,731 468,978
---------- ----------
Net utility plant . . . . . . . . . . . . . . . . . . . . . . 1,264,585 1,253,991
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net . . . . . . . . . . . . . . . . 93,020 94,383
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,458 79,376
---------- ----------
Total other property and investments . . . . . . . . . . . . . 183,478 173,759
---------- ----------
CURRENT ASSETS:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . 9,101 11,201
Short-term investments . . . . . . . . . . . . . . . . . . . . . 18,113 22,517
Accounts and notes receivable-net . . . . . . . . . . . . . . . . 62,340 63,649
Materials and supplies (average cost) . . . . . . . . . . . . . . 11,575 10,997
Fuel stock (average cost) . . . . . . . . . . . . . . . . . . . . 3,254 4,201
Natural gas stored . . . . . . . . . . . . . . . . . . . . . . . 2,044 4,350
Prepayments and other . . . . . . . . . . . . . . . . . . . . . . 5,153 5,832
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . 111,580 122,747
---------- ----------
DEFERRED CHARGES:
Investment in terminated nuclear project-net . . . . . . . . . . 4,169 4,829
Regulatory assets for deferred income tax . . . . . . . . . . . . 176,616 177,786
Conservation programs . . . . . . . . . . . . . . . . . . . . . . 56,272 47,612
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,323 57,114
---------- ----------
Total deferred charges . . . . . . . . . . . . . . . . . . . . 294,380 287,341
---------- ----------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,854,023 $1,837,838
========== ==========
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements of Capitalization) . . . $1,409,348 $1,416,608
---------- ----------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 37,312 40,169
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . 38,940 19,957
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . 14,400 10,046
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,424 44,548
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . 136,076 114,720
---------- ----------
DEFERRED CREDITS:
Investment tax credits . . . . . . . . . . . . . . . . . . . . . 2,432 2,456
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 291,334 288,905
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,751 14,126
---------- ----------
Total deferred credits . . . . . . . . . . . . . . . . . . . . 307,517 305,487
---------- ----------
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 1,082 1,023
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 3)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,854,023 $1,837,838
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CAPITALIZATION
The Washington Water Power Company
- - ------------------------------------------------------------------------------
Thousands of Dollars
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
---------- ------------
<S> <C> <C>
COMMON EQUITY:
Common stock, no par value: 100,000,000 shares authorized:
shares outstanding: 1994-53,139,711; 1993-52,757,545 . . . . . $ 551,412 $ 544,609
Note receivable from employee stock ownership plan . . . . . . . (12,644) (12,756)
Capital stock expense and other paid in capital . . . . . . . . . (9,909) (9,898)
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . 120,714 112,424
---------- ----------
Total common equity . . . . . . . . . . . . . . . . . . . . . 649,573 634,379
---------- ----------
PREFERRED STOCK-CUMULATIVE: (Note 2)
10,000,000 shares authorized:
Not subject to mandatory redemption:
Flexible Auction Series J; 500 shares outstanding
($100,000 stated value) . . . . . . . . . . . . . . . . . . 50,000 50,000
---------- ----------
Total not subject to mandatory redemption . . . . . . . . . 50,000 50,000
---------- ----------
Subject to mandatory redemption:
$8.625, Series I; 500,000 shares outstanding
($100 stated value) . . . . . . . . . . . . . . . . . . . . 50,000 50,000
$6.95, Series K; 350,000 shares outstanding
($100 stated value) . . . . . . . . . . . . . . . . . . . . 35,000 35,000
---------- ----------
Total subject to mandatory redemption . . . . . . . . . . . 85,000 85,000
---------- ----------
LONG-TERM DEBT: (Note 2)
First Mortgage Bonds:
4 5/8% due March 1, 1995 . . . . . . . . . . . . . . . . . . . 10,000 10,000
7 1/8% due December 1, 2013 . . . . . . . . . . . . . . . . . 66,700 66,700
7 2/5% due December 1, 2016 . . . . . . . . . . . . . . . . . 17,000 17,000
Secured Medium-Term Notes Series A
4.72% to 7.54% due 1996 through 2023 . . . . . . . . . . . 225,000 225,000
---------- ----------
Total first mortgage bonds . . . . . . . . . . . . . . . . 318,700 318,700
---------- ----------
Pollution Control Bonds:
6% Series due 2023 . . . . . . . . . . . . . . . . . . . . . . 4,100 4,100
Unsecured Medium-Term Notes:
Series A - 7.94% to 9.58% - maturing 1995 through 2007 . . . . 100,000 100,000
Series B - 5.50% to 8.55% - maturing 1995 through 2023 . . . . 150,000 150,000
---------- ----------
Total unsecured medium-term notes . . . . . . . . . . . . . 250,000 250,000
---------- ----------
Notes payable (due within one year) and commercial paper
to be refinanced . . . . . . . . . . . . . . . . . . . . . . . 41,500 68,001
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,475 6,428
---------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . 624,775 647,229
---------- ----------
TOTAL CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . $1,409,348 $1,416,608
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
The Washington Water Power Company
- - ------------------------------------------------------------------------------
For the Three Months Ended March 31
Thousands of Dollars
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,691 $ 36,031
NON-CASH REVENUES AND EXPENSES
INCLUDED IN NET INCOME:
Depreciation and amortization . . . . . . . . . . . . . . . . 17,101 15,650
Investment tax credit adjustments-net . . . . . . . . . . . . (24) (24)
Provision for deferred income taxes . . . . . . . . . . . . . 2,294 4,417
Allowance for equity funds used during construction . . . . . (568) (271)
Power and natural gas cost deferrals and amortization . . . . (357) (2,283)
Deferred revenues and other-net . . . . . . . . . . . . . . . (439) 3,382
(Increase) decrease in working capital components:
Receivables and prepaid expenses-net . . . . . . . . . . . 1,486 138
Materials & supplies, fuel stock and natural gas stored . . 2,646 400
Payables and other accrued liabilities . . . . . . . . . . 20,990 27,178
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . 235 1,069
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . 70,055 85,687
-------- --------
INVESTING ACTIVITIES:
Construction expenditures (excluding AFUDC-equity funds) . . . . . (25,427) (15,406)
Other capital requirements . . . . . . . . . . . . . . . . . . . (9,466) (6,192)
(Increase) decrease in other noncurrent balance sheet items-net . 2,246 (2,099)
Assets acquired and investments in subsidiaries (Note 4) . . . . . (6,133) 174
-------- --------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . (38,780) (23,523)
-------- --------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper, notes payable
and bank borrowings-net . . . . . . . . . . . . . . . . . . . . (26,501) 15,000
Sale of medium-term notes . . . . . . . . . . . . . . . . . . . . - 20,000
Redemption and maturity of medium-term notes . . . . . . . . . . - (10,000)
Redemption of mortgage bonds . . . . . . . . . . . . . . . . . . - (50,000)
Redemption premiums . . . . . . . . . . . . . . . . . . . . . . . - (3,745)
Sale of common stock - Net of ESOP note receivable . . . . . . . . 4,084 5,237
Miscellaneous-net . . . . . . . . . . . . . . . . . . . . . . . . 4,720 (7,866)
-------- --------
NET FINANCING ACTIVITIES BEFORE CASH DIVIDENDS . . . . . . . . . . . (17,697) (31,374)
Less cash dividends paid . . . . . . . . . . . . . . . . . . . (15,678) (15,341)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES . . . . . . . . . . . . . . . . (33,375) (46,715)
-------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS . . . . . . . . . . . (2,100) 15,449
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . 11,201 8,354
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . $ 9,101 $ 23,803
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,367 $ 9,449
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,352 $ 639
Non-cash financing and investing activities . . . . . . . . . . . $ 2,831 $ 2,851
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
6
<PAGE> 7
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
The Washington Water Power Company
- - ------------------------------------------------------------------------------
For the Three Months Ended March 31
Thousands of Dollars
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
OPERATING REVENUES:
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,926 $ 149,973
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,489 48,612
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,456 14,393
---------- ----------
Total operating revenues . . . . . . . . . . . . . . . . . . . $ 190,871 $ 212,978
========== ==========
OPERATIONS AND MAINTENANCE EXPENSES:
Electric:
Power purchased . . . . . . . . . . . . . . . . . . . . . . . $ 29,903 $ 44,953
Fuel for generation . . . . . . . . . . . . . . . . . . . . . 11,405 11,377
Other electric . . . . . . . . . . . . . . . . . . . . . . . . 15,113 15,418
Natural gas:
Natural gas purchased for resale . . . . . . . . . . . . . . . 30,696 24,208
Other natural gas . . . . . . . . . . . . . . . . . . . . . . 3,005 3,254
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,846 7,191
---------- ----------
Total operations and maintenance expenses . . . . . . . . . . $ 97,968 $ 106,401
========== ==========
ADMINISTRATIVE AND GENERAL EXPENSES:
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,579 $ 7,513
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,896 2,536
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,036 2,433
---------- ----------
Total administrative and general expenses . . . . . . . . . . $ 13,511 $ 12,482
========== ==========
DEPRECIATION AND AMORTIZATION EXPENSES:
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,974 $ 11,023
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,935 2,131
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 839
---------- ----------
Total depreciation and amortization expenses . . . . . . . . . $ 14,298 $ 13,993
========== ==========
INCOME FROM OPERATIONS:
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,105 $ 50,098
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,961 13,756
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,882 3,556
---------- ----------
Total income from operations . . . . . . . . . . . . . . . . . $ 51,948 $ 67,410
========== ==========
INCOME AVAILABLE FOR COMMON STOCK:
Utility operations . . . . . . . . . . . . . . . . . . . . . . . $ 23,002 $ 31,099
Non-utility operations . . . . . . . . . . . . . . . . . . . . . 1,619 2,833
---------- ----------
Total income available for common stock . . . . . . . . . . . $ 24,621 $ 33,932
========== ==========
ASSETS: (1993 amounts at December 31)
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,380,764 $1,354,258
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,092 229,538
Common plant . . . . . . . . . . . . . . . . . . . . . . . . . . 24,768 36,157
Other utility assets . . . . . . . . . . . . . . . . . . . . . . 79,670 81,699
Non-utility assets . . . . . . . . . . . . . . . . . . . . . . . 143,729 136,186
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $1,854,023 $1,837,838
========== ==========
CAPITAL EXPENDITURES (excluding AFUDC):
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,177 $ 13,250
Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,069 4,498
Common plant . . . . . . . . . . . . . . . . . . . . . . . . . . 3,999 3,038
Non-utility . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,259 235
---------- ----------
Total capital expenditures . . . . . . . . . . . . . . . . . . $ 33,504 $ 21,021
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
7
<PAGE> 8
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements of The Washington Water Power Company
(Company) for the interim periods ended March 31, 1994 and 1993 are unaudited
but, in the opinion of management, reflect all adjustments, consisting only of
normal recurring accruals, necessary for a fair statement of the results of
operations for those interim periods. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year. These financial statements do not contain the detail or
footnote disclosure concerning accounting policies and other matters which
would be included in full fiscal year financial statements; therefore, they
should be read in conjunction with the Company's audited financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
NOTE 1. RECLASSIFICATIONS
Certain prior year amounts related to segment information have been
reclassified due to a current year change in the allocation method for common
plant, plant-related costs and administrative and general expenses.
NOTE 2. FINANCINGS
Reference is made to the information relating to financings and borrowings as
discussed under the caption "Liquidity and Capital Resources" in Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
NOTE 3. COMMITMENTS AND CONTINGENCIES
SUPPLY SYSTEM PROJECT 3
In 1985, the Company and the Bonneville Power Administration (BPA) reached a
settlement surrounding litigation related to the suspension of construction of
Washington Public Power Supply System (Supply System) Project 3. Project 3 is
a partially constructed 1,240 MW nuclear generating plant in which the Company
has a 5% interest. Under the settlement agreement, the Company receives power
deliveries from BPA from 1987 to 2017 in proportion to the Company's investment
in Project 3.
The settlement with BPA and other parties does not affect the Company's
obligations under the Ownership Agreement among the owners of Project 3. In
connection with its 1993 rate proceedings, BPA has proposed termination of
Project 1 and 3. Termination of Project 3 will require proposal of a
termination budget and approval by BPA and the Project 3 Owners under the
Ownership Agreement. The Company would be reimbursed for the cost of
termination under the settlement with BPA.
The only material claim against the Company arising out of the Company's
involvement in Project 3, which is still pending in the United States District
Court for the Western District of Washington (District Court), is the claim of
Chemical Bank, as bond fund trustee for Supply System Projects 4 and 5, against
all owners of Projects 1, 2 and 3 for unjust enrichment in the allocation of
certain costs of common services and facilities among the Supply System's five
nuclear projects. Projects 4 and 5 were being constructed adjacent to Projects
1 and 3, respectively, under a plan to share certain costs. Chemical Bank is
seeking a reallocation of $495 million in costs (plus interest since
commencement of construction in 1976) originally allocated to Projects 4 and 5.
On October 7, 1992, the District Court issued an order ruling in favor of the
defendants, including the Company, that the "proportional" allocation
methodology actually employed by the Supply System was permitted by the
Projects 4 and 5 bond resolution. This ruling does not resolve all cost
reallocation claims pending in the District Court, including whether the Supply
System correctly followed its methodology. Chemical Bank has indicated its
intent to assert claims for cost reallocations based upon other theories which
have not been litigated. The case is now in the discovery phase on those
claims, as settlement talks were not successful.
The Company cannot predict whether Chemical Bank will ultimately be successful
in its claim for reallocation of any of the costs of Supply System projects,
nor can the Company predict any amounts which might be reallocated to Project 3
or to the Company due to its 5% ownership interest therein. The Company also
has claims pending against the Supply System and Chemical Bank with respect to
a subordinated loan made by the Company to Projects 4 and 5 in 1981, in the
amount of approximately $11 million including interest. The District Court has
yet to rule
8
<PAGE> 9
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
on the Company's motion to set-off the amount due on the loan, including
interest, against any recovery by Chemical Bank on its cost reallocation
claims. The District Court has indicated, however, that it intends to appoint
a Settlement Master to explore settlement of some or all of the issues.
Meanwhile, the District Court set a trial date for July 15, 1995, for the
litigation of all remaining issues affecting the Company. The Company intends
to continue to defend this suit vigorously. Since the discovery is not yet
complete, the Company is unable to assess the likelihood of an adverse outcome
in this litigation, or estimate an amount or range of potential loss in the
event of an adverse outcome.
NEZ PERCE TRIBE
On December 6, 1991, the Nez Perce Tribe filed an action against the Company in
U. S. District Court for the District of Idaho alleging, among other things,
that two dams formerly operated by the Company, the Lewiston Dam on the
Clearwater River and the Grangeville Dam on the South Fork of the Clearwater
River, provided inadequate passage to migrating anadromous fish in violation of
rights under treaties between the Tribe and the United States made in 1855 and
1863. The Lewiston and Grangeville Dams, which had been owned and operated by
other utilities under hydroelectric licenses from the Federal Power Commission
(the "FPC", predecessor of the FERC) prior to acquisition by the Company, were
acquired by the Company in 1937 with the approval of the FPC, but were
dismantled and removed in 1973 and 1963, respectively. The Tribe initially
indicated through expert opinion disclosures that they were seeking actual and
punitive damages of $208 million. However, supplemental disclosures reflect
allegations of actual loss under different assumptions of between $425 million
and $650 million. Discovery in this case has been stayed pending a decision by
the Court on a case involving some similar issues between Idaho Power Company
and the Nez Perce Tribe. The case is not yet set for trial. The Company
intends to vigorously defend against the Tribe's claims. Since the discovery
is not yet complete, the Company is unable to assess the likelihood of an
adverse outcome in this litigation, or estimate an amount or range of potential
loss in the event of an adverse outcome.
LITTLE FALLS PROJECT
Pending before the U. S. District Court in the Eastern District of Washington
is the case of Spokane Tribe of Indians v. WWP. This matter involves a claim
of the Spokane Tribe of Indians for damages arising out of the Company's Little
Falls Hydroelectric Development that was constructed on the Spokane River
pursuant to a 1905 Act of Congress. The Tribe is claiming the Company's dam
interfered with Indian fishing rights. The Tribe is also seeking a declaratory
judgment and quiet title to part of the property comprising the Little Falls
Hydroelectric Development. Discovery conducted by the Company revealed that
the Tribe may seek damages in the range of $100 million to $1.4 billion, to
compensate them for the alleged loss of fishing rights, alleged lost
opportunity to develop the properties, and alleged damage to the Tribe's
cultural heritage. The trial of these matters is currently scheduled for
November 1994 in the United States District Court for the Eastern District of
Washington, in Spokane, Washington. On the merits, the Company claims that it
has all of the right, title and interest necessary for the construction,
operation and maintenance of the Little Falls Development, which rights, title
and interest were duly acquired from the United States pursuant to a 1905 Act
of Congress. The Company intends to vigorously defend against the Tribe's
claims. The Company is unable to assess the likelihood of an adverse outcome
in this litigation, or estimate an amount or range of potential loss in the
event of an adverse outcome.
STEAM HEAT PLANT
The Company recently completed an updated investigation of an oil spill that
occurred several years ago in downtown Spokane at the site of the Company's
steam heat plant. The Company purchased the plant in 1916 and operated it as a
non-regulated plant until it was deactivated in 1986 in a business decision
unrelated to the leak. After the Bunker C fuel oil spill, initial studies
suggested that the oil was being adequately contained by both geological
features and man-made structures. The Washington State Department of Ecology
(DOE) concurred with these findings. However, more recent tests confirm that
the oil has migrated beyond the steam plant property. On December 6, 1993, the
Company asked the DOE to approve a voluntary proposal to begin extracting the
underground oil. The extraction process is intended to remove quantities of
the oil and relieve any pressure on the deposit which might cause it to move.
In December 1993, the Company established a reserve of $2.0 million, which is
the current best estimate of mitigation costs.
9
<PAGE> 10
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
FIRESTORM
On October 16, 1991, gale-force winds struck a five-county area in eastern
Washington and a seven-county area in northern Idaho. These winds were
responsible for causing 92 separate wildland fires, resulting in two deaths and
the loss of 114 homes and other structures, some of which were located in the
Company's service territory. On October 13, 1993, three separate class action
lawsuits were filed by private individuals in the Superior Court of Spokane
County in connection with fires occurring in the Midway, Nine Mile and
Chattaroy regions of eastern Washington. Service of these suits, together with
a fourth suit, occurred on January 7, 1994. The Company was served with a
fifth suit on April 22, 1994, relating to the same occurrences. Complainants
allege various theories of tortious conduct, including negligence, creation of
a public nuisance, strict liability and trespass. The lawsuits seek recovery
for property damage, emotional and mental distress, lost income and punitive
damages, but do not specify the amount of damages being sought. The Superior
Court has yet to certify these lawsuits as class actions. The Company intends
to vigorously defend against all such pending claims. Since the discovery is
not yet complete, the Company is unable to assess the likelihood of an adverse
outcome in this litigation, or estimate an amount or range of potential loss in
the event of an adverse outcome.
OTHER CONTINGENCIES
The Company has long-term contracts related to the purchase of fuel for thermal
generation, natural gas and hydroelectric power. Terms of the natural gas
purchase contracts range from one month to five years and the majority provide
for minimum purchases at the then effective market rate. The Company also has
various agreements for the purchase, sale or exchange of power with other
utilities, cogenerators, small power producers and government agencies.
NOTE 4. ACQUISITIONS
On February 15, 1994, the Company announced it had reached agreement to acquire
the northern Idaho electric properties of Pacific Power & Light Company, an
operating division of PacifiCorp. The adjusted cash purchase price will be
approximately $30 million, subject to adjustments upon closing. The
approximate book value of the assets is $23 million. Pacific Power's
northern Idaho electric system currently serves approximately 9,600 customers.
The purchase is subject to regulatory approval by the Idaho Public Utilities
Commission (IPUC) and the Federal Energy Regulatory Commission (FERC).
Hearings have been scheduled before the IPUC on July 11 and 12, 1994. Closing
of the transaction is proposed to occur during the third quarter of 1994. The
Company believes this acquisition will not have a material impact on its
financial position or its results of operations.
In March 1994, Pentzer Corporation (Pentzer) acquired The Form House, Inc., a
bindery services company that serves customers in the advertising, printing,
publishing and direct mail industries.
10
<PAGE> 11
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is primarily engaged as a utility in the generation, purchase,
transmission, distribution and sale of electric energy and the purchase,
transportation, distribution and sale of natural gas. Natural gas operations
are affected to a significant degree by weather conditions and customer growth.
The Company's electric operations are highly dependent upon hydroelectric
generation for its power supply. As a result, the electric operations of the
Company are significantly affected by weather and streamflow conditions, and to
a lesser degree, by customer growth. Revenues from the sale of surplus energy
to other utilities and the cost of power purchases vary from year to year
depending on streamflow conditions and the wholesale power market. The
wholesale power market in the Northwest region is affected by several factors,
including the availability of water for hydroelectric generation, the
availability of base load plants in the region and the demand for power from
the Southwest region. Usage by retail customers varies from year to year
primarily as a result of weather conditions, the economy in the Company's
service area, customer growth and conservation.
The Company will continue to emphasize the efficient use of energy by its
customers, increase efforts to grow its customer base, especially natural gas,
and continue to manage its operating costs, increase revenues and improve
margins. The Company will also pursue resource opportunities through system
upgrades, purchases, demand side management and other options that will result
in obtaining electric power and natural gas supplies at the lowest possible
cost.
RESULTS OF OPERATIONS
OVERALL OPERATIONS
Overall earnings per share for the first quarter of 1994 were $0.46 compared to
$0.66 for the first quarter of 1993. The change was primarily the result of
unfavorable weather conditions and decreased electric wholesale sales. Weather
in the first quarter of 1994 was 20% warmer than in the first quarter of 1993,
which reduced customer usage and had a significant impact on electric and
natural gas revenues. The 1993 results also reflect a large short-term
wholesale sale of energy that increased wholesale revenues for that period.
Customer growth and decreased purchased power costs helped to partially offset
the impact of unfavorable weather during the first quarter of 1994.
Utility income available for common stock contributed $0.43 to earnings per
share in the first quarter of 1994 compared with $0.61 in 1993. Non-utility
income available for common stock contributed $0.03 to earnings per share in
the first quarter of 1994 compared to $0.05 for the same period in 1993. The
decrease in non-utility operating results is primarily due to a transactional
gain of $1.4 million, net of tax, in 1993 from the sale of gas turbines.
ELECTRIC OPERATIONS
Operating income summary
<TABLE>
<CAPTION>
(Dollars in thousands) Change
Three months ended March 31 -------------------
1994 1993 Amount %
-------- -------- -------- ---
<S> <C> <C> <C> <C>
Operating Revenues . . . . . . . . . . . . . . . . $124,926 $149,973 $(25,047) (17)
Operating Expenses:
Purchased power . . . . . . . . . . . . . . . 29,903 44,953 (15,050) (33)
Fuel for generation . . . . . . . . . . . . . 11,405 11,377 28 -
Other operating and maintenance . . . . . . . 15,113 15,418 (305) (2)
Administrative and general . . . . . . . . . . 8,579 7,513 1,066 14
Depreciation and amortization . . . . . . . . 11,974 11,023 951 9
Taxes other than income . . . . . . . . . . . 9,847 9,591 256 3
-------- -------- --------
Total operating expenses . . . . . . . . . 86,821 99,875 (13,054) (13)
-------- -------- --------
Income from operations . . . . . . . . . . . . . . 38,105 50,098 (11,993) (24)
Electric operations income taxes . . . . . . . 11,244 15,061 (3,817) (25)
-------- -------- --------
Net operating income (1) $ 26,861 $ 35,037 $ (8,176) (23)
======== ======== ========
</TABLE>
(1) Does not include interest expense or other income.
- - ------------------------------------------------------------------------------
11
<PAGE> 12
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
Electric operating revenues decreased 17% in the first quarter of 1994 over
1993, due primarily to warmer weather in the first quarter of 1994, compared to
the first quarter of 1993, and decreased wholesale sales in 1994. Wholesale
revenues were $18.8 million, or 43%, lower in the first quarter of 1994 as a
result of a large sale of wholesale energy over a six-week period in the first
quarter of 1993. The Company's electric customer base grew by 2% from the
first quarter of 1993 to 1994, in both the residential and commercial sectors,
which helped to partially offset the weather-related impact on revenues.
ELECTRIC REVENUES AND KWH SALES BY SERVICE CLASS
<TABLE>
<CAPTION>
Class Increase (Decrease) from prior year
------------------- --------------------------------------
REVENUE KWH SALES
------------- -------------
(Dollars and kWh in millions)
<S> <C> <C> <C> <C>
Residential. . . . . . . .$ (7.9) (15)% (135.6) (13)%
Commercial . . . . . . . . (0.6) (2) (8.2) (1)
Industrial . . . . . . . . (1.5) (10) 0.5 -
Other utilities. . . . . . (18.8) (43) (262.7) (25)
----------------------------------------------------------------
</TABLE>
Lower levels of wholesale sales and warmer temperatures decreased purchased
power costs by $15.1 million in the first quarter of 1994. Purchased power
costs increased in the first quarter of 1993 due to a large sale of wholesale
energy. Administrative and general expenses increased by $1.1 million in the
first quarter of 1994 due primarily to labor-related costs. Depreciation and
amortization expenses were up $1.0 million in the first quarter of 1994 as a
result of increased plant-in-service. Income taxes were down $3.8 million from
the first quarter of 1993, primarily due to decreased operating income in the
first quarter of 1994.
NATURAL GAS OPERATIONS
Operating income summary
<TABLE>
<CAPTION>
(Dollars in thousands) Change
Three months ended March 31 ------------------
1994 1993 Amount %
------- ------- ------- ---
<S> <C> <C> <C> <C>
Operating Revenues . . . . . . . . . . . . . . . . $53,489 $48,612 $ 4,877 10
Operating Expenses:
Natural gas purchased . . . . . . . . . . . . 30,696 24,208 6,488 27
Other operating and maintenance . . . . . . . 3,005 3,254 (249) (8)
Administrative and general . . . . . . . . . . 2,896 2,536 360 14
Depreciation and amortization . . . . . . . . 1,935 2,131 (196) (9)
Taxes other than income . . . . . . . . . . . 2,996 2,727 269 10
------- ------- -------
Total operating expenses . . . . . . . . . 41,528 34,856 6,672 19
------- ------- -------
Income from operations . . . . . . . . . . . . . . 11,961 13,756 (1,795) (13)
Natural gas operations income taxes . . . . . 3,971 4,229 (258) (6)
------- ------- -------
Net operating income (1) . . . . . . . . . . . . . $ 7,990 $ 9,527 $(1,537) (16)
======= ======= =======
Actual Heating Degree Days for Spokane . . . . . . 2,615 3,267 (652) (20)
30 Year Average Heating Degree Days . . . . . . . . 2,878 2,980
Actual Heating Degree Days as a Percent of
Historical Heating Degree Days . . . . . . . . 91% 110%
</TABLE>
(1) Does not include interest expense or other income.
- - ------------------------------------------------------------------------------
Total natural gas revenues increased 10% in the first quarter of 1994, over
1993, primarily due to 10% customer growth in the residential and commercial
sectors and higher average prices than last year. These increases offset the
impact of warmer temperatures in the first quarter of 1994 compared to 1993.
Total sales decreased by 13.6 million therms, or 8%, across all classes.
12
<PAGE> 13
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
NATURAL GAS REVENUES AND THERM SALES BY SERVICE CLASS
<TABLE>
<CAPTION>
Class Increase (Decrease) from prior year
----------------- --------------------------------------
REVENUE THERM SALES
------------- -------------
(Dollars and therms in millions)
<S> <C> <C> <C> <C>
Residential $ 3.4 13% (3.9) (6)%
Commercial 2.6 16 (1.9) (4)
Industrial - firm (0.1) (8) (1.5) (26)
Industrial - interruptible (0.4) (26) (2.1) (43)
Transportation (0.3) (12) (3.7) (7)
-----------------------------------------------------------------------
</TABLE>
Total natural gas operating expenses increased by $6.7 million, or 19%, in the
first quarter of 1994. Purchased gas costs increased $6.5 million in the first
quarter of 1994 due primarily to increased residential and commercial therm
sales as a result of customer growth and accounting adjustments.
Administrative and general expenses increased by 14% in 1994 over the first
quarter of 1993, primarily due to labor-related costs.
NON-UTILITY OPERATIONS
Operating income summary
<TABLE>
<CAPTION>
(Dollars in thousands) Change
Three months ended March 31 -------------
1994 1993 Amount %
------- ------- ------- ---
<S> <C> <C> <C> <C>
Operating revenues $12,456 $14,393 $(1,937) (13)
Operating expenses 10,574 10,837 (263) (2)
------- ------- -------
Income from operations 1,882 3,556 (1,674) (47)
Other income - net 223 348 (124) (36)
------- ------- -------
Income before income taxes 2,105 3,904 (1,798) (46)
Income tax provision 486 1,071 (584) (55)
------- ------- -------
Net income $ 1,619 $ 2,833 $(1,214) (43)
======= ======= =======
- - -------------------------------------------------------------------------------
</TABLE>
Non-utility operations include the results of Pentzer and three non-operating
subsidiary companies. Pentzer's business strategy is to acquire controlling
interests in a broad range of middle-market companies, to help these companies
grow through internal development and strategic acquisitions, and to sell the
portfolio investments to the public or to strategic buyers when it becomes most
advantageous in meeting Pentzer's return on invested capital objectives.
Pentzer's goal is to produce financial returns for the Company's shareholders
that, over the long term, should be higher than that of the utility operations.
From time to time, a significant portion of Pentzer's earnings contributions
may be the result of transactional gains. Accordingly, although the income
stream is expected to be positive, it may be uneven from year to year.
Pentzer's earnings for the first quarter of 1994 were less than 1993 by $1.2
million primarily due to the impact in 1993 of a transactional gain of $1.4
million, net of tax, from the sale of gas turbines. The 1994 non-transactional
earnings from its portfolio of investments were slightly higher than 1993.
In March 1994, Pentzer acquired The Form House, Inc., a bindery services
company that serves customers in the advertising, printing, publishing and
direct mail industries.
13
<PAGE> 14
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES.
UTILITY
In January 1994, the Company received authorization to issue $250 million in
new First Mortgage Bonds, which will be issued in the form of Secured Medium
Term Notes, Series B. This brings the Company's total authorized but unissued
Secured Medium Term Notes to $275 million as of May 13, 1994.
The Company has a number of common stock ownership plans which provide
additional equity to fund the Company's capital expenditure program. These
include a Dividend Reinvestment and Stock Purchase Plan, a Periodic Offering
Program, and an Investment and Employee Stock Ownership Plan. During the first
three months of 1994, the Company issued and sold almost 400,000 shares of
Common Stock for proceeds of approximately $7 million under these plans.
Capital expenditures are financed on an interim basis with short-term debt.
The Company has $160 million in committed lines of credit, a portion of which
backs up a $50 million commercial paper facility. In addition, the Company may
borrow up to $60 million through other borrowing arrangements with banks. As
of March 31, 1994, $16.5 million was outstanding under the committed lines of
credit and $25 million was outstanding under the other short-term borrowing
arrangements.
During the 1994-1996 period, capital expenditures are expected to be $334
million, and $90 million will be required for long-term debt maturities and
preferred stock sinking fund redemptions. During this three-year period, the
Company expects that internally-generated funds will provide approximately 50%
of the funds for its capital expenditures. External financing will be required
to fund maturing long-term debt, preferred stock sinking fund requirements and
the remaining portion of capital expenditures.
NON-UTILITY
The non-utility operations have $26 million in short-term borrowing
arrangements available ($18 million in current liabilities outstanding at March
31, 1994) to fund capital expenditures and other corporate requirements on an
interim basis. At March 31, 1994, the non-utility operations had $28 million
in cash and marketable securities and $11 million in long-term debt
outstanding.
The 1994-1996 non-utility capital expenditures are expected to be $8 million,
and $3 million in debt maturities will also occur. During the next three
years, internally-generated cash and other debt obligations are expected to
provide the majority of the funds for the non-utility capital expenditure
requirements.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On March 25, 1994, the Company signed a contract for the long-term sale of 50
megawatts of firm capacity and energy to the Idaho Power Company. The
contract, which is scheduled to begin January 1, 1996 and continue for 25
years, contains a cancellation option by Idaho Power between the 10th and 15th
year. The agreement is subject to approval by both the IPUC and the FERC.
During the first 10 years of the contract the energy requirements are forecast
to be met by system surpluses.
REGULATORY PROCEEDINGS.
Demand Side Management (DSM) In March 1994, the Company filed with the
Washington Utilities and Transportation Commission (WUTC) and the IPUC for
additional modifications to the Company's Energy Exchanger and other DSM
programs. The program changes were requested to more closely align the amount
of electric resources acquired through energy-efficiency programs with
forecasted resource needs. The changes were approved by the WUTC effective
April 28, 1994 and by the IPUC effective May 12, 1994.
The Public Utility Commission of Oregon (OPUC) approved a High Efficiency
Showerhead Program, effective January 1, 1994, and a Pilot Commercial/
Industrial DSM Program, effective April 20, 1994. The DSM program costs, and
margin losses associated with these programs, will be submitted in December
1994 as part of the Company's OPUC-approved rate adjustment mechanism.
14
<PAGE> 15
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
ADDITIONAL FINANCIAL DATA.
The following table reflects the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges and preferred dividend requirements:
<TABLE>
<CAPTION>
12 Months Ended
------------------------------------
March 31, December 31,
1994 1993
----------------- -----------------
<S> <C> <C>
Ratio of Earnings to Fixed Charges 3.19 (x) 3.45 (x)
Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements 2.55 (x) 2.77 (x)
</TABLE>
The Company has long-term purchased power arrangements with various Public
Utility Districts, with interest on these contracts included in purchased power
expenses. These amounts do not have a material impact on fixed charges ratios.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<S> <C>
4(a) Restated Articles of Incorporation, as amended.
4(b) Amendment No. 1 to Rights Agreement dated May 10,
1994, between the Company and The Bank of New York,
as successor Rights Agent.
12 Computation of ratio of earnings to fixed charges
and preferred dividend requirements.
</TABLE>
(b) Reports on Form 8-K.
None.
15
<PAGE> 16
THE WASHINGTON WATER POWER COMPANY
- - ------------------------------------------------------------------------------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WASHINGTON WATER POWER COMPANY
(Registrant)
Date: May 13, 1994 \s\ J. E. Eliassen
------------------------------------
J. E. Eliassen
Vice President - Finance and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
16
<PAGE> 1
Exhibit 4(a)
RESTATED ARTICLES
OF INCORPORATION
OF
The Washington Water Power
Company
<PAGE> 2
RESTATED
ARTICLES OF INCORPORATION OF "THE WASHINGTON WATER POWER COMPANY"
Know all men by these presents that we have this day voluntarily associated
ourselves together for the purpose of forming, and we do hereby form and agree
to become a Corporation, under and by virtue of the laws of the Territory of
Washington, and for such purpose we do hereby certify:-
FIRST, That the name of said Corporation is "The Washington Water Power
Company."
SECOND, The objects and purposes for which the Corporation is formed are:
To acquire, buy, hold, own, sell, lease, exchange, dispose of, finance,
deal in, construct, build, equip, improve, use, operate, maintain and work
upon:
(a) Any and all kinds of plants and systems for the manufacture,
production, storage, utilization, purchase, sale, supply,
transmission, distribution or disposition of electric energy,
natural or artificial gas, water or steam, or power produced
thereby, or of ice and refrigeration of any and every kind;
(b) Any and all kinds of telephone, telegraph, radio, wireless and other
systems, facilities and devices for the receipt and transmission of
sounds and signals, any and all kinds of interurban, city and street
railways and bus lines for the transportation of passengers and/or
freight, transmission lines, systems, appliances, equipment and
devices and tracks, stations, buildings and other structures and
facilities;
(c) Any and all kinds of works, power plants, manufactories, structures,
substations, systems, tracks, machinery, generators, motors, lamps,
poles, pipes, wires, cables, conduits, apparatus, devices,
equipment, supplies, articles and merchandise of every kind
pertaining to or in anywise connected with the construction,
operation or maintenance of telephone, telegraph, radio, wireless
and other systems, facilities and devices for the receipt and
transmission of sounds and signals, or of interurban city and street
railways and bus lines, or in anywise connected with or pertaining
to the manufacture, production, purchase, use, sale, supply,
transmission, distribution, regulation, control or application of
electric energy, natural or artificial gas, water, steam, ice,
refrigeration and power or any other purpose;
To acquire, buy, hold, own, sell, lease, exchange, dispose of, transmit,
distribute, deal in, use, manufacture, produce, furnish and supply street and
interurban railway and bus service, electric energy, natural or artificial gas,
light, heat, ice, refrigeration, water and steam in any form and for any
purposes whatsoever; and any power or force, or energy in any form and for any
purposes whatsoever;
To manufacture, produce, buy or in any other manner acquire, and to sell,
furnish, dispose of and distribute steam for heating or other purposes, and to
purchase, lease or otherwise acquire, build, construct, erect, hold, own,
improve, enlarge, maintain, operate, control, supervise and manage and to sell,
lease or otherwise dispose of plants, works and facilities, including
distribution systems, mains, pipes, conduits and meters, and all other
necessary apparatus and appliances used or useful or convenient for use in the
business of manufacturing, producing, selling, furnishing, disposing of and
distributing steam for heating or for any other purposes;
To acquire, organize, assemble, develop, build up and operate constructing
and operating and other organizations and systems, and to hire, sell, lease,
exchange, turn over, deliver and dispose of such organizations and systems in
whole or in part and as going organizations and systems and otherwise, and to
enter into and perform contracts, agreements and undertakings of any kind in
connection with any or all of the foregoing powers;
<PAGE> 3
To do a general contracting business;
To purchase, acquire, develop, mine, explore, drill, hold, own, sell and
dispose of lands, interest in and rights with respect to lands and waters and
fixed and movable property;
To plan, design, construct, alter, repair, remove or otherwise engage in
any work upon bridges, dams, canals, piers, docks, wharves, buildings,
structures, foundations, mines, shafts, tunnels, wells, waterworks and all
kinds of structural excavations and subterranean work and generally to carry on
the business of contractors and engineers;
To manufacture, improve and work upon and to deal in, purchase, hold, sell
and convey minerals, metals, wood, oils and other liquids, gases, chemicals,
animal and plant products or any of the products and by-products thereof or any
article or thing into the manufacture of which any of the foregoing may enter;
To manufacture, improve, repair and work upon and to deal in, purchase,
hold, sell and convey any and all kinds of machines, instruments, tools,
implements, mechanical devices, engines, boilers, motors, generators, rails,
cars, ships, boats, launches, automobiles, trucks, tractors, airships,
aeroplanes, articles used in structural work, building materials, hardware,
textiles, clothing, cloth, leather goods, furs and any other goods, wares and
merchandise of whatsoever kind;
To construct, erect and sell buildings and structures in and on any lands
for any use or purpose; to equip and operate warehouses, office buildings,
hotels, apartment houses, apartment hotels and restaurants, or any other
buildings and structures of whatsoever kind;
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of the shares of the capital stock of, or any bonds,
securities or evidences of indebtedness created by any other corporation or
corporations of the state of Washington or of any other state or government
and, while the owner of such stock, to exercise all the rights, powers and
privileges of individual ownership with respect thereto, including the right to
vote thereon, and to consent and otherwise act with respect thereto;
To aid in any manner any corporation or association, domestic or foreign,
or any firm or individual, any shares of stock in which or any bonds,
debentures, notes, securities, evidence of indebtedness, contracts or
obligations of which are held by or for the Corporation or in which or in the
welfare of which the Corporation shall have any interest, and to do any acts
designed to protect, preserve, improve or enhance the value of any property at
any time held or controlled by the Corporation, or in which it may be
interested at any time; and to organize or promote or facilitate the
organization of subsidiary companies;
To purchase from time to time any of its stock outstanding (so far as may
be permitted by law) at such price as may be fixed by its Board of Directors or
Executive Committee and accepted by the holders of the stock purchased, and to
resell any stock so purchased at such price as may be fixed by its said Board
of Directors or Executive Committee;
In any manner to acquire, enjoy, utilize and to sell or otherwise dispose
of patents, copyrights and trademarks and any licenses or other rights or
interests therein and thereunder;
To purchase, acquire, hold, own and sell or otherwise dispose of
franchises, concessions, consents, privileges and licenses;
To borrow money and contract debts, to issue bonds, promissory notes, bills
of exchange, debentures and other obligations and evidences of indebtedness
payable at a specified time or times or payable
<PAGE> 4
upon the happening of a specified event or events, whether secured by mortgage,
pledge or otherwise or unsecured, for money borrowed or in payment for property
purchased or acquired or any other lawful objects; all as may be determined
from time to time by the Board of Directors or Executive Committee of the
Corporation, pursuant to the authority hereby conferred;
To create mortgages or deeds of trust which shall cover and create a lien
upon all or any part of the property of the Corporation of whatsoever kind and
wheresoever situated, then owned or thereafter acquired, and to provide in any
such mortgage or deed of trust that the amount of bonds or other evidences of
indebtedness to be issued thereunder and to be secured thereby shall be limited
to a definite amount or limited only by the conditions therein specified and to
issue or cause to be issued by the Corporation the bonds or other evidences of
indebtedness to be secured thereby; all as may be determined from time to time
by the Board of Directors or Executive Committee of the Corporation pursuant to
the authority hereby conferred;
To do all and everything necessary and proper for the accomplishment of the
objects enumerated in these Articles of Incorporation or any amendment thereof
or necessary or incidental to the protection and benefit of the Corporation,
and in general to carry on any lawful business necessary or incidental to the
attainment of the objects of the Corporation whether or not such business is
similar in nature to the objects set forth in these Articles of Incorporation
or any amendment thereof;
To do any or all things herein set forth, to the same extent and as fully
as natural persons might or could do, and in any part of the world, and as
principal, agent, contractor or otherwise, and either alone or in conjunction
with any other persons, firms, associations or corporations;
To conduct its business in any or all its branches in the state of
Washington, other states, the District of Columbia, the territories and
colonies of the United States, and any foreign countries, and to have one or
more offices out of the state of Washington.
THIRD:
(a) The amount of capital with which the Corporation will begin to carry
on business hereunder shall be FIVE MILLION FIVE HUNDRED DOLLARS
($5,000,500).
(b) The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 110,000,000 shares,
divided into 10,000,000 shares of Preferred Stock without nominal or
par value, issuable in series as hereinafter provided, and
200,000,000 shares of Common Stock without nominal or par value.
(c) A statement of the preferences, limitations and relative rights of
each class of capital stock of the Corporation, namely, the
Preferred Stock without nominal or par value and the Common Stock
without nominal or par value, of the variations in the relative
rights and preferences as between series of the Preferred Stock
insofar as the same are fixed by these Articles of Incorporation,
and of the authority vested in the Board of Directors of the
Corporation to establish series of Preferred Stock and to fix and
determine the variations in the relative rights and preferences as
between series insofar as the same are not fixed by these Articles
of Incorporation and as to which there may be variations between
series is as follows:
(d) The shares of the Preferred Stock may be divided into and issued in
series. Each series shall be so designated as to distinguish the
shares thereof from the shares of all other series of the Preferred
Stock and all other classes of capital stock of the Corporation. To
the extent that these Articles of Incorporation shall not have
established series of the Preferred Stock and fixed and determined
the variations in the relative rights and preferences as between
series, the Board of Directors shall have authority, and is hereby
expressly vested with authority,
<PAGE> 5
to divide the Preferred Stock into series and, within the
limitations set forth in these Articles of Incorporation and such
limitations as may be provided by law, to fix and determine the
relative rights and preferences of any series of the Preferred Stock
so established. Such action by the Board of Directors shall be
expressed in a resolution or resolutions adopted by it prior to the
issuance of shares of each series, which resolution or resolutions
shall also set forth the distinguishing designation of the
particular series of the Preferred Stock established thereby.
Without limiting the generality of the foregoing, authority is
hereby expressly vested in the Board of Directors so to fix and
determine, with respect to any series of the Preferred Stock:
(1) the rate or rates of dividend, if any, which may be expressed
in terms of a formula or other method by which such rate or
rates shall be calculated from time to time, and the date or
dates on which dividends may be payable;
(2) whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(3) the amount payable upon shares in event of voluntary and
involuntary liquidation;
(4) sinking fund provisions, if any, for the redemption or
purchase of shares; and
(5) the terms and conditions, if any, on which shares may be
converted.
All shares of the Preferred Stock of the same series shall be
identical except that shares of the same series issued at different
times may vary as to the dates from which dividends thereon shall be
cumulative; and all shares of the Preferred Stock, irrespective of
series, shall constitute one and the same class of stock, shall be
of equal rank, and shall be identical except as to the designation
thereof, the date or dates from which dividends on shares thereof
shall be cumulative, and the relative rights and preferences set
forth above in clauses (1) through (5) of this subdivision (d), as
to which there may be variations between different series. Except
as may be otherwise provided by law, by subdivision (j) of this
Article THIRD, or by the resolutions establishing any series of
Preferred Stock in accordance with the foregoing provisions of this
subdivision (d), whenever the written consent, affirmative vote, or
other action on the part of the holders of the Preferred Stock may
be required for any purpose, such consent, vote or other action
shall be taken by the holders of the Preferred Stock as a single
class irrespective of series and not by different series.
(e) Out of any funds legally available for the payment of dividends, the
holders of the Preferred Stock of each series shall be entitled, in
preference to the holders of the Common Stock, to receive, but only
when and as declared by the Board of Directors, dividends at the
rate or rates fixed and determined with respect to each series in
accordance with these Articles of Incorporation, and no more,
payable as hereinafter provided. Such dividends shall be cumulative
so that if for all past dividend periods and the then current
dividend periods dividends shall not have been paid or declared and
set apart for payment on all outstanding shares of each series of
the Preferred Stock, at the dividend rates fixed and determined for
the respective series, the deficiency shall be fully paid or
declared and set apart for payment before any dividends on the
Common Stock shall be paid or declared and set apart for payment;
provided, however, that nothing in this subdivision (e) or elsewhere
in these Articles of Incorporation shall prevent the simultaneous
declaration and payment of dividends on both the Preferred Stock and
the Common Stock if there are sufficient funds legally available to
pay all dividends concurrently. Dividends on all shares of the
Preferred Stock of each series shall be cumulative from the date of
issuance of shares of such series. If more than one series of the
Preferred Stock shall be outstanding and if dividends on each series
shall not have been paid or declared and set apart for payment, at
the dividend rate or
<PAGE> 6
rates fixed and determined for such series, the shares of the
Preferred Stock of each series shall share ratably in the payment of
dividends including accumulations, if any, in accordance with the
sums which would be payable on such shares if all dividends were
declared and paid in full. As to all series of Preferred Stock, the
dividend payment dates for regular dividends shall be the fifteenth
day of March, June, September and December in each year, unless
other dividend payment dates shall have been fixed and determined
for any series in accordance with subdivision (d) of this Article
THIRD, and the dividend period in respect of which each regular
dividend shall be payable in respect of each series shall be the
period commencing on the next preceding dividend payment date for
such series and ending on the day next preceding the dividend
payment date for such dividend. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend
payment or payments which may be in arrears.
(f) Subject to the limitations set forth in paragraph (e) or elsewhere
in these Articles of Incorporation (and subject to the rights of any
class of stock hereafter authorized), dividends may be paid on the
Common Stock when and as declared by the Board of Directors out of
any funds legally available for the payment of dividends, and no
holder of shares of any series of the Preferred Stock as such shall
be entitled to share therein.
(g) In the event of any voluntary dissolution, liquidation or winding up
of the Corporation, before any distribution or payment shall be made
to the holders of the Common Stock, the holders of the Preferred
Stock of each series then outstanding shall be entitled to receive
out of the net assets of the Corporation available for distribution
to its stockholders the respective amounts per share fixed and
determined in accordance with these Articles of Incorporation to be
payable on the shares of such series in the event of voluntary
liquidation, and no more, and in the event of any involuntary
dissolution, liquidation or winding up of the Corporation, before
any distribution or payment shall be made to the holders of the
Common Stock, the holders of the Preferred Stock of each series then
outstanding shall be entitled to receive out of the net assets of
the Corporation available for distribution to its stockholders the
respective amounts per share fixed and determined in accordance with
these Articles of Incorporation to be payable on the shares of such
series in the event of involuntary liquidation, and no more. If
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, the net assets of the Corporation
available for distribution to its stockholders shall be insufficient
to pay the holders of all outstanding shares of Preferred Stock of
all series the full amounts to which they shall be respectively
entitled as aforesaid, the entire net assets of the Corporation
available for distribution shall be distributed ratably to the
holders of all outstanding shares of Preferred Stock of all series
in proportion to the amounts to which they shall be respectively so
entitled. For the purposes of this and the next succeeding
subdivision, and without limiting the right of the Corporation to
distribute its assets or to dissolve, liquidate or wind up in
connection with any sale, merger or consolidation, the sale of all
or substantially all of the property of the Corporation, or the
merger or consolidation of the Corporation into or with any other
corporation or corporations, shall not be deemed to be a
distribution of assets or a dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary.
(h) Subject to the limitations set forth in subdivision (g) of this
Article THIRD or elsewhere in these Articles of Incorporation (and
subject to the rights of any class of stock hereafter authorized)
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, any net assets of the Corporation
available for distribution to its stockholders shall be distributed
ratably to holders of the Common Stock.
(i) The Preferred Stock may be redeemed in accordance with the following
provisions of this subdivision (i):
<PAGE> 7
(1) Each series of the Preferred Stock which has been determined
to be redeemable as permitted by subdivision (d) of this
Article THIRD may be redeemed in whole or in part by the
Corporation, at its election expressed by resolution of the
Board of Directors, at any time or from time to time, at the
then applicable redemption price fixed and determined with
respect to each series, subject however, to any terms and
conditions specified in respect of any series of the Preferred
Stock in accordance with subdivision (d) of this Article
THIRD. If less than all of the shares of any series are to be
redeemed, the redemption shall be made either pro rata or by
lot in such manner as the Board of Directors shall determine.
(2) In the event the Corporation shall so elect to redeem shares
of the Preferred Stock, notice of the intention of the
Corporation to do so and of the date and place fixed for
redemption shall be mailed not less than thirty nor more than
ninety days before the date fixed for redemption to each
holder of shares of the Preferred Stock to be redeemed at his
address as it shall appear on the books of the Corporation,
and on and after the date fixed for redemption and specified
in such notice (unless the Corporation shall default in making
payment of the redemption price), such holders shall cease to
be shareholders of the Corporation with respect to such shares
and shall have no interest in or claim against the Corporation
with respect to such shares, excepting only the right to
receive the redemption price therefor from the Corporation on
the date fixed for redemption, without interest, upon
endorsement, if required, and surrender of their certificates
for such shares.
(3) Contemporaneously with the mailing of notice of redemption of
any shares of the Preferred Stock as aforesaid or at any time
thereafter on or before the date fixed for redemption, the
Corporation may, if it so elects, deposit the aggregate
redemption price of the shares to be redeemed with any bank or
trust company doing business in the City of New York, New
York, or Spokane, Washington, having a capital and surplus of
at least $5,000,000, named in such notice, payable on the date
fixed for redemption in the proper amounts to the respective
holders of the shares to be redeemed, upon endorsement, if
required, and surrender of their certificates for such shares,
and on and after the making of such deposit such holders shall
cease to be stockholders of the Corporation with respect to
such shares and shall have no interest in or claim against the
Corporation with respect to such shares, excepting only the
right to exercise such redemption or exchange rights, if any,
on or before the date fixed for redemption as may have been
provided with respect to such shares or the right to receive
the redemption price of their shares from such bank or trust
company on the date fixed for redemption, without interest,
upon endorsement, if required, and surrender of their
certificates for such shares.
(4) If the Corporation shall have so elected to deposit the
redemption moneys with a bank or trust company, any moneys so
deposited which shall remain unclaimed at the end of six years
after the redemption date shall be repaid to the Corporation,
and upon such repayment holders of Preferred Stock who shall
not have made claim against such moneys prior to such
repayment shall be deemed to be unsecured creditors of the
Corporation for an amount, without interest, equal to the
amount they would theretofore have been entitled to receive
from such bank or trust company. Any redemption moneys so
deposited which shall not be required for such redemption
because of the exercise, after the date of such deposit, of
any right of conversion or exchange or otherwise, shall be
returned to the Corporation forthwith. The Corporation shall
be entitled to receive any interest allowed by any bank or
trust company on any moneys deposited with such bank or trust
company as herein provided, and the holders of any shares
called for redemption shall have no claim against any such
interest.
<PAGE> 8
(5) Nothing herein contained shall limit any legal right of the
Corporation to purchase or otherwise acquire any shares of the
Preferred Stock.
(j) The holders of the Preferred Stock shall not have any right to vote
for the election of Directors or for any other purpose except as
otherwise provided by law and as set forth below in this subdivision
of this Article THIRD or elsewhere in these Articles of
Incorporation. Holders of Preferred Stock shall be entitled to
notice of each meeting of stockholders at which they shall have any
right to vote but except as may be otherwise provided by law shall
not be entitled to notice of any other meeting of stockholders.
(1) Whenever and as often as, at any date, dividends payable on
any shares of the Preferred Stock shall be in arrears in an
amount equal to the aggregate amount of dividends accumulated
on such shares of the Preferred Stock over the eighteen-month
period ended on such date, the holders of the Preferred Stock
of all series, voting separately and as a single class, shall
be entitled to vote for and to elect a majority of the Board
of Directors, and the holders of the Common Stock, voting
separately and as a single class, shall be entitled to vote
for and to elect the remaining Directors of the Corporation.
The right of the holders of the Preferred Stock to elect a
majority of the Board of Directors shall, however, cease when
all defaults in the payment of dividends on their stock shall
have been cured and such dividends shall be declared and paid
out of any funds legally available therefor as soon as in the
judgment of the Board of Directors is reasonably practicable.
The terms of office of all persons who may be Directors of the
Corporation at the time the right to elect Directors shall
accrue to the holders of the Preferred Stock as herein
provided shall terminate upon the election of their successors
at a meeting of the shareholders of the Corporation then
entitled to vote. Such election shall be held at the next
Annual Meeting of Shareholders or may be held at a special
meeting of shareholders but shall be held upon notice as
provided in the Bylaws of the Corporation for a special
meeting of the shareholders. Any vacancy in the Board of
Directors occurring during any period when the Preferred Stock
shall have elected representatives on the Board shall be
filled by a majority vote of the remaining Directors
representing the class of stock theretofore represented by the
Director causing the vacancy. At all meetings of the
shareholders held for the purpose of electing Directors during
such times as the holders of the Preferred Stock shall have
the exclusive right to elect a majority of the Board of
Directors of the Corporation, the presence in person or by
proxy of the holders of a majority of the outstanding shares
of Preferred Stock of all series shall be required to
substitute a quorum of such class for the election of
Directors, and the presence in person or by proxy of the
holders of a majority of the outstanding shares of Common
Stock shall be required to constitute a quorum of such class
for the election of Directors; provided, however, that the
absence of a quorum of the holders of stock of either class
shall not prevent the election at any such meeting, or
adjournment thereof, of Directors by the other class if the
necessary quorum of the holders of stock of such class is
present in person or by proxy at such meeting; and provided
further, that, in the absence of a quorum of the holders of
stock of either class, a majority of those holders of such
stock who are present in person or by proxy shall have the
power to adjourn the election of those Directors to be elected
by that class from time to time without notice, other than
announcement at the meeting, until the requisite amount of
holders of stock of such class shall be present in person or
by proxy.
(2) So long as any shares of the Preferred Stock shall be
outstanding, the Corporation shall not, without the
affirmative vote of the holders of at least a majority of the
shares of the Preferred Stock at the time outstanding, adopt
any amendment to these Articles of Incorporation if such
amendment would:
<PAGE> 9
(i) create or authorize any new class of stock ranking
prior to or on a parity with the Preferred Stock as
to dividends or upon dissolution, liquidation or
winding up;
(ii) increase the authorized number of shares of the
Preferred Stock; or
(iii) change any of the rights or preferences of the
Preferred Stock at the time outstanding provided,
however, that if any proposed change of any of the
rights or preferences of any outstanding shares of
the Preferred Stock would affect the holders of
shares of one or more, but not all, series of the
Preferred Stock then outstanding, only the
affirmative vote of the holders of at least a
majority of the total number of outstanding shares of
all series so affected shall be required; and
provided further, that nothing herein shall authorize
the adoption of any amendment to these articles of
Incorporation by the vote of the holders of a lesser
number of shares of the Preferred Stock, or of any
other class of stock, or of all classes of stock,
than is required for such an amendment by the laws of
the State of Washington at the time applicable
thereto.
(3) So long as any shares of the Preferred Stock shall be
outstanding, the Corporation shall not, without the
affirmative vote of the holders of at least a majority of the
shares of the Preferred Stock at the time outstanding, issue
any shares of the Preferred Stock, or of any other class of
stock ranking prior to or on a parity with the Preferred Stock
as to dividends or upon dissolution, liquidation or winding
up, unless the net income of the Corporation available for the
payment of dividends for a period of twelve consecutive
calendar months within the fifteen calendar months immediately
preceding the issuance of such shares (including, in any case
in which such shares are to be issued in connection with the
acquisition of new property, the net income of the property so
to be acquired, computed on the same basis as the net income
of the Corporation) is at least equal to one and one-half
times the annual dividend requirements on all shares of the
Preferred Stock, and on all shares of all other classes of
stock ranking prior to or on a parity with the Preferred
Stock, as to dividends or upon dissolution, liquidation or
winding up, which will be outstanding immediately after the
issuance of such shares, including the shares proposed to be
issued; provided, however, that if the shares of any series of
the Preferred Stock or any such prior or parity stock shall
have a variable dividend rate, the annual dividend requirement
on the shares of such series shall be determined by reference
to the weighted average dividend rate on such shares during
the twelve-month period for which the net income of the
Corporation available for the payment of dividends shall have
been determined; and provided, further, that if the shares of
the series to be issued are to have a variable dividend rate,
the annual dividend requirement on the shares of such series
shall be determined by reference to the initial dividend rate
upon the issuance of such shares. In any case where it would
be appropriate, under generally accepted accounting principles
to combine or consolidate the financial statements of any
parent or subsidiary of the Corporation with those of the
Corporation, the foregoing computation may be made on the
basis of such combined or consolidated financial statements.
(k) Subject to the limitations set forth in subdivision (j) of this
Article THIRD (and subject to the rights of any class of stock
hereafter authorized), and except as may be otherwise provided by
law, the holders of the Common Stock shall have the exclusive right
to vote for the election of Directors and for all other purposes.
At each meeting of stockholders, each holder of stock entitled to
vote thereat shall be entitled to one vote for each share of such
stock held by him and recorded in his name on the record date for
such meeting, and may vote and otherwise act in person or by proxy-,
provided, however, that at each election for Directors every
stockholder entitled to vote at such election shall have the right
to vote the number of
<PAGE> 10
shares held by him for as many persons as there are Directors to be
elected and for whose election he has the right to vote, or to
cumulate his votes by giving one candidate as many votes as the
number of such Directors multiplied by the number of his shares
shall equal, or by distributing such votes on the same principle
among any number of such candidates.
(l) Subject to the limitations set forth in subdivision (j) of this
Article THIRD (and subject to the rights of any class of stock
hereafter authorized), and except as may be otherwise provided by
law, upon the vote of a majority of all of the Directors of the
Corporation and of the holders of record of two-thirds of the total
number of shares of the Corporation then issued and outstanding and
entitled to vote (or, if the vote of a larger number or different
proportion of shares is required by the laws of the state of
Washington, notwithstanding the above agreement of the stockholders
of the Corporation to the contrary, then upon the vote of the
holders of record of the larger number or different proportion of
shares so required) the Corporation may from time to time create or
authorize one or more other classes of stock with such preferences,
designations, rights, privileges, powers, restrictions, limitations
and qualifications as may be determined by said vote, which may be
the same or different from the preferences, designations, rights,
privileges, powers, restrictions, limitations and qualifications of
the classes of stock of the Corporation then authorized and/or the
Corporation may increase or decrease the number of shares of one or
more of the classes of stock then authorized.
(m) All stock of the Corporation without nominal or par value whether
authorized herein or upon subsequent increases of capital stock or
pursuant to any amendment hereof may be issued, sold and disposed of
by the Corporation from time to time for such consideration in
labor, services, money or property as may be fixed from time to time
by the Board of Directors and authority to the Board of Directors so
to fix such consideration is hereby granted by the stockholders.
The consideration received by the Corporation from the issuance and
sale of new or additional shares of capital stock without par value
shall be entered in the capital stock account.
(n) No holder of any stock of the Corporation shall be entitled as of
right to purchase or subscribe for any part of any stock of the
Corporation authorized herein or of any additional stock of any
class to be issued by reason of any increase of the authorized
capital stock of the Corporation or of any bonds, certificates of
indebtedness, debentures or other securities convertible into stock
of the Corporation but any stock authorized herein or any such
additional authorized issue of any stock or of securities
convertible into stock may be issued and disposed of by the Board of
Directors to such persons, firms, corporations or associations upon
such terms and conditions as the Board of Directors in their
discretion may determine without offering any thereof on the same
terms or any terms to the stockholders then of record or to any
class of stockholders.
(o) (1) SERIES A. There is hereby established a first series of the
Preferred Stock of the Corporation which shall:
(a) consist of 250,000 shares and be designated as "$9.00
Preferred Stock Series A";
(b) have a dividend rate of $9.00 per share per annum;
(c) be redeemable at the price of $109.00 per share if
redeemed on or before May 1, 1983, of $105.40 per share
if redeemed after May 1, 1983 and on or before May 1,
1988, of $102.70 per share if redeemed after May 1, 1988
and on or before May 1, 1993, and of $100.90 per share
if redeemed after May 1, 1993, in each case plus an
amount equivalent to accumulated and unpaid dividends
thereon, if any, to the date fixed for redemption;
provided, however, that no share of said flat series
<PAGE> 11
shall be redeemed prior to May 1, 1983 if such
redemption is for the purpose or in anticipation of
refunding such share through the use, directly or
indirectly, of borrowed funds or funds derived through
the issuance by the Corporation of stock ranking prior
to or on a parity with the shares of said first series
as to dividends or upon dissolution, liquidation or
winding up, if such borrowed funds have an effective
interest cost to the Corporation (computed in accordance
with accepted financial practice) or such stock has an
effective dividend cost to the Corporation (so computed)
of less than the effective dividend cost to the
Corporation of the shares of said first series;
(d) the amount payable upon the shares of said first series
in the event of involuntary dissolution, liquidation or
winding up of the Corporation shall be $100 per share
plus an amount equivalent to the accumulated and unpaid
dividends thereon, if any, to the date of such
involuntary dissolution, liquidation or winding up, and
the amount payable upon shares of said first series in
the event of voluntary dissolution, liquidation or
winding up of the Corporation shall be an amount
equivalent to the then redemption price (including an
amount equivalent to accumulated and unpaid dividends
thereon) of shares of said first series;
(e) there shall be no sinking fund provisions for the
redemption or purchase of the shares of said first
series; and
(f) the shares of said first series shall not, by their
terms, be convertible.
(2) SERIES E. There is hereby established a fifth series of the
Preferred Stock of the Corporation which shall have, in
addition to the general terms and characteristics of all of
the authorized shares of Preferred Stock of the Corporation,
the following distinctive terms and characteristics:
(a) The fifth series of Preferred Stock of the Corporation
shall consist of 400,000 shares and be designated as
"$11.25 Preferred Stock Series E";
(b) Said fifth series shall have a dividend rate of $11.25
per share per annum;
(c) Said fifth series shall not be redeemable prior to March
15, 1990. At the election of the Board of Directors of
the Corporation, said fifth series shall be redeemable
at the price of $104.00 per share if redeemed on or
after March 15, 1990 and before March 15, 1991, of
$102.50 per share if redeemed on or after March 15, 1991
and before March 15, 1992, of $101.00 per share if
redeemed on or after March 15, 1992 and before March 15,
1993, and of $100.00 per share if redeemed on or after
March 15, 1993, in each case plus an amount equivalent
to the accumulated and unpaid dividends thereon, if any,
to the date fixed for redemption. No redemption shall
be made under this subparagraph (c) of less than 10,000
shares. If less than all of the shares of the fifth
series are to be redeemed, the redemption shall be made
pro rata (to the nearest full share) among the holders
of the shares of said fifth series then outstanding in
proportion to the respective numbers of shares of said
fifth series then held by such holders;
(d) The amount payable upon the shares of said fifth series
in the event of involuntary dissolution, liquidation
or winding up of the Corporation shall be $100.00 per
share plus an amount equivalent to the accumulated and
unpaid dividends thereon, if any, to the date of such
involuntary dissolution, liquidation
<PAGE> 12
or winding up. The amount payable upon the shares of
said fifth series, in the event of voluntary
dissolution, liquidation or winding up of the
corporation shall be $111.25 per share if such event
shall occur before March 15, 1985, $110.00 per share if
such event shall occur on or after March 15, 1985 and
before March 15, 1986, $108.75 per share if such event
shall occur on or after March 15, 1986 and before
March 15, 1987, $107.50 per share if such event
shall occur on or after March 15, 1987 and before March
15,1988, $106.25 per share if such event shall occur on
or after March 15, 1988 and before March 15, 1989,
$105.00 per share if such event shall occur on or after
March 15, 1989 and before March 15, 1990, $103.75 per
share if such event shall occur on or after March 15,
1990 and before March 15,1991, $102.50 per share if such
event shall occur on or after March 15, 1991 and before
March 15,1992, $101.25 per share if such event shall
occur on or after March 15, 1992 and before March 15,
1993, and $100.00 per share if such event shall occur on
or after March 15, 1993, in each case plus an amount
equivalent to the accumulated and unpaid dividends
thereon, if any, to the date of such event;
(e) (i) As and for a sinking fund for the redemption
of shares of said fifth series, on March 15,
1990 and each March 15 thereafter until all
shares of said fifth series shall have been
retired, the Corporation shall redeem 80,000
shares of said fifth series at the price of
$100.00 per share plus an amount equivalent
to the accumulated and unpaid dividends
thereon, if any, to the date fixed for
redemption;
(ii) The sinking fund requirement of the
Corporation to redeem shares of said fifth
series pursuant to this subparagraph (e)
shall be subject to any applicable
restrictions of law and such redemption shall
be made only out of funds legally available
therefor;
(iii) The sinking fund requirement of the
Corporation to redeem shares of said fifth
series pursuant to this subparagraph (e)
shall be cumulative. If at any time the
Corporation shall not have satisfied in full
the cumulative sinking fund requirement to
redeem shares of said fifth series, the
Corporation shall not pay or declare and set
apart for payment any dividends upon, or make
any other distribution with respect to, or
redeem, purchase or otherwise acquire any
shares of, the Common Stock or any other
class of stock ranking as to dividends and
distributions of assets junior to the
Preferred Stock;
(iv) If at any time the Corporation shall not have
satisfied in full the cumulative sinking fund
requirement to redeem shares of said fifth
series pursuant to this subparagraph (e), and
if at such time the Corporation shall not
have satisfied in full any requirements of
sinking funds for the redemption or purchase
of shares of any other series of the
Preferred Stock or any other class of stock
ranking as to dividends and distributions of
assets on a parity with the Preferred Stock,
any funds of the Corporation legally
available for the purpose shall be allocated
among all such sinking funds for series of
the Preferred Stock and such parity stock in
proportion to the respective amounts then
required for the satisfaction thereof;
(f) The shares of said fifth series shall not, by their
terms, be convertible.
<PAGE> 13
(3) SERIES F. There is hereby established a sixth series of the
Preferred Stock of the Corporation which shall have, in
addition to the general terms and characteristics of an of the
authorized shares of Preferred Stock of the Corporation, the
following distinctive terms and characteristics:
(a) The sixth series of Preferred Stock of the Corporation
shall consist of 300,000 shares and be designated as
"$12.50 Preferred Stock, Series F";
(b) Said sixth series shall have a dividend rate of $12.50
per share per annum;
(c) Said sixth series shall not be redeemable prior to June
15, 1990. At the election of the Board of Directors of
the Corporation, said sixth series shall be redeemable
at the price of $104.40 per share if redeemed on or
after June 15, 1990 and before June 15, 1991, of $102.70
per share if redeemed on or after June 15, 1991 and
before June 15, 1992, of $101.00 per share if redeemed
on or after June 15, 1992 and before June 15, 1993, and
of $100.00 per share if redeemed on or after June 15,
1993, in each case plus an amount equivalent to the
accumulated and unpaid dividends thereon, if any, to the
date fixed for redemption. No redemption shall be made
under this subparagraph (c) of less than 10,000 shares.
If less than all of the shares of the sixth series are
to be redeemed, the redemption shall be made pro rata
(to the nearest full share) among the holders of the
shares of said sixth series then outstanding in
proportion to the respective numbers of shares of said
sixth series then held by such holders;
(d) The amount payable upon the shares of said sixth series
in the event of involuntary dissolution, liquidation or
winding up of the Corporation shall be $100.00 per share
plus an amount equivalent to the accumulated and unpaid
dividends thereon, if any, to the date of such
involuntary dissolution, liquidation or winding up. The
amount payable upon the shares of said sixth series, in
the event of voluntary dissolution, liquidation or
winding up of the Corporation shall be $112.50 per share
if such event shall occur before June 15, 1985, $111.11
per share if such event shall occur on or after June 15,
1985 and before June 15, 1986, $109.72 per share if such
event shall occur on or after June 15, 1986 and before
June 15, 1987, $108.33 per share if such event shall
occur on or after June 15, 1987 and before June 15,
1988, $106.94 per share if such event shall occur on or
after June 15, 1988 and before June 15, 1989, $105.56
per share if such event shall occur on or after June
15,1989 and before June 15, 1990, $104.17 per share if
such event shall occur on or after June 15, 1990 and
before June 15, 1991, $102.78 per share if such event
shall occur on or after June 15, 1991 and before June
15, 1992, $101.39 per share if such event shall occur on
or after June 15, 1992 and before June 15, 1993, and
$100.00 per share if such event shall occur on or after
June 15, 1993, in each case plus an amount equivalent to
the accumulated and unpaid dividends thereon, if any, to
the date of such event;
(e) (i) As and for a sinking fund for the redemption of
shares of said sixth series, on June 15, 1990 and
each June 15 thereafter until all shares of said
sixth series shall have been retired, the
Corporation shall redeem 60,000 shares of said
sixth series at the price of $100.00 per share
plus an amount equivalent to the accumulated and
unpaid dividends thereon, if any, to the date
fixed for redemption;
(ii) The sinking fund requirement of the Corporation
to redeem shares of said sixth series pursuant to
this subparagraph (e) shall be subject to any
<PAGE> 14
applicable restrictions of law and such
redemption shall be made only out of the funds
legally available therefor;
(iii) The sinking fund requirement of the Corporation
to redeem shares of said sixth series pursuant to
this subparagraph (e) shall be cumulative. If at
any time the Corporation shall not have satisfied
in full the cumulative sinking fund requirement
to redeem shares of said sixth series, the
Corporation shall not pay or declare and set
apart for payment any dividends upon, or make any
other distribution with respect to, or redeem,
purchase or otherwise acquire any shares of, the
Common Stock or any other class of stock ranking
as to dividends and distributions of assets
junior to the Preferred Stock;
(iv) If at any time the Corporation shall not have
satisfied in full the cumulative sinking fund
requirement to redeem shares of said sixth series
pursuant to this subparagraph (e), and if at such
time the Corporation shall not have satisfied in
full any requirements of sinking funds for the
redemption or purchase of shares of any other
series of the Preferred Stock or any other class
of stock ranking as to dividends and
distributions of assets on a parity with the
Preferred Stock any funds of the Corporation
legally available for the purpose shall be
allocated among all such sinking funds for series
of the Preferred Stock and such parity stock in
proportion to the respective amounts then
required for the satisfaction thereof;
(f) The shares of said sixth series shall not, by their
terms, be convertible.
(4) SERIES G. There is hereby established a seventh series of the
Preferred Stock of the Corporation which shall have, in
addition to the general terms and characteristics of all of
the authorized shares of Preferred Stock of the Corporation,
the following distinctive terms and characteristics:
(a) The seventh series of Preferred Stock of the Corporation
shall consist of 450,000 shares and be designated as
"Adjustable Rate Preferred Stock, Series G";
(b) The rate of dividend per annum on said seventh series of
Preferred Stock is hereby determined and fixed at the
Dividend Rate (as hereinafter defined) from time to time
in effect.
The "Dividend Rate" for the initial dividend
period ending December 14, 1985 shall be 8.80% per
annum. Except as provided below in this paragraph, the
"Dividend Rate" for each subsequent dividend period will
be 1.55% below the highest of (a) the Treasury Bill
Rate, (b) the Ten Year Constant Maturity Rate and (c)
the Twenty Year Constant Maturity Rate (each as
hereinafter defined) for such dividend period. In the
event that the Corporation shall determine in good faith
that for any reason one or more of such rates cannot be
determined for any dividend period, then the Dividend
Rate for such dividend period shall be 1.55% below the
higher of whichever of such rates can be so determined.
In the event that the Corporation shall determine in
good faith that none of such rates can be determined for
any dividend period, then the Dividend Rate in effect
for the preceding dividend period shall be continued for
such dividend period. Anything herein to the contrary
notwithstanding, the Dividend Rate for any dividend
period shall in no event be less than 6% per annum nor
greater than 13% per annum,
<PAGE> 15
Except as provided below in this paragraph, the
"Treasury Bill Rate" for each dividend period will be
the arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one
such rate shall have been published during the relevant
Calendar Period [as hereinafter defined]) for
three-month U.S. Treasury bills, as published weekly by
the Federal Reserve Board during the Calendar Period
ending on (and including) the March 4, June 4, September
4 or December 4, as the case may be, immediately
preceding the commencement of the dividend period for
which the Dividend Rate on the shares of said seventh
series of Preferred Stock is being calculated. In the
event that the Federal Reserve Board shall not have
published a weekly per annum secondary market discount
rate during such Calendar Period, then the Treasury Bill
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum
secondary market discount rates (or the one weekly per
annum secondary market discount rate, if only one such
rate shall have been published during such Calendar
Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In
the event that no per annum secondary market discount
rate for three-month U.S. Treasury bills shall have been
published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Treasury
Bill Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one
such rate shall have been published during such Calendar
Period) for all of the U.S. Treasury bills then having
remaining terms to maturity of not less than 80 nor more
than 100 days, as published during such Calendar Period
by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that
the Corporation shall determine in good faith that for
any reason no such U.S. Treasury bill rates shall have
been published as provided above during such Calendar
Period, then the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the per annum
secondary market discount rates based upon the closing
bids during such Calendar Period for each of the issues
of marketable non-interest-bearing U.S. Treasury
securities than having remaining terms to maturity of
not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business
day in The City of New York (or less frequently if daily
quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation. In the
event that the Corporation shall determine in good faith
that for any reason the Corporation cannot determine the
Treasury Bill Rate for any dividend period as provided
above in this paragraph, the Treasury Bill Rate for such
dividend period shall be the arithmetic average of the
per annum secondary market discount rates based upon the
closing bids during such Calendar Period for each of the
issues of marketable interest-bearing U.S. Treasury
securities then having remaining terms to maturity of
not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business
day in The City of New York (or less frequently if daily
quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
Except as provided below in this paragraph, the
"Ten Year Constant Maturity Rate" for each dividend
period shall be the arithmetic average of the
<PAGE> 16
two most recent weekly per annum Ten Year Average Yields
(as hereinafter defined) (or the one weekly per annum
Ten Year Average Yield, if only one such yield shall
have been published during the relevant Calendar
Period), as published weekly by the Federal Reserve
Board during the Calendar Period ending on (and
including) the March 4, June 4, September 4 or December
4, as the case may be, immediately preceding the
commencement of the dividend period for which the
Dividend Rate on the shares of said seventh series of
Preferred Stock is being calculated. In the event that
the Federal Reserve Board shall not have published such
a weekly per annum Ten Year Average Yield during such
Calendar Period, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum Ten Year
Average Yields (or the one weekly per annum Ten Year
Average Yield, if only one such yield shall have been
published during such Calendar Period), as published
weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that
no per annum Ten Year Average Yield shall have been
published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Ten Year
Constant Maturity Rate for such dividend period shall be
the arithmetic average of the two most recent weekly per
annum average yields to maturity (or the one weekly per
annum average yield to maturity, if only one such yield
shall have been published during such Calendar Period)
for all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special
Securities [as hereinafter defined]) then having
remaining terms to maturity of not less than eight (8)
nor more than twelve (12) years, as published during
such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such yields,
by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In
the event that the Corporation shall determine in good
faith that for any reason the Corporation cannot
determine the Ten Year Constant Maturity Rate for any
dividend period as provided above in this paragraph,
then the Ten Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of the
per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities)
with a final maturity date not less than eight (8) nor
more than twelve (12) years from the date of each such
quotation, as quoted daily for each business day in The
City of New York (or less frequently if daily quotations
shall not be generally available) to the Corporation by
at least three recognized U.S. Government securities
dealers selected by the Corporation.
Except as provided below in this paragraph, the
"Twenty Year Constant Maturity Rate" for each dividend
period shall be the arithmetic average of the two most
recent weekly per annum Twenty Year Average Yields (as
hereinafter defined) (or the one weekly per annum Twenty
Year Average Yield, if only one such yield shall have
been published during the relevant Calendar Period), as
published weekly by the Federal Reserve Board during the
Calendar Period ending on (and including) the March 4,
June 4, September 4 or December 4, as the case may be,
immediately preceding the commencement of the dividend
period for which the Dividend Rate on the shares of said
seventh series of Preferred Stock is being calculated.
In the event that the Federal Reserve Board shall not
have published such a weekly per annum Twenty Year
Average Yield during such Calendar Period, then the
Twenty Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the two most
recent weekly
<PAGE> 17
per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if
only one such yield shall have been published during
such Calendar Period), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the
Corporation. In the event that no per annum Twenty Year
Average Yield shall have been published by the Federal
Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such
Calendar Period, then the Twenty Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum average
yields to maturity (or the one weekly per annum average
yield to maturity, if only one such Yield shall have
been published during such Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities)
then having remaining terms to maturity of not less than
eighteen (18) nor more than twenty-two (22) years, as
published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation shall
determine in good faith that for any reason the
Corporation cannot determine the Twenty Year Constant
Maturity Rate for any dividend period as provided above
in this paragraph, then the Twenty Year Constant
Maturity Rate for such dividend period shall be the
arithmetic average of the per annum average yields to
maturity based upon the closing bids during such
Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final
maturity date not less than eighteen (18) nor more than
twenty-two (22) years from the date of each such
quotation, as quoted daily for each business day in The
City of New York (or less frequently if daily quotations
shall not be generally available) to the Corporation by
at least three recognized U.S. Government securities
dealers selected by the Corporation.
The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Twenty Year Constant Maturity Rate
shall each be rounded to the nearest five one-hundredths
of a percentage point.
The amount of the dividend per share payable for
each full dividend period shall be calculated by
multiplying the Dividend Rate for such dividend period
by the $100 per share liquidation price of said seventh
series of the Preferred Stock and dividing the product
of such multiplication by 4. The amount of the dividend
per share payable for any period less than a full
dividend period and for the initial dividend shall be
calculated on the basis of a 360-day year consisting of
twelve 30-day months and the actual number of days which
have elapsed in such period.
The Dividend Rate with respect to each dividend
period shall be calculated as promptly as practicable by
the Corporation according to the appropriate method
described herein. The mathematical accuracy of each
such calculation shall be confirmed in writing by
independent accountants of recognized standing. The
Corporation shall cause each Dividend Rate to be
published in a newspaper of general circulation in The
City of New York (or if such publication is not
possible, to be published or circulated to the public in
such other manner as the Corporation shall deem
appropriate) prior to the commencement of the dividend
period to which it applies and shall cause notice of
such Dividend Rate to be mailed to the holders of shares
of said seventh series of Preferred Stock.
<PAGE> 18
As used herein, the term "Calendar Period" means
a period of fourteen calendar days; the term "Special
Securities" means securities which can, at the option of
the holder, be surrendered at face value in payment of
any Federal estate tax or which provide tax benefits to
the holder and are priced to reflect such tax benefits
or which were originally issued at a deep or substantial
discount; the term "Ten Year Average Yield" means the
average yield to maturity for actively traded marketable
U.S. Treasury fixed interest rate securities (adjusted
to constant maturities of ten [10 years); and the term
"Twenty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant
maturities of twenty [20] years).
(c) The shares of said seventh series shall be redeemable at
the price of $106.00 per share if redeemed on or before
December 15, 1990, of $103.00 per share if redeemed on
or before December 15, 1995, and of $100.00 per share if
redeemed after December 15, 1995, in each case, plus an
amount equivalent to accumulated and unpaid dividends
thereon, if any, to the date fixed for redemption;
provided, however, that no share of said seventh series
shall be redeemed prior to December 15, 1990 if such
redemption is for the purpose or in anticipation of
refunding such share through the use, directly or
indirectly, of borrowed funds or funds derived through
the issuance by the Corporation of stock ranking prior
to or on a parity with the shares of said seventh series
as to dividends or upon dissolution, liquidation or
winding up, if such borrowed funds have an effective
interest cost to the Corporation (computed in accordance
with generally accepted financial practice), or such
stock has an effective dividend cost to the Corporation
(so computed), of less than 8.80% per annum;
(d) The amount payable upon the shares of said seventh
series in the event of dissolution, liquidation or
winding up of the Corporation shall be $100 per share
plus an amount equivalent to the accumulated and unpaid
dividends thereon, if any, to the date of such
dissolution, liquidation or winding up;
(e) There shall be no sinking fund provisions for the
redemption or purchase of the shares of said seventh
series; and
(f) The shares of said seventh series shall not, by their
terms, be convertible.
(5) SERIES H. There is hereby established an eighth series of the
Preferred Stock of the Corporation which shall have, in
addition to the general terms and characteristics of all the
authorized shares of Preferred Stock of the Corporation, the
following distinctive terms and characteristics:
(a) The eighth series of Preferred Stock of the Corporation
shall consist of 200,000 shares and be designated as
"Adjustable Rate Preferred Stock, Series H";
(b) The rate of dividend per annum on said eighth series of
Preferred Stock is hereby determined and fixed at the
Dividend Rate (as hereinafter defined) from time to time
in effect.
The "Dividend Rate" for the initial dividend
period ending June 14, 1986 shall be 6.00% per annum.
Except as provided below in this paragraph, the
"Dividend Rate' for each subsequent dividend period will
be 1.65% below the highest of (a) the Treasury Bill
Rate, (b) the Ten Year Constant Maturity Rate
<PAGE> 19
and (c) the Twenty Year Constant Maturity Rate (each as
hereinafter defined) for such dividend period. In the
event that the Corporation shall determine in good faith
that for any reason one or more of such rates cannot be
determined for any dividend period, then the Dividend
Rate for such dividend period shall be 1.65% below the
higher of whichever of such rates can be so determined.
In the event that the Corporation shall determine in
good faith that none of such rates can be determined for
any dividend period, then the Dividend Rate in effect
for the preceding dividend period shall be continued for
such dividend period. Anything herein to the contrary
notwithstanding, the Dividend Rate for any dividend
period shall in no event be less than 6% per annum nor
greater than 11% per annum.
Except as provided below in this paragraph, the
"Treasury Bill Rate" for each dividend period will be
the arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one
such rate shall have been published during the relevant
Calendar Period [as hereinafter defined]) for
three-month U.S. Treasury bills, as published weekly by
the Federal Reserve Board during the Calendar Period
ending on (and including) the March 4, June 4, September
4 or December 4, as the case may be, immediately
preceding the commencement of the dividend period for
which the Dividend Rate on the shares of said eighth
series of Preferred Stock is being calculated. In the
event that the Federal Reserve Board shall not have
published a weekly per annum secondary market discount
rate during such Calendar Period, then the Treasury Bill
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum
secondary market discount rates (or the one weekly per
annum secondary market discount rate, if only one such
rate shall have been published during such Calendar
Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In
the event that no per annum secondary market discount
rate for three-month U.S. Treasury bills shall have been
published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Treasury
Bill Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one
such rate shall have been published during such Calendar
Period) for all of the U.S. Treasury bills than having
remaining terms to maturity of not less than 80 nor more
than 100 days, as published during such Calendar Period
by the Federal Reserve Board, or, if the Federal Reserve
Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. quotation, as
quoted daily for each business day in The City of New
York (or less frequently if daily quotation shall not be
generally available) to the Corporation by at least
three recognized U.S. Government securities dealers
selected by the Corporation. In the event that the
Corporation shall determine in good faith that for
any reason no such U.S. Treasury bill rates shall
have been published as provided above during such
Calendar Period, then the Treasury Bill Rate for such
dividend period shall be the arithmetic average of the
per annum secondary market discount rates based upon the
closing bids during such Calendar Period for each of the
issues of marketable non-interest-bearing U.S. Treasury
securities then having remaining terms to maturity of
not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business
day in The City of New York (or less frequently if daily
quotations shall not be generally available) to the
<PAGE> 20
Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation. In the
event that the Corporation shall determine in good faith
that for any reason the Corporation cannot determine the
Treasury Bill Rate for any dividend period as provided
above in this paragraph, the Treasury Bill Rate for such
dividend period shall be the arithmetic average of the
per annum secondary market discount rates based upon the
closing bids during such Calendar Period for each of the
issues of marketable interest-bearing U.S. Treasury
securities then having remaining terms to maturity of
not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business
day in The City of New York (or less frequently if daily
quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
Except as provided below in this paragraph, the
"Ten Year Constant Maturity Rate" for each dividend
period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (as
hereinafter defined) (or the one weekly per annum Ten
Year Average Yield, if only one such Yield shall have
been published during the relevant Calendar Period), as
published weekly by the Federal Reserve Board during the
Calendar Period ending on (and including) the March 4,
June 4, September 4 or December 4, as the case may be,
immediately preceding the commencement of the dividend
period for which the Dividend Rate on the shares of said
eighth series of Preferred Stock is being calculated.
In the event that the Federal Reserve Board shall not
have published such a weekly per annum Ten Year Average
Yield during such Calendar Period, then the Ten Year
Constant Maturity Rate for such dividend period shall be
the arithmetic average of the two most recent weekly per
annum Ten Year Average Yields (or the one weekly per
annum Ten Year Average Yield, if only one such yield
shall have been published during such Calendar Period),
as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In
the event that no per annum Ten Year Average Yield shall
have been published by the Federal Reserve Board or by
any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then
the Ten Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the two most
recent weekly per annum average yields to maturity (or
the one weekly average yield to maturity, if only one
such Yield shall have been published during such
Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities
(other than Special Securities [as hereinafter defined])
then having remaining terms to maturity of not less than
eight (8) nor more than twelve (12) years, as published
during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the
Corporation. In the event that the Corporation shall
determine in good faith that for any reason the
Corporation cannot determine the Ten Year Constant
Maturity Rate for any dividend period as provided above
in this paragraph, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period
for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less
than eight (8) nor more than twelve (12) years from the
date of each such quotation, as quoted daily for each
business day in The City of New York (or less frequently
if daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S.
Government securities dealers selected by the
Corporation.
<PAGE> 21
Except as provided below in this paragraph, the "Twenty
Year Constant Maturity Rate" for each dividend period
shall be the arithmetic average of the two most recent weekly
per annum Twenty Year Average Yields (as hereinafter defined)
(or the one weekly per annum Twenty Year Average Yield, if
only one such yield shall have been published during the
relevant Calendar Period), as published weekly by the Federal
Reserve Board during the Calendar Period ending on (and
including) the March 4, June 4, September 4 or December 4, as
the case may be, immediately preceding the commencement of the
dividend period for which the Dividend Rate on the shares of
said eighth series of Preferred Stock is being calculated. In
the event that the Federal Reserve Board shall not have
published such a weekly per annum Twenty Year Average Yield
during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year
Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such yield shall have been
published during such Calendar Period), as published weekly
during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the
Corporation. In the event that no per annum Twenty Year
Average Yield shall have been published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the
Twenty Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall have
been published during such Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) then having
remaining terms to maturity of not less than eighteen (18) nor
more than twenty-two (22) years, as published during such
Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that the
Corporation shall determine in good faith that for any reason
the Corporation cannot determine the Twenty Year Constant
Maturity Rate for any dividend period as provided above in
this paragraph, then the Twenty Year Constant Maturity Rate
for such dividend period shall be the arithmetic average of
the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with
a final maturity date not less than eighteen (18) nor more
than twenty-two (22) years from the date of each such
quotation, as quoted daily for each business day in The City
of New York (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three
recognized U.S. Government securities dealers selected by the
Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Twenty Year Constant Maturity Rate shall each be
rounded to the nearest five one-hundredths of a percentage
point.
The amount of the dividend per share payable for each
full dividend period shall be calculated by multiplying the
Dividend Rate for such dividend period by the $100 per share
liquidation price of said eighth series of the Preferred Stock
and dividing the product of such multiplication by 4. The
amount of the dividend per share payable for any period less
than a full dividend period and for the initial dividend shall
be calculated on the basis of a 360-day year
<PAGE> 22
consisting of twelve 30-day months and the actual number of
days which have elapsed in such period.
The Dividend Rate with respect to each dividend period
shall be calculated as promptly as practicable by the
Corporation according to the appropriate method described
herein. The mathematical accuracy of each such calculation
shall be confirmed in writing by independent accountants of
recognized standing. The Corporation shall cause each
Dividend Rate to be published in a newspaper of general
circulation in The City of New York (or if such publication is
not possible, to be published or circulated to the public in
such other manner as the Corporation shall deem appropriate)
prior to the commencement of the dividend period to which it
applies and shall cause notice of such Dividend Rate to be
mailed to the holders of shares of said eighth series of
Preferred Stock.
As used herein, the term "Calendar Period" means a
period of fourteen calendar days; the term "Special
Securities" means securities which can, at the option of the
holder, be surrendered at face value in payment of any Federal
estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally
issued at a deep or substantial discount; the term "Ten Year
Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten [10]
years); and the term "Twenty Year Average Yield" means the
average yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to constant
maturities of twenty [20] years).
(c) The shares of said eighth series shall be redeemable at the
price of $106 per share if redeemed on or before June 15,
1991, of $103 per share if redeemed on or before June 15,
1996, and of $100 per share if redeemed after June 15, 1996,
in each case, plus an amount equivalent to accumulated and
unpaid dividends thereon, if any, to the date fixed for
redemption; provided, however, that no share of said eighth
series shall be redeemed prior to June 15, 1991 if such
redemption is for the purpose or in anticipation of refunding
such share through the use, directly or indirectly, of
borrowed funds or funds derived through the issuance by the
Corporation of stock ranking prior to or on a parity with the
shares of said eighth series as to dividends or upon
dissolution, liquidation or winding up, if such borrowed funds
have an effective interest cost to the Corporation (computed
in accordance with generally accepted financial practice), or
such stock has an effective dividend cost to the Corporation
(so computed), of less than 6% per annum;
(d) The amount payable upon the shares of said eighth series in
the event of dissolution, liquidation or winding up of the
Corporation shall be $100 per share plus an amount equivalent
to the accumulated and unpaid dividends thereon, if any, to
the date of such dissolution, liquidation or winding up;
(e) There shall be no sinking fund provisions for the redemption
or purchase of the shares of said eighth series; and
(f) The shares of said eighth series shall not, by their terms, be
convertible.
(6) SERIES I. There is hereby established a ninth series of the Preferred
Stock of the Corporation which shall have, in addition to the general
terms and characteristics of
<PAGE> 23
all of the authorized shares of Preferred Stock of the Corporation,
the following distinctive terms and characteristics:
(a) The ninth series of Preferred Stock of the Corporation shall
consist of 500,000 shares and be designated as "$8.625
Preferred Stock, Series I."
(b) Said ninth series shall have a dividend rate of $8.625 per
share per annum.
(c) The amount payable upon the shares of said ninth series in the
event of dissolution, liquidation or winding up of the
Corporation shall be $100.00 per share plus an amount
equivalent to the accumulated and unpaid dividends thereon, if
any, to the date of such dissolution, liquidation or winding
up.
(d) (i) As and for a sinking fund for the redemption of shares
of said ninth series, on June 15, 1996 and each June 15
thereafter until all shares of said ninth series shall
have been retired, the Corporation shall redeem 100,000
shares of said ninth series at the price of $100 per
share plus an amount equivalent to the accumulated and
unpaid dividends thereon, if any, to the date fixed for
redemption. The Corporation shall be entitled, at its
option, on June 15, 1996 and each June 15 thereafter, to
redeem up to 100,000 shares of said ninth series, in
addition to the shares otherwise required to be redeemed
on such date, at $100 per share plus an amount
equivalent to the accumulated and unpaid dividends
thereon, if any, to the date fixed for redemption;
provided, however, that the option of the Corporation to
so redeem up to 100,000 additional shares of the ninth
series on each such sinking fund redemption date shall
not be cumulative and shall not reduce the sinking fund
requirements of this subparagraph (d) in any subsequent
year. In the case of any redemption pursuant to this
paragraph (d), the shares to be redeemed shall be
selected by lot among the holders of the shares of said
ninth series then outstanding in such manner as the
appropriate Officers of the Corporation shall determine
to result in a random selection. The shares of said
ninth series shall not be redeemable at the option of
the Corporation except as set forth in this subparagraph
(d).
(ii) The sinking fund requirement of the Corporation to
redeem shares of said ninth series pursuant to this
subparagraph (d) shall be subject to any applicable
restrictions of law and such redemption shall be made
only out of funds legally available therefor.
(iii) The sinking fund requirement of the Corporation to
redeem shares of said ninth series pursuant to this
subparagraph (d) shall be cumulative. If at any time
the Corporation shall not have satisfied in full the
cumulative sinking fund requirement to redeem shares of
said ninth series, the Corporation shall not pay or
declare and set apart for payment any dividends upon, or
make any other distribution with respect to, or redeem,
purchase or otherwise acquire any shares of, the Common
Stock or any other class of stock ranking as to
dividends and distributions of assets junior to the
Preferred Stock.
(iv) If at any time the Corporation shall not have satisfied
in full the cumulative sinking fund requirement to
redeem shares of said ninth series pursuant to this
subparagraph (d), and if at such time the Corporation
shall be required pursuant to a sinking of similar fund
to redeem or purchase shares of any other series of the
Preferred Stock or any other class of stock
<PAGE> 24
ranking as to dividends and distributions of assets on
a parity with the Preferred Stock, any funds of the
Corporation legally available for the purpose shall be
allocated among all such sinking or similar funds for
series of the Preferred Stock and such parity stock in
proportion to the respective amounts then required
for the satisfaction thereof.
(e) The shares of said ninth series shall not, by their terms, be
convertible.
(7) SERIES J. There is hereby established a tenth series of the Preferred
Stock of the Corporation which shall have, in addition to the general
terms and characteristics of all of the authorized shares of Preferred
Stock of the Corporation, the following distinctive terms and
characteristics:
PART I
(a) The tenth series of Preferred Stock of the Corporation shall
consist of 500 shares and be designated as "Flexible Auction
Preferred Stock, Series J" (hereafter in this paragraph 10
referred to as the "Auction Preferred Stock").
(b) As used in this paragraph 10 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:
"Affiliate" means any Person known to the Trust
Company to be controlled by, in control of or under common
control with the Corporation.
"Applicable 'AA' Composite Commercial Paper Rate" means,
as of any date and with respect to any Dividend Period, (i) in
the case of any Dividend Period having a term less than 70
days, the interest equivalent of the 60-day rate, (ii) in the
case of any Dividend Period having a term 70 days or more but
less than 85 days, the arithmetic average of the interest
equivalents of the 60-day and 90-day rates, (iii) in the case
of any Dividend Period having a term 85 days or more but not
less than 120 days, the interest equivalent of the 90-day
rate, (iv) in the case of any Dividend Period having a term of
120 days or more but less than 148 days, the arithmetic
average of the interest equivalents of the 90-day and 180-day
rates and (v) in the case of any Dividend Period having a term
148 days or more but less than or equal to 182 days, the
interest equivalent of the 180-day rate, on commercial paper
placed on behalf of corporate issuers the bonds of which are
rated "AA" by Standard & Poor's or "Aa" by Moody's, or the
equivalent of either or both of such ratings by such agencies
or another rating agency, as such rates are 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 the interest equivalents 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
Applicable "AA" Composite Commercial Paper Rate, the
Applicable "AA" Composite Commercial Paper Rate shall be
determined on the basis of the quotation furnished 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.
<PAGE> 25
"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 section (c)(ii)
hereof.
"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, Inc. is open for trading and which is not a day on
which banking institutions in The City of New York are
authorized or required by law or executive order to remain
closed.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commercial Paper Dealer" means any commercial paper
dealer, the principal office of which is located in New York
City which is a nationally recognized leading dealer in the
domestic commercial paper market and which is designated by
the Corporation as a "Commercial Paper Dealer' in an
instrument delivered to the Trust Company; provided that no
such dealer may be an affiliate of the Corporation. On the
Date of Original Issue, the Corporation shall designate two
Commercial Paper Dealers. The Corporation may change any such
designation, at any time and from time to time, in an
instrument delivered to the Trust Company.
"Corporation" means The Washington Water Power Company,
a corporation of the State of Washington, or its successors.
"Date of Original Issue" means the date on which the
Corporation originally issues the Auction Preferred Stock.
"Designator" means any member of the National
Association of Security Dealers which is a nationally
recognized leading dealer in the domestic commercial paper
market and a nationally recognized leading dealer in the
market for obligations of the United States and which has
entered into an agreement with the Corporation to perform the
functions of the Designator specified herein, a copy of which
shall have been delivered to the Trust Company.
"Dividend Payment Date" has the meaning set forth in
section (c)(i)(F) below.
"Dividend Period" has the meaning set forth in section
(c)(i)(G) below.
"Dividend Period Days" has the meaning set forth in
section (c)(i)(E) below.
"Dividend Quarter" has the meaning set forth in section
(c)(i)(F) below.
<PAGE> 26
"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 sections (c)(i) and (ii) hereof.
"Dividends-Received Deduction" has the meaning set
forth in section (c)(i)(D) below.
"Holder" means a Person in the name of which any shares
of the Auction Preferred Stock are registered in the Stock
Books of the Corporation.
"Initial Dividend Payment Date" means the date specified
as set forth in section (c)(i)(G) below.
"Initial Dividend Period" has the meaning set forth in
section (c)(i)(G) below.
"Interest Equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given days
maturity means the quotient (rounded to the nearest
one-thousandth (.001) of one percent (1%)) of (A) such
discount rate divided by (B) the difference between (x) 1.00
and (y) a fraction the numerator of which shall be the product
of the discount rate times the number of days in the original
term of such commercial paper and the denominator of which
shall be 360; and the "interest equivalent" of a rate stated
on a basis other than a discount or interest basis for
commercial paper shall be determined by the Trust Company in
accordance with accepted financial practice after consultation
with the Corporation.
"Long-Term Dividend Period" means any Dividend Period
designated by the Designator pursuant to section (c)(i)(H)
below consisting of a number of days evenly divisible by 7
which is greater than 49 days (or such number of days as shall
result from the adjustment set forth in section (c)(i)(E)
hereof) but is not in excess of 182 days.
"Market Conditions" means, as of the time of any
designation by the Designator of a Long-Term Dividend Period,
conditions prevailing generally in world financial markets
including without limitation, to the extent relevant in the
judgment of the Designator:
(i) the yield on Comparable Securities
determined on the basis of (A) the periodic
implementation of auction or other remarketing
procedures at intervals of approximately the then
current length of a Short-Term Dividend Period and (B)
the periodic implementation of auction or other
remarketing procedures at intervals approximately equal
to, or the retirement of shares through a sinking or
other fund producing an average life approximately equal
to, the length of the Long-Term Dividend Period proposed
to be designated;
(ii) the Dividend Rate on the Auction Preferred
Stock for the Dividend Period during which such
designation is made, the length of such Dividend Period
and other results of the Auction next preceding such
designation;
<PAGE> 27
(iii) the financial condition and results of
operations of the Corporation and economic, financial
and other conditions in the electric and gas utility
industries;
(iv) current and projected yields on, and
current and projected market supply and demand for, (A)
preferred stock the holders of which are entitled to the
Dividends-Received Deduction (taking into consideration
permanent fixed rate stock, stock subject to a sinking
or other fund for the retirement thereof and stock
subject to periodic auction or other remarketing
procedures) and (B) short-term and long-term corporate
and United States government obligations;
(v) other financial market indicators including
without limitation (A) publicly available indices of
yields on preferred stock and obligations described in
clause (iv) above including any such indices regularly
published by any entity acting as the Designator or a
Broker-Dealer or a Commercial Paper Dealer and (B) rates
on certificates of deposit, commercial bank prime or
base rates, federal funds rates and interbank offered
rates for United States dollar deposits in foreign
financial centers; and
(vi) such other financial or statistical
information as, in the judgment of the Designator, may
be necessary, desirable or appropriate in determining
whether or not a Long-Term Dividend Period should be
designated in accordance with section (c)(i)(I) and, if
so, the duration thereof.
As used in this definition, "Comparable Securities" means
preferred stock (x) the holders of which are entitled to the
Dividends-Received Deduction and (y) which has the same
"prevailing rating" (as such term is defined in the definition
of the term "Rate Multiple") as the Auction Preferred Stock.
"Maximum Applicable Rate" means, as of any date, a per
annum rate equal to the product of the Applicable "AA"
Composite Commercial Paper Rate as of such date multiplied by
the Rate Multiple as of such date.
"Minimum Holding Period" has the meaning set forth in
section (c)(i)(D) 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.
"Nonpayment Event" has the meaning set forth in section
(c)(ii) below.
"Nonpayment Rate" has the meaning set forth in section
(c)(ii) below.
"Normal Dividend Payment Date" has the meaning set forth
in section (c)(i)(A) below.
"Notice of Long-Term Dividend Period" has the meaning
set forth in section c)(i)(H) below.
"Notice of Revocation" has the meaning set forth in
section (c)(i)(H) below.
<PAGE> 28
"Person" shall mean an individual, a corporation, a
partnership, an association, a joint stock company, a trust,
any unincorporated organization, or a government or political
subdivision thereof.
"Preferred Stock" means the shares of Preferred Stock
without par value, of the Corporation authorized by Article
THIRD of the Restated Articles.
"Rate Multiple " means, as of any date and with respect
to shares of Auction Preferred Stock, the percentage set forth
below opposite the prevailing rating of the Auction Preferred
Stock in effect at the close of business on the Business Day
immediately preceding such date:
<TABLE>
<CAPTION>
RATE
PREVAILING RATING MULTIPLE
----------------- --------
<S> <C>
AA/aa or Above 110%
A/a 125%
BBB/baa 150%
BB/ba 200%
Below BB/ba 250%
</TABLE>
For purposes of this definition, the "prevailing rating"
of Auction Preferred Stock shall be (i) AA/aa or Above, if the
Auction Preferred Stock has a rating of AA- or better by
Standard & Poor's 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, (ii) if not AA/aa or Above, then
A/a, if the Auction Preferred Stock has a rating of A- or
better by Standard & Poor's 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, (iii) 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 Standard & Poor's 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, (iv) if not AA/aa or
Above, A/a or BBB/baa, then BB/ba, if the Auction Preferred
Stock has a rating of BB- or better by Standard & Poor's and
ba3 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 as provided below, and (v) if not
AA/aa or Above, A/a, BBB/baa or BB/ba, then Below BB/ba. The
Corporation shall take all reasonable action necessary to
enable Standard & Poor's and Moody's to provide a rating for
the Auction Preferred Stock. If either Standard & Poor's or
Moody's shall not make such a rating available, or neither
Standard & Poor's nor Moody's shall 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 such organizations to act as Substitute
Rating Agency or Substitute Rating Agencies, as the case may
be.
"Rating Agencies" means Moody's and Standard & Poor's.
"Redemption Price" means, as of any date and with
respect to a share of Auction Preferred Stock, an amount equal
to the sum of (i) the amount payable upon such share in the
event of liquidation as set forth in section (e) below and
<PAGE> 29
(ii) an amount equivalent to all accumulated and unpaid
dividends on such share to but excluding such date.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as heretofore amended and
restated and as amended by the inclusion hereof.
"Securities Depository" means 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 Stock.
"Seven-Day Dividend Period" means a Dividend Period
arising under the circumstances set forth in section (c)(i)(J)
below.
"Short-Term Dividend Period" has the meaning set forth
in section (c)(i)(G) below.
"Standard & Poor's" 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.
"Stock Books" means the stock transfer books of the
Corporation relating to the Auction Preferred Stock maintained
by the Trust Company.
"Substitute Rating Agency" means a nationally recognized
statistical rating organization (as that term is used in the
rules and regulations of the Securities Exchange Commission
promulgated under the Securities Exchange Act of 1934) which
is designated by the Corporation as a "Substitute Rating
Agency" in an instrument delivered to the Trust Company, so
long as such agency is in the business of rating securities of
the type of the Auction Preferred Stock.
"Trust Company" means Bankers Trust Company, unless or
until another bank or trust company has been appointed as such
by the Board of Directors of the Corporation.
(c) (i) The rate of dividend per annum on said tenth series
of Preferred Stock is hereby fixed and determined at the Dividend Rate
from time to time in effect as provided in subsection (ii) of this
section (c).
(A) Dividends which accumulate during a Short-Term
Dividend Period shall be payable commencing on the Initial
Dividend Payment Date and thereafter, except as provided below
in section (c)(i)(B), on each seventh Thursday following the
preceding Dividend Payment Date. Dividends which accumulate
during a Long-Term Dividend Period shall be payable, except as
provided below in section (c)(i)(C), on the Business Day next
succeeding the last day of such Long-Term Dividend Period and,
if occurring prior to the last day of such Long-Term Dividend
Period, on the first Thursday of the fourth calendar month
after the commencement of such Long-Term Dividend Period.
Dividends which accumulate during a Seven-Day Dividend Period
occurring in connection with an Auction (whether or not held)
pursuant to section (c)(i)(J) shall be payable, except as
provided below in section (c)(i)(B), on the seventh day
following the Dividend Payment Date next succeeding the date
of such Auction (or, as the case may be, the date on which
such Auction was to have been held).
<PAGE> 30
Each day on which dividends would be payable as determined as
set forth in this subsection (A) but for the provisions set
forth below in this section (c)(i) is referred to herein as a
"Normal Dividend Payment Date."
(B) In the case of dividends payable on shares with a
Short-Term Dividend Period or a Seven-Day Dividend Period, if:
(1)(x) the Securities Depository shall then 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
(2)(x) the Securities Depository shall then 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.
(C) In the case of dividends payable on the shares with
a Long-Term Dividend Period, if:
(1)(x) the Securities Depository shall then 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
(2)(x) the Securities Depository shall then 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.
(D) Notwithstanding clauses (A), (B) and (C) above, if
the date on which the dividends on the Auction Preferred
Stock would be payable as determined as set forth in clauses
(A), (B) or (C) 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 (which minimum holding period, as
of November 1, 1990, is 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 held by non-affiliated corporations (which
deduction, as of November 1, 1990, is allowed by Section
243(a) of the Code)
<PAGE> 31
("Dividends Received Deduction"), then, unless the second such
Auction Date occurs on the Business Day next preceding the last day
of a Seven-Day Dividend Period, dividends on such shares shall be
payable, if either clause (B)(1) or (C)(1) above 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
either clause (B)(2) or (C)(2) above 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 above) being
at least equal to the then current Minimum Holding Period.
(E) Notwithstanding clauses (A), (B), (C) and (D) above, in
the event of a change in law altering the Minimum Holding Period, the
period of time between Dividend Payment Dates shall, without further
act, be automatically adjusted so that the number of days (such number
of days, without giving effect to the provisions in sections (c)(i)(B)
and (C), being hereinafter referred to as "Dividend Period Days") in
Dividend Periods commencing after the date of such change in law shall
equal the lowest multiple of seven which is not less than the then
current Minimum Holding Period; provided, however, that the maximum
number of Dividend Period Days shall in no event exceed 98; and
provided, further, that this clause (E) shall not apply to a Seven-Day
Dividend Period except to the extent that the Minimum Holding Period,
as altered by such change in law, 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 such a change in law, the
Corporation shall mail notice of such change by first-class mail,
postage prepaid, to the Trust Company and to each Holder at such
Holder's address as the same appears on the Stock Books of the
Corporation, to each Broker-Dealer and to the Designator and to the
Securities Depository.
(F) Each date on which dividends on the shares shall be
payable as determined as set forth above shall be referred to herein
as a "Dividend Payment Date". The period from (and including) a
Dividend Payment Date to (but excluding) the next succeeding Dividend
Payment Date with respect to 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 provisions, each succeeding
Dividend Payment Date shall be, subject to such provisions, the date
determined as set forth in clause (A) above as if all preceding
Dividend Payment Dates had occurred on their respective originally
scheduled Normal Dividend Payment Dates.
(G) The Initial Dividend Payment Date for the Auction
Preferred Stock shall be January 10, 1991 (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 provided in clauses (B), (C) and (D) 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 provided in
section (c)(i)(E) above, being referred to herein as a "Short-Term
Dividend Period"), unless, as provided in section (c)(i)(H) below, the
Designator designates any such subsequent Dividend Period as a
Long-Term Dividend Period and unless, as provided in section (c)(i)(J)
<PAGE> 32
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,
and include, a Dividend Payment Date and shall end (1) in the case of
a Short-Term Dividend Period or a Seven-Day Dividend Period, on the
day next preceding the next succeeding Dividend Payment Date and (2)
in the case of a Long-Term Dividend Period, on the last day of the
Long-Term Dividend Period specified by the Designator in the related
Notice of Long-Term Dividend Period.
(H) In the event that the Designator shall, in accordance with
the terms of section (c)(i)(I) below, designate any Dividend Period as
a Long-Term Dividend Period, it shall give notice of such designation,
stating the duration of such Long-Term Dividend Period, on or prior to
the tenth day, but not earlier than the twentieth day, prior to the
Auction Date next preceding the first day of such Dividend Period, by
telephonic and written notice (a "Notice of Long-Term Dividend
Period") to the Corporation, the Trust Company and the securities
Depository; provided, however, that after the initial Auction, such
Notice of Long-Term Dividend Period shall be null and void and the
designation of a Long-Term Dividend Period shall be of no force or
effect unless Sufficient Clearing Bids were made in the Auction next
preceding, and full cumulative dividends have been paid in full to the
Dividend Payment Date next preceding, the date of such Notice of
Long-Term Dividend. Any Notice of Long-Term Dividend Period maybe
revoked by the Designator 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 Corporation, the
Trust Company and the Securities Depository. If the Designator does
not give a Notice of Long-Term Dividend Period with respect to any
Dividend Period or gives a Notice of Revocation with respect thereto,
each succeeding Dividend Period (subject to the exception stated in
clause (J)(2) below) shall be a Short-Term Dividend Period. Unless a
Notice of Revocation shall be duly and timely given with respect to a
Notice of Long-Term Dividend Period or the provisions of clause (J)
below shall be applicable, the term specified in any such Notice of
Long-Term Dividend Period shall, except to the extent inconsistent
with any other express provision herein, be conclusive and binding on
the Corporation and the Holders of shares of Auction Preferred Stock
with respect to the next succeeding Dividend Period.
(I) The Designator shall designate a Dividend Period as a
Long-Term Dividend period of a specified duration if the Designator
shall have concluded, in its sole judgment based upon its evaluation
of Market Conditions, that the establishment of such Long-Term
Dividend Period would minimize the cost of capital to the Corporation
in respect of the Auction Preferred Stock for the duration of such
designated Long-Term Dividend Period.
(J) In the event that (1) Sufficient Clearing Bids are not
made in an Auction in respect of which a Notice of Long- Term Dividend
Period shall have been given by the Designator in accordance with
section (c)(i)(H) above, (x) the Dividend Period next succeeding such
Auction shall, notwithstanding such Notice of Long-Term Dividend
Period, be a period of 7 days commencing on the Dividend Payment Date
next succeeding such Auction Date (a "Seven-Day Dividend Period") and
(y) such Notice shall be null and void and the designation of a
Long-Term Dividend Period shall be of no force or effect, and the
Designator may not again give a Notice of Long-Term Dividend Period
until Sufficient Clearing Bids
<PAGE> 33
have been made in a subsequent Auction
with respect to a Short-Term Dividend Period, and (2) an Auction is
not held or an Auction Date for any reason other than the
discontinuation of Auctions due to the occurrence of a Nonpayment
Event or the prior call for redemption of all the shares of Auction
Preferred Stock then outstanding, 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 (J)(2) above, in which case the next succeeding Dividend Period
shall be a Seven-Day Dividend Period.
(K) Dividends on the Auction Preferred Stock, if any and to
the extent declared, shall be paid on each Dividend Payment Date in
funds available on such date. The Corporation shall on or 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 Holders.
(L) Dividends on the Auction Preferred Stock, if and to the
extent declared, shall be paid to the Holders thereof as such Holders'
names appear on the Stock Books on the record date relating to each
Dividend Payment Date, which shall be the opening of business on the
Business Day immediately preceding such Dividend Payment Date.
(ii) The Dividend Rate on the Auction Preferred Stock (A) for the
Initial Dividend Period shall be 7.50% per annum and (B) 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, (1) in
the event shares of Auction Preferred Stock are duly called for redemption, the
Dividend Rate on such shares until the redemption date shall be the Applicable
Rate in effect on the date the notice of redemption is given; (2) 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
section (c)(i)(J)(1) above, the greatest of (1) the Maximum Applicable Rate for
a Short-Term Dividend Period as of the Auction Date next preceding such
Seven-Day Dividend Period, (11) the Maximum Applicable Rate for 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 (111) 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
section (c)(i)(J)(2) above, the Maximum Applicable Rate for a Short-Term
Dividend Period as of the Auction Date next preceding such Seven- Day Dividend
Period; and (3) in the event and during the continuance of any Nonpayment
Event, (x) Auctions will be discontinued, (y) if the dividends in respect of
which such Nonpayment Event occurred were to be paid in respect of, or the
redemption in respect of which such Nonpayment Event occurred was to have
occurred on a redemption date during, 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 redemption date, as
the case maybe, in respect of which such Nonpayment Event occurred, and (z) the
Applicable Rate on the Auction Preferred Stock for each succeeding Short-Term
Dividend Period (including without limitation a Short-Term Dividend Period
which occurs pursuant to clause (y) above) shall be the Nonpayment Rate. With
respect to any Nonpayment Event, the "Nonpayment Rate" shall be the higher of
(I) 250% of the Applicable "AA" Composite Commercial Paper Rate as of the
Business Day next preceding the date on
<PAGE> 34
which such Nonpayment Event occurred
and (11)(x) if such Nonpayment Event first occurred by reason of nonpayment of
dividends, the Applicable Rate in effect for the Dividend Period in respect of
which such Nonpayment Event first occurred or (y) if such Nonpayment Event
first occurred by reason of nonpayment of the Redemption Price of shares called
for redemption, the Applicable Rate in effect on the date the notice of
redemption is given. For purposes of the foregoing, a "Nonpayment Event" shall
be deemed to occur upon the nonpayment by the Corporation to the Trust Company
(aa) on any Dividend Payment Date, of the full amount of any dividends
accumulated and unpaid on the Auction Preferred Stock to such Dividend Payment
Date or (bb) on any redemption date, of the full amount of the Redemption Price
to be paid on such redemption date for any share with respect to which a notice
of redemption has been given. Notwithstanding the foregoing, a Nonpayment
Event shall be deemed not to have occurred if on or prior to the first Business
Day next succeeding any such nonpayment, the Corporation shall have paid to the
Trust Company (1) in the case of a nonpayment of dividends, the full amount of
the dividends accumulated and unpaid on the Auction Preferred Stock to the
Dividend Payment Date in respect of which such nonpayment occurred or (II) in
the case of a nonpayment of the Redemption Price, the full amount of the
aggregate Redemption Price of all shares with respect to which the notice of
redemption was given. A Nonpayment Event shall continue until there shall
occur an Auction Date on which the full amount of all dividends payable on each
Dividend Payment Date prior to such Auction Date, and the fun amount of any
Redemption Price then or theretofore due, shall have been paid to the Trust
Company, and thereupon Auctions shall be resumed on such Auction Date 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 Dividend 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, as the case may be)
such share was outstanding and the denominator of which shall be 360 and
multiplying the amount so obtained by $100,000.
(d) The shares of said tenth series may, at the option of the
Corporation, be redeemed, as a whole or in part on the last Dividend Payment
Date in respect of any Dividend Period, at the Redemption Price payable on the
date of such redemption. In the event of redemption of less than all the
outstanding shares of Auction Preferred Stock, the shares to be redeemed shall
be selected by lot among the Holders of the shares of said tenth series then
outstanding in such manner as the appropriate Officers of the Corporation shall
determine to result in a random selection. The shares of said tenth series
shall not be redeemable at the option of the Corporation except as set forth in
this section (d).
(e) The amount payable upon the shares of said tenth series in the
event of dissolution, liquidation or winding up of the Corporation shall be
$100,000 per share plus an amount equivalent to the accumulated and unpaid
dividends thereon, if any, to the date of such dissolution, liquidation or
winding up.
(f) There shall be no sinking fund provisions for the redemption or
purchase of the shares of said tenth series.
(g) The shares of said tenth series shall not, by their terms, be
convertible.
<PAGE> 35
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 Stock" shall mean shares of Flexible
Auction Preferred Stock, Series J, of the Corporation subject to an
Auction on any Auction Date.
(vi) "Available Auction Preferred stock" 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 Stock, 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 Stock 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
<PAGE> 36
agrees, among other things, to offer to
purchase, purchase, offer to sell and/or sell shares of Auction
Preferred Stock as set forth in this Part II.
(xv) "Order" shall have the meaning specified in section
(b)(i) below.
(xvi) "Outstanding " shall, for purposes of this Part II,
mean, as of any date, shares of Auction Preferred Stock theretofore
issued by the Corporation except, without duplication, (A) any shares
of Auction Preferred Stock theretofore cancelled or delivered to the
Trust Company for cancellation, or redeemed by the Corporation or as
to which a notice of redemption shall have been given by the
Corporation, (B) any shares of Auction Preferred Stock 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 Stock 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 Stock (or, in the case of an Existing Holder, additional
shares of Auction Preferred Stock).
(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 Stock.
(xx) "Sell Excess" shall have the meaning specified in section
(c)(iv)(C)(1) below.
(xxi) "Sell Order" shall have the meaning specified in section
(b)(i) below.
(xxii) "Submission Deadline" shall mean 12:30 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 with the consent of the
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.
<PAGE> 37
(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 Stock 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 Stock that such Existing Holder
desires to continue to hold, provided that the
Applicable Rate for the next succeeding Dividend
Period shall not 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 Stock 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 Stock 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
Stock 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
Stock specified in such Bid or a lesser number of Outstanding shares
of Auction Preferred Stock 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
<PAGE> 38
(3) the number of Outstanding shares of Auction Preferred
Stock specified in such Bid or a lesser number of Outstanding shares
of Auction Preferred Stock 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
Stock specified in such Sell Order; or
(2) the number of Outstanding shares of Auction Preferred
Stock specified in such Sell Order or a lesser number of Outstanding
shares of Auction Preferred Stock 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:
(1) the number of Outstanding shares of Auction Preferred
Stock 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
Stock specified in such Bid or a lesser number of Outstanding Shares
of Auction, Preferred Stock to bet 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
Applicable "AA" Composite Commercial Paper Rate, 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 Stock 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 Stock subject to any Hold
Order placed by such Existing Holder;
(2) the number of shares, if any, of
Auction Preferred Stock 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 Stock subject to any Sell
Order placed by such Existing Holder; and
<PAGE> 39
(D) to the extent that such Bidder is a
Potential Holder, the rate and the number of shares
of Auction Preferred Stock 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 Stock 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
Stock held by such Existing Holder and not subject to Orders
submitted to the Trust Company.
(iv) If one or more Orders submitted by an Existing
Holder covering in the aggregate more than the number of
Outstanding shares of Auction Preferred Stock 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:
(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 Stock 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 Stock subject
to such Hold Orders exceeds the number of Outstanding
shares of Auction Preferred Stock held by such
Existing Holder, the number of shares of Auction
Preferred Stock 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
Stock held by such Existing Holder.
(B) (1) any Bid shall be considered valid up
to an including the excess (the "Bid Excess") of the
number of Outstanding shares of Auction Preferred
Stock held by such Existing Holder over the number of
shares of Auction Preferred Stock 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 Stock subject
to such Bids is greater than the Bid Excess, the
number of shares of Auction Preferred Stock subject
to such Bids shall be reduced pro rata so that such
Bids shall cover the number of shares of Auction
Preferred Stock 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) any Sell Order shall be considered
valid up to and including the excess (the "Sell
Excess") of the number of Outstanding shares of
<PAGE> 40
Auction Preferred Stock held by such Existing Holder
over the number of shares of Auction Preferred Stock
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 Stock subject to such Sell
Orders is greater than the Sell Excess, the number of
shares of Auction Preferred Stock subject to such
Sell Orders shall be reduced pro rata so that such
Sell Orders shall cover the number of shares of
Auction Preferred Stock 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
Stock 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 Stock over the number of
Outstanding shares of Auction Preferred stock that are the
subject of Submitted Hold Orders (such excess being
hereinafter referred to as the "Available Auction Preferred
Stock");
(B) from the Submitted Orders whether the number of
Outstanding shares of Auction Preferred Stock 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 Stock 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 Stock that are subject to Submitted
Sell Orders (if such excess or such equality exists
(other than because the number of shares of Auction
Preferred Stock in clauses (x) and (y) is each zero
because all of the Outstanding shares of Auction
Preferred Stock 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 the Trust Company accepted:
(1) each Submitted Bid from Existing Holders
specifying such lowest rate and all other Submitted
Bids from Existing Holders specifying rates lower
than such lowest rate, and
<PAGE> 41
(2) each Submitted Bid from Potential Holders
specifying such lowest rate and all other Submitted
Bids from Potential Holders specifying rates lower
than such lowest rate,
would result in such Existing Holders continuing to hold an
aggregate number of Outstanding shares of Auction Preferred
Stock that, when added to the number of Outstanding shares of
Auction Preferred Stock to be purchased by such Potential
Holders, would equal not less than the Available Auction
Preferred Stock.
(ii) Promptly after the Trust Company has made the
determinations pursuant to section (d)(i), the Trust Company shall
advise the Corporation of 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 Stock are the subject of Submitted Hold Orders),
then (a) if the Designator 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, that 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
Designator 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, that
such next succeeding Dividend Period will, notwithstanding
such Notice of Long-Term Dividend Period, be a Seven-Day
Dividend Period, and that 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 Stock are the subject of Submitted Hold Orders, that
the Applicable Rate for the next succeeding Dividend Period
shall be equal to 58% of the Applicable "AA" Composite
Commercial Paper 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 Stock that are the subject of Submitted Hold Orders
and, based on the determinations made pursuant to section (d)(i), the Submitted
Bids and the 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:
<PAGE> 42
(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 rejected, thus requiring each such
Existing Holder to sell the shares of Auction Preferred Stock
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 accepted, thus entitling each such Existing Holder to
continue to hold the shares of Auction Preferred Stock 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 accepted, thus entitling each such Existing Holder to
continue to hold the shares of Auction Preferred Stock that
are the subject of such Submitted Bid, unless the number of
Outstanding shares of Auction Preferred Stock subject to all
such Submitted Bids shall be greater than the number of shares
of Auction Preferred Stock ("remaining shares") equal to the
excess of the Available Auction Preferred Stock over the
number of shares of Auction Preferred Stock 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 rejected and each such Existing Holder shall be
required to sell shares of Auction Preferred Stock, but only
in an amount equal to the difference between (1) the number of
Outstanding shares of Auction Preferred Stock then held by
such Existing Holder subject to such Submitted Bid and (2) the
number of shares of Auction Preferred Stock 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 Stock 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 Stock subject to such
Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate; and
(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 Stock obtained by
multiplying the difference between the Available Auction
Preferred Stock and the number of shares of Auction Preferred
Stock 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 Stock subject to such Submitted Bid and
the denominator of which shall be the sum of the number of
Outstanding shares of Auction Preferred Stock 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 Stock
are subject to Submitted Hold Orders in an Auction relating to a
Short-Term Dividend Period), subject to the provisions of sections
(e)(iii) and (e)(iv), Submitted Orders shall be accepted or
<PAGE> 43
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 accepted thus entitling such Existing
Holder to continue to hold the shares of Auction Preferred
Stock 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
Stock 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 rejected 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 Stock then held by
such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of shares of Auction
Preferred Stock obtained by multiplying (x) the difference
between the Available Auction Preferred Stock and the
aggregate number of shares of Auction Preferred Stock 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 Stock
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 Stock
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 Stock 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 Stock 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 Stock.
(iv) If, as a result of the procedures described in section
(e)(i), any Potential Holder would be entitled or required to purchase
less than a whole share on any Auction Date, the Trust Company shall,
in such manner as, in its sole discretion, it shall determine,
allocate shares for purchase among Potential Holders so that only
whole shares are purchased on such Auction Date by any Potential
Holder, even if such allocation results in one or more of such
Potential Holders not purchasing shares on such Auction Date.
(v) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of Auction Preferred Stock 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 Stock held by such
Existing Holder immediately prior to such Auction.
<PAGE> 44
(vi) If all of the Outstanding shares of Auction Preferred
Stock are the subject of Submitted Hold Orders, all Submitted Bids
shall be rejected.
(vii) Based on the results of each Auction, the Trust Company
shall determine the aggregate number of shares of Auction Preferred
Stock to be purchased and the aggregate number of shares of Auction
Preferred Stock 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 Stock.
(f) Miscellaneous (i) 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, (ii) an Existing Holder (A)
may sell, transfer or otherwise dispose of shares of Auction Preferred Stock
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 singed 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 Stock 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 Stock for its own account, it must submit a Sell Order in the
next Auction with respect to such shares of Auction Preferred Stock.
(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.
(8) SERIES K. There is hereby established an eleventh series of the
Preferred Stock of the Corporation which shall have, in addition to the general
terms and characteristics of all of the authorized shares of Preferred Stock of
the Corporation, the following distinctive terms and characteristics:
(a) The eleventh series of Preferred Stock of the Corporation
shall consist of 350,000 shares and be designated as "$6.95 Preferred
Stock, Series K."
(b) Said eleventh series shall have a dividend rate of $6.95
per share per annum.
(c) The amount payable upon the shares of said eleventh series
in the event of dissolution, liquidation or winding up of the
Corporation shall be $100 per share plus an amount equivalent to
accumulated and unpaid dividends thereon, if any, to the date of such
dissolution, liquidation or winding up.
<PAGE> 45
(d) (i) As and for a sinking fund for the redemption of
shares of said eleventh series, on September 15, 2002 and on each
September 15 thereafter to and including September 15, 2006, the
Corporation shall redeem 17,500 shares of said eleventh series, and on
September 15, 2007 the Corporation shall redeem all of the shares of
said eleventh series then outstanding, in each case at the price of
$100 per share plus an amount equivalent to the accumulated and unpaid
dividends thereon, if any, to the date fixed for redemption. The
Corporation shall be entitled, at its option, on September 15, 2002
and on each September 15 thereafter to and including September 15,
2006, to redeem up to 17,500 shares of said eleventh series, in
addition to the shares otherwise required to be redeemed on such date,
at the price of $100.00 per share plus an amount equivalent to the
accumulated and unpaid dividends thereon, if any, to the date fixed
for redemption; provided, however, that the option of the Corporation
to so redeem up to 17,500 additional shares of the eleventh series on
each such sinking fund redemption date not be cumulative and shall not
reduce the sinking fund requirements of this subparagraph (d) in any
subsequent year. The Corporation shall be entitled, at its option, to
credit against any sinking fund redemption requirement any shares of
said eleventh series theretofore purchased or otherwise acquired by
the Corporation and not theretofore credited against any other sinking
fund redemption requirement. In the case of any redemption pursuant
to this subparagraph (d), the shares to be redeemed shall be selected
by lot among the holders of the shares of said eleventh series then
outstanding in such manner as the appropriate Officers of the
Corporation shall determine to result in a random selection. The
shares of said eleventh series shall not be redeemable at the option
of the Corporation except as set forth in this subparagraph (d).
(ii) The sinking fund requirement of the Corporation to redeem
shares of said eleventh series pursuant to this subparagraph (d) shall
be subject to any applicable restrictions of law and such redemption
shall be made only out of funds legally available therefor.
(iii) The sinking fund requirement of the Corporation to
redeem shares of said eleventh series pursuant to this subparagraph
(d) shall be cumulative. If at any time the Corporation shall not
have satisfied in full the cumulative sinking fund requirement to
redeem shares of said eleventh series, the Corporation shall not pay
or declare and set apart for payment any dividends upon, or make any
other distribution with respect to, or redeem, purchase or otherwise
acquire any shares of, the Common Stock or any other class of stock
ranking as to dividends and distributions of assets junior to the
Preferred Stock.
(iv) If at any time the Corporation shall not have satisfied
in full the cumulative sinking fund requirement to redeem shares of
said eleventh series pursuant to this subparagraph (d), and if at such
time the Corporation shall be required pursuant to a sinking or
similar fund to redeem or purchase shares of any other series of the
Preferred Stock or any other class of stock ranking as to dividends
and distributions of assets on a parity with the Preferred Stock, any
funds of the Corporation legally available for the purpose shall be
allocated among all such sinking or similar funds for series of the
Preferred Stock and such parity stock in proportion to the respective
amounts then required for the satisfaction thereof.
(e) The shares of said eleventh series shall not, by their terms,
be convertible.
FOURTH: The duration of the Corporation shall be perpetual.
FIFTH: The number of Directors of the Corporation shall be such
number, not to exceed eleven, as shall be specified from time to time by the
Board of Directors in the Bylaws; provided, however, that if the right to elect
a majority of the Board of Directors shall have accrued to the holders of the
<PAGE> 46
Preferred Stock as provided in paragraph (1) of subdivision (j) of Article
THIRD, then, during such period as such holders shall have such right, the
number of directors may exceed eleven. The Directors shall be divided into
three classes, as nearly equal in number as possible. Commencing with the
directors elected at the 1987 Annual meeting of Shareholders, the term of
office of the first class shall expire at the 1988 Annual Meeting of
Shareholders, the term of office of the second class shall expire at the 1989
Annual Meeting of Shareholders and the term of office of the third class shall
expire at the 1990 Annual Meeting of Shareholders. At each Annual meeting of
Shareholders thereafter, Directors elected to succeed those Directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Shareholders after their election.
Notwithstanding the foregoing, Directors elected by the holders of the
Preferred Stock in accordance with paragraph (1) of subdivision (j) of Article
THIRD shall be elected for a term which shall expire not later than the next
Annual Meeting of Shareholders. All Directors shall hold office until the
expiration of their respective terms of office and until their successors shall
have been elected and qualified.
Subject to the provisions of paragraph (1) of subdivision (j) of
Article THIRD, (a) any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board of Directors and any director so elected to
fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office and (b) any directorship to be filled by reason of an
increase in the number of Directors may be filled by the Board of Directors for
a term of office continuing only until the next election of Directors by the
shareholders.
No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Subject to the provisions of paragraph (1) of subdivision (j) of
Article THIRD and the provisions of the next preceding paragraph of this
Article FIFTH, any Director may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of at least a
majority of the voting power of all of the shares of capital stock of the
Corporation entitled generally to vote in the election of directors (such stock
being hereinafter in these Articles of Incorporation called "Voting Stock"),
voting together as a single class, at a meeting of shareholders called
expressly for that purpose; provided, however, that if less than the entire
Board of Directors is to be removed, no one of the directors may be removed if
the votes cast against the removal of such director would be sufficient to
elect such director if then cumulatively voted at an election of the class of
Directors of which such director is a part.
Notwithstanding anything contained in these Articles of Incorporation
to the contrary, the provisions of this Article FIFTH shall not be altered,
amended or repealed, and no provision inconsistent therewith shall be included
in these Articles of Incorporation or the Bylaws of the Corporation, without
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the shares of the Voting Stock, voting together as a
single class.
SIXTH: That the principal place of business of said Corporation shall
be Spokane, Spokane County, Washington.
SEVENTH: The corporate powers shall be exercised by the Board of
Directors, except as otherwise provided by statute or by these Articles of
Incorporation. The Board of Directors shall have power to authorize the
payment of compensation to the Directors for services to the Corporation,
including fees for attendance at meetings of the Board of Directors and other
meetings, and to determine the amount of such compensation and fees.
The Board of Directors shall have power to adopt, alter, amend and
repeal the Bylaws of the Corporation. To the extent provided under the laws of
the state of Washington, any Bylaws adopted by the Directors under the powers
conferred hereby may be repealed or changed by the shareholders.
<PAGE> 47
An Executive Committee may be appointed by and from the Board of
Directors in such manner and subject to such regulations as may be provided in
the Bylaws, which committee shall have and may exercise, when the Board is not
in session, all the powers of said Board which may be lawfully delegated
subject to such limitations as may be provided in the Bylaws or by resolutions
of the Board. The fact that the Executive Committee has acted shall be
conclusive evidence that the Board was not in session at the time of such
action. Additional committees may be appointed by and from the Board of
Directors in such manner and subject to such regulations as may be provided in
the Bylaws. Any action required or permitted by these Articles of
Incorporation to be taken by the Board of Directors of the Corporation may be
taken by a duly authorized committee of the Board of Directors, except as
otherwise required by law.
No Director shall have any personal liability to the Corporation or
its shareholders for monetary damages for his or her conduct as a Director of
the Corporation; provided, however, that nothing herein shall eliminate or
limit any liability which may not be so eliminated or limited under Washington
law, as from time to time in effect. No amendment, modification or repeal of
this paragraph shall eliminate or limit the protection afforded by this
paragraph with respect to any act or omission occurring prior to the effective
date thereof.
The Corporation shall, to the full extent permitted by applicable law,
as from time to time in effect, indemnify any person made a party to, or
otherwise involved in, any proceeding by reason of the fact that he or she is
or was a Director of the Corporation against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by him or her in
connection with such proceeding. The Corporation shall pay any reasonable
expenses incurred by a Director in connection with any such proceeding in
advance of the final determination thereof upon receipt from such Director of
such undertakings for repayment as may be required by applicable law and a
written affirmation by such director that he or she has met the standard of
conduct necessary for indemnification, but without any prior determination,
which would otherwise be required by Washington law, that such standard of
conduct has been met. The Corporation may enter into agreements with each
Director obligating the Corporation to make such indemnification and advances
of expenses as are contemplated herein. Notwithstanding the foregoing, the
Corporation shall not make any indemnification or advance which is prohibited
by applicable law. The rights to indemnity and advancement of expenses granted
herein shall continue as to any person who has ceased to be a Director and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
A Director of the Corporation shall not be disqualified by his office
from dealing or contracting with this Corporation either as a vendor, purchaser
or otherwise, nor shall any transaction or contract of the Corporation be void
or violable by reason of the fact that any Director, or any firm of which any
Director is a member, or any corporation of which any Director is a shareholder
or Director, is in any way interested in such transaction or contract, provided
that such transaction or contract is or shall be authorized, ratified, or
approved, either (1) by vote of a majority of a quorum of the Board of
Directors or of the Executive Committee without counting in such majority or
quorum any Directors so interested, or a member of a firm so interested, or a
stockholder or Director of a corporation so interested; or (2) by the written
consent or by vote at a stockholders' meeting of the holders of record of a
majority in number of all the outstanding shares of capital stock of the
Corporation entitled to vote; nor shall any Director be liable to account to
the Corporation for any profits realized by and from or through any such
transaction or contract of the Corporation authorized, ratified, or approved as
aforesaid by reason of the fact that he, or any firm of which he is a member,
or any corporation of which he is a shareholder or a Director, was interested
in such transaction or contract. Nothing herein contained shall create any
liability in the events above described or prevent the authorization,
ratification or approval of such transaction or contract in any other manner
approved by law.
Stockholders shall have no rights, except as conferred by statute or
by the Bylaws, to inspect any book, paper or account of the Corporation.
<PAGE> 48
Any property of the Corporation not essential to the conduct of its
corporate business may be sold, leased, exchanged, or otherwise disposed of, by
authority of its Board of Directors and the Corporation may sell, lease,
exchange or otherwise dispose of, all of its property and franchises, or any of
its property, franchises, corporate rights, or privileges, essential to the
conduct of its corporate business and purposes upon the consent of and for such
consideration and upon such terms as may be authorized by a majority of all of
the Directors and the holders of two-thirds of the issued and outstanding
shares of the Corporation having voting power (or, if the consent or vote of a
larger number or different proportion of the Directors and/or shares is
required by the laws of the state of Washington, notwithstanding the above
agreement of the stockholders of the Corporation to the contrary, then upon the
consent or vote of the larger number or different proportion of the Directors
and/or shares so required) expressed in writing, or by vote at a meeting of
holders of the shares of the Corporation having voting power duly held as
provided by law, or in the manner provided by the Bylaws of the Corporation, if
not inconsistent therewith.
Upon the affirmative vote of the holders of two-thirds of the issued
and outstanding shares of the Corporation having voting power given at a
meeting of the holders of the shares of the Corporation having voting power
duly called for that purpose or when authorized by the written consent of the
holders of two-thirds of the issued and outstanding shares of the Corporation
having voting power and upon the vote of a majority of the Board of Directors,
all of the property, franchises, rights and assets of the Corporation may be
sold, conveyed, assigned and transferred as an entirety to a new company to be
organized under the laws of the United States, the state of Washington or any
other state of the United States, for the purpose of so taking over all the
property, franchises, rights and assets of the Corporation, with the same or a
different authorized number of shares of stock and with the same preferences,
voting powers, restrictions and qualifications thereof as may then attach to
the classes of stock of the Corporation then outstanding so far as the same
shall be consistent with such laws of the United States or of Washington or of
such other state (provided that the whole or any part of such stock or of any
class thereof may be stock with or without a nominal or par value), the
consideration for such sale and conveyance to be the assumption by such new
company of all of the then outstanding liabilities of the Corporation and the
issuance and delivery by the new company of shares of stock (any or all thereof
either with or without nominal or par value) of such new company of the several
classes into which the stock of the Corporation is then divided equal in number
to the number of shares of stock of the Corporation of said several classes
then outstanding. In the event of such sale, each holder of stock of the
Corporation agrees so far as he may be permitted by the laws of Washington
forthwith to surrender for cancellation his certificate or certificates for
stock of the Corporation and to receive and accept in exchange therefor, as his
full and final distributive share of the proceeds of such sale and conveyance
and of the assets of the Corporation, a number of shares of the stock of the
new company of the class corresponding to the class of the shares surrendered
equal in number to the shares of stock of the Corporation so surrendered, and
in such event no holder of any of the stock of the Corporation shall have any
rights or interests in or against the Corporation, except the right upon
surrender of his certificate as aforesaid properly endorsed, to receive from
the Corporation certificates for such shares of said new company as herein
provided. Such new company may have all or any of the powers of the
Corporation and the certificate of incorporation and bylaws of such new company
may contain all or any of the provisions contained in the Articles of
Incorporation and Bylaws of the Corporation.
Upon the written assent, in person or by proxy, or pursuant to the
affirmative vote, in person or by proxy, of the holders of a majority in number
of the shares then outstanding and entitled to vote (or, if the assent or vote
of a larger number or different proportion of shares is required by the laws of
the state of Washington notwithstanding the above agreement of the stockholders
of the Corporation to the contrary, then upon the assent or vote of the larger
number or different proportion of the shares so required) (1) any or every
statute of the state of Washington hereafter enacted, whereby the rights,
powers or privileges of the Corporation are or may be increased, diminished, or
in any way affected, or whereby the rights, powers or privileges of the
stockholders of corporations organized under the law under which the
Corporation is organized are increased, diminished or in any way affected or
whereby effect is given to the action taken by any, part less than all of the
stockholders of any such corporation
<PAGE> 49
shall, notwithstanding any provision which
may at the time be contained in these Articles of Incorporation or any law,
apply to the Corporation, and shall be binding not only upon the Corporation
but upon every stockholder thereof, to the same extent as if such statute had
been in force at the date of the making and filing of these Articles of
Incorporation and/ or (2) amendments to said Articles authorized at the time of
the making of such amendments by the laws of the state of Washington may be
made; provided, however, that (a) the provisions of Article THIRD hereof
limiting the preemptive rights of stockholders, requiring cumulative voting in
the election of Directors and regarding entry in the capital stock account of
consideration received upon the sale of shares of capital stock without nominal
or par value and all of the provisions of Article FIFTH hereof shall not be
altered, amended, repealed, waived or changed in any way, unless the holders of
record of at least two-thirds of the number of shares entitled to vote then
outstanding shall consent thereto in writing or affirmatively vote therefor in
person or by proxy at a meeting of stockholders at which such change is duly
considered.
Special meetings of the shareholders may be called by the President,
the Chairman of the Board of Directors, a majority of the Board of Directors,
any Executive Committee of the Board of Directors, and shall be called by the
President at the request of the holders of at least two-thirds (2/3) of the
voting power of all of the shares of the Voting Stock, voting together as a
single class. Only those matters that are specified in the call of or request
for a special meeting may be considered or voted upon at such meeting.
Notwithstanding anything contained in these Articles of Incorporation
to the contrary, the paragraph in this Article SEVENTH relating to the
adoption, alteration, amendment, change and repeal of the Bylaws of the
Corporation, the paragraph in this Article SEVENTH relating to the calling and
conduct of special meetings of the shareholders and this paragraph, and the
provisions of the Bylaws of the Corporation relating to procedures for the
nomination of Directors, shall not be altered. amended or repealed, and no
provision inconsistent therewith shall be included in these Articles of
Incorporation or the Bylaws of the Corporation, without the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all the
shares of the Voting Stock, voting together as a single class.
EIGHTH:
(a) In addition to any affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly
provided in subdivision (b) of this Article EIGHTH:
(1) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or
(b) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such
merger or consolidation would be, an Affiliate (as
hereinafter defined) of an Interested Shareholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series
of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested
Shareholder of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value of
$10,000,000 or more; or
(3) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange
for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market
Value of $10,000,000 or more; or
<PAGE> 50
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Shareholder
or any Affiliate of any Interested Shareholder; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Shareholder or any
Affiliate of any Interested Shareholder;
shall require the affirmative vote of the holders of at least
80% of the voting power of all of the shares of the Voting
Stock, voting together as a single class. Such affirmative
vote shall be required notwithstanding the fact that no vote
maybe required or that the vote of a lower percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise. The term "Business
Combination" as used in this Article EIGHTH shall mean any
transaction which is referred to in any one or more of
paragraphs (1) through (5) of this subdivision (a).
(b) The provisions of subdivision (a) of this Article EIGHTH shall
not be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative
vote, if any, as is required by law and any other provision of
these Articles of Incorporation, if all of the conditions
specified in either paragraph (1) or paragraph (2) below are
met:
(1) The Business Combination shall have been approved by
a majority of the Continuing Directors (as
hereinafter defined); or
(2) All of the following conditions shall have been met:
(A) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of
the date of the consummation of the Business
Combination of consideration other than cash
to be received per share by holders of Common
Stock in such Business Combination shall be
at least equal to the highest of the
following:
(i) (if applicable) the highest per
share price (including any brokerage
commissions, transfer taxes and
soliciting dealers' fees) paid by
the Interested Shareholder for any
shares of Common Stock acquired by
it (x) within the two-year period
immediately prior to the date of the
first public announcement of the
proposal of the Business Combination
(the "Announcement Date") or (y) in
the transaction in which it became
an Interested Shareholder, whichever
is higher;
(ii) the Fair Market Value per share of
Common Stock on the Announcement
Date or on the date on which the
Interested Shareholder became an
Interested Shareholder (the
"Determination Date"), whichever is
higher; and
(iii) (if applicable) the price per share
equal to the Fair Market Value per
share of Common Stock determined
pursuant to clause (A)(ii) above,
multiplied by the ratio of (x) the
highest per share price (including
any brokerage commissions, transfer
taxes and soliciting dealers' fees)
paid by the Interested Shareholder
for any shares of Common Stock
acquired by it within the two-year
period immediately prior to the
Announcement Date to (y) the Fair
Market Value per share of Common
<PAGE> 51
Stock on the first day in such
two-year period upon which the
Interested Shareholder acquired any
shares of Common Stock.
(B) The aggregate amount of the cash and the Fair
Market Value as of the date of the
consummation of the Business Combination of
consideration other than cash to be received
per share by holders of shares of each class
of outstanding Voting Stock (other than
Common Stock and Institutional Voting Stock
[as hereinafter defined]) shall be at least
equal to the highest of the following (it
being intended that the requirements of this
subparagraph (B) shall be required to be met
with respect to every class of outstanding
Voting Stock (other than Institutional Voting
Stock), whether or not the Interested
Shareholder has previously acquired any
shares of a particular class of Voting
Stock):
(i) (if applicable) the highest per
share price (including any brokerage
commissions, transfer taxes and
soliciting dealers' fees) paid by
the Interested Shareholder for any
shares of such class of Voting Stock
acquired by it (x) within the
two-year period immediately prior to
the Announcement Date or (y) in the
transaction in which it became an
Interested Shareholder, whichever is
higher;
(ii) (if applicable) the highest
preferential amount per share to
which the holders of shares of such
class of Voting Stock are entitled
in the event of any voluntary or
involuntary dissolution, liquidation
or winding up of the Corporation;
(iii) the Fair Market Value per share of
such class of Voting Stock on the
Announcement Date or on the
Determination Date, whichever is
higher; and
(iv) (if applicable) the price per share
equal to the Fair Market Value per
share of such class of Voting Stock
determined pursuant to clause
(B)(iii) above, multiplied by the
ratio of (x) the highest per share
price (including any brokerage
commissions, transfer taxes and
soliciting dealers' fees) paid by
the Interested Shareholder for any
shares of such class of Voting Stock
acquired by it within the two-year
period immediately prior to the
Announcement Date to (y) the Fair
Market Value per share of such class
of Voting Stock on the first day in
such two-year period upon which the
Interested Shareholder acquired any
shares of such class of Voting
Stock.
(C) The consideration to be received by holders
of a particular class of outstanding Voting
Stock (including Common Stock) shall be in
cash or in the same form as the Interested
Shareholder has previously paid for shares of
such class of Voting Stock. If the
Interested Shareholder has paid for shares of
any class of Voting Stock with varying forms
of consideration, the form of consideration
for such class of Voting Stock shall be
either cash or the form used to acquire the
largest number of shares of such class of
Voting Stock previously acquired by it.
(D) After such Interested Shareholder has become
an Interested Shareholder and prior to the
consummation of such Business Combination:
(i) except as approved by a majority of
the Continuing Directors, there
shall have been no failure to
declare and pay at the regular date
therefor full dividends (whether or
not cumulative) on the outstanding
shares of stock of all classes
ranking prior as to dividends to the
Common Stock;
(ii) there shall have been (x) no
reduction in the annual rate of
dividends paid on the Common Stock
(except as necessary to reflect any
subdivision of the Common Stock),
<PAGE> 52
except as approved by a majority of
the Continuing Directors, and (y) an
increase in such annual rate of
dividends as necessary to reflect
any reclassification (including any
reverse stock split),
recapitalization, reorganization or
any similar transaction which has
the effect of reducing the number of
outstanding shares of the Common
Stock, unless the failure to so
increase such annual rate is
approved by a majority of the
Continuing Directors; and
(iii) such Interested Shareholder shall
not have become the beneficial owner
of any additional shares of Voting
Stock except as part of the
transaction which results in such
Interested Shareholder becoming an
Interested Shareholder.
(E) After such Interested Shareholder has become
an Interested Shareholder, such Interested
Shareholder shall not have received the
benefit, directly or indirectly (except
proportionately as a shareholder), of any
loans, advances, guarantees, pledges or other
financial assistance or any tax credits or
other tax advantages provided by the
Corporation, whether in anticipation of or in
connection with such Business Combination or
otherwise.
(F) A proxy or information statement describing
the proposed Business Combination and
complying with the requirements of the
Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (or
any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to
shareholders of the Corporation at least 30
days prior to the consummation of such
Business Combination (whether or not such
proxy or information statement is required to
be mailed pursuant to such Act or subsequent
provisions).
(c) For the purposes of this Article EIGHTH:
The terms "Affiliate" and "Associate" have the
respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on January 1, 1987.
A person shall be deemed to be a 'beneficial owner"
of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or
indirectly, or;
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time), pursuant to any agreement, arrangement
or understanding or upon the exercise of
conversion rights, exchange rights, warrants
or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement
or understanding; or
(iii) which is beneficially owned, directly or
indirectly, by any other person with which
such person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any shares of
Voting Stock.
For the purposes of determining whether a person is an Interested
Shareholder the number of shares of Voting Stock deemed to be outstanding shall
include all shares of which such person is the beneficial owner in accordance
with the foregoing definition but shall not include any other shares of Voting
Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
<PAGE> 53
The term "Continuing Director" means any member of the Board of
Directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the time that
the Interested Shareholder became an Interested Shareholder, and any successor
of a Continuing Director who is unaffiliated with the Interested Shareholder
and is recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board of Directors.
The term "Fair Market Value" means (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which such stock is listed,
or, if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, the fair market value on the date in question of
a share of such stock as determined by the Continuing Directors in good faith;
and (ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by a majority of
the Continuing Directors in good faith.
The term "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more than
10% of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of 10% or more
of the voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two- year
period immediately prior to the date in question beneficially
owned by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933, as amended.
The term "Institutional Voting Stock" shall mean any class of Voting
Stock which was issued to and continues to be held solely by one or more
insurance companies, pension funds, commercial banks, savings banks or similar
financial institutions or institutional investors.
The term "person" shall mean any individual, firm, corporation or
other entity.
The term "Subsidiary" shall mean any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by the
corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth above, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
The term "Voting Stock" has the meaning ascribed to such term in
Article FIFTH.
In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
paragraphs 2(A) and 2(B) of subdivision
<PAGE> 54
(b) of this Article EIGHTH shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting Stock retained by the
holders of such shares.
(d) The Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry, (A) whether a
person is an Interested Shareholder, (B) the number of shares of
Voting Stock beneficially owned by any person, (C) whether a person is
an Affiliate or Associate of another person, (D) whether a class of
Voting Stock is Institutional Voting Stock, and (E) whether the assets
which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $10,000,000 or
more.
Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
Notwithstanding anything contained in these Articles of
Incorporation to the contrary, the provisions of this Article EIGHTH
shall not be altered, amended or repealed, and no provision
inconsistent therewith shall be included in these Articles of
Incorporation or the Bylaws of the Corporation, without the
affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all of the shares of the Voting Stock, voting
together as a single class.
<PAGE> 55
IN WITNESS WHEREOF, we have set our hands and seals under these presents, this
10th day of December, 1988.
JAMES R. HARVEY
-------------------------------
James R. Harvey, President and
Chief Operating Officer
ATTEST:
TERRY L. SYMS
-------------------------------
(SEAL) Terry L. Syms, Corporate
Secretary
STATE OF WASHINGTON
County of Spokane ss.
JAMES R. HARVEY and TERRY L. SYMS, being first duly sworn on oath
depose and say:
(a) That they have been authorized to execute the within Restated
Articles by Resolution of the Board of Directors adopted on the 4th
day of August, 1988.
(b) That the Restated Articles correctly set forth the text of the
Articles of Incorporation as amended and supplemented to the date of
the Restated Articles, and
(c) These Restated Articles shall set forth all of the operative
provisions of the Articles of Incorporation as theretofore amended
together. The Restated Articles of Incorporation correctly set forth
without change the provisions of the Articles of Incorporation as
theretofore amended and that the Restated Articles of Incorporation
supersede the original Articles of Incorporation and all amendments
thereto.
JAMES R. HARVEY
-----------------------
James R. Harvey
TERRY L. SYMS
----------------------
Terry L. Syms
SUBSCRIBED AND SWORN to before me this 10th day of December, 1988.
JULIE V. SHANHOLTZER
-------------------------
(SEAL) Notary Public in and for
the State of Washington,
County of Spokane
<PAGE> 1
Exhibit 4(b)
AMENDMENT NO. 1
to
RIGHTS AGREEMENT
AMENDMENT NO. 1, dated as of May 10, 1994, to the Rights
Agreement, dated as of February 16, 1990 (the "Rights Agreement"), between The
Washington Water Power Company, a Washington corporation (the "Company"), and
The Bank of New York, as Rights Agent (the "Rights Agent").
WHEREAS, all capitalized terms used herein, unless otherwise
defined, shall have the respective meanings ascribed to them in the Rights
Agreement; and
WHEREAS, on November 9, 1993 (the "Effective Date"), the
Company issued and distributed one Common Share for each Common Share
outstanding and held of record on October 23, 1993, under a two-for-one stock
split effected in the form of a 100% stock dividend payable in Common Shares
(the "Stock Split"); and
WHEREAS, pursuant to Section 11(m) and Section 23(b) of the
Rights Agreement and without action on the part of the Company, on the
Effective Date
(i) the Exercise Price per Right was proportionately
reduced from $80 to $40;
(ii) the number of Rights outstanding was proportionately
increased so that each Common Share outstanding on
and after the Effective Date had issued with respect
to it one Right (which represented the number of
Rights which each Common Share had issued with
respect to it immediately prior to the Effective
Date); and
(iii) the Redemption Price was proportionately reduced from
$.01 per Right to $.005 per Right,
all for the purpose of keeping the number of Rights, the Exercise Price of each
Right, and the Redemption Price of each Right on and after the Effective Date
proportionate to the number of Rights, the Exercise Price of each Right, and
the Redemption Price of each Right, respectively, immediately prior to the
Effective Date; and
WHEREAS, the Rights Agreement contains no provision which
expressly provides for the adjustment, as a result of the Stock Split, of the
portion of a Preferred Share to be purchased upon the exercise of a Right so
that the economic value of a Right on and after the Effective Date is
proportionate to the economic value of a Right immediately prior to the
Effective Date, as is contemplated by the Rights Agreement with respect to the
Exercise Price per Right, the number of Rights and the Redemption Price per
Right, as aforesaid; and
<PAGE> 2
WHEREAS, the expiration date specified in the Rights Agreement
differs from the expiration date specified in the form of Right Certificate
attached as a exhibit to the Rights Agreement and in the Company's reports and
registration statements filed under the federal securities laws, including the
Company's Current Report on Form 8-K dated February 16, 1990 disclosing the
terms of the Rights Agreement and the Company's Registration Statement on Form
8-A for the registration of the Rights, and the date so specified in the Rights
Certificate accurately reflects the intention of the Board of Directors in
approving the Rights Agreement;
NOW, THEREFORE, pursuant to Section 26 of the Rights
Agreement, in order to cure any ambiguity in the Rights Agreement which may be
occasioned by stock dividends, stock splits and similar transactions, and in
order to cure any ambiguity in the Rights Agreement relating to its expiration
date, and in order to make provision in regard to certain matters or questions
arising under the Rights Agreement which the Company deems necessary and
desirable and which are consistent with the objectives of the Board of
Directors of the Company in authorizing the Rights Agreement, the Company and
the Rights Agent hereby amend the Rights Agreement as follows:
1. Amendment of Section 11(m). Section 11(m) of the Rights
Agreement is hereby amended to read in its entirety as follows:
"(m) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company
shall (i) declare or pay any dividend on its Common Shares
payable in Common Shares or (ii) effect a subdivision,
combination or consolidation of its Common Shares (by
reclassification or otherwise than by payment of dividends in
its Common Shares) into a greater or lesser number of Common
Shares of the Company, then in any such case (i) the Exercise
Price in effect after such event upon proper exercise of each
Right shall be determined by multiplying the Exercise Price in
effect immediately prior to such event by a fraction, the
numerator of which is the number of such Common Shares
outstanding immediately before such event and the denominator
of which is the number of such Common Shares outstanding
immediately after such event, (ii) each Common Share of the
Company outstanding immediately after such event shall have
issued with respect to it that number of Rights which each
such Common Share outstanding immediately prior to such event
had issued with respect to it, and (iii) the number of
hundredths of a Preferred Share issuable upon the exercise of
a Right shall be determined by multiplying the number of
hundredths of a Preferred Share issuable upon the exercise of
a Right immediately prior to such event by a fraction, the
numerator of which is the number of Common Shares outstanding
immediately prior to such event and
<PAGE> 3
the denominator of which is the number of such Common Shares
outstanding immediately after such event. The adjustments
provided for in this Section 11(m) shall be made successively
whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected."
2. Applicability to Stock Split. Effective as of the
Effective Date, the portion of a Preferred Share issuable upon the exercise of
a Right shall be one two-hundredth (1/200), until further adjusted in
accordance with the terms of the Rights Agreement.
3. Amendment of Section 7(a)(i) - definition of "Final
Expiration Date". Section 7(a)(i) of the Rights Agreement is hereby amended by
deleting therefrom the date "June 6, 1999" and substituting in lieu therefor
the date "February 16, 1990".
4. Rights Agreement Remains in Full Force and Effect. Except
as provided in this Amendment No. 1 to Rights Agreement, the Rights Agreement
remains unmodified and in full force and effect.
5. Certificate of Adjustment. This Amendment No. 1 to
Rights Agreement shall satisfy the requirement for a certificate of adjustment
required by Section 12(a) of the Rights Agreement, and delivery of this
Amendment No. 1 to the Rights Agent shall satisfy the requirement for delivery
to the Rights Agent of such certificate of adjustment pursuant to Section 12(b)
of the Rights Agreement.
6. Counterparts. This Amendment may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
<PAGE> 4
IN WITNESS WHEREOF, the Company and the Rights Agent have
caused this Amendment No. 1 to be duly executed as of the day and year first
above written.
THE WASHINGTON WATER POWER COMPANY
By:
--------------------------------
Name: Ronald R. Peterson
Title: Treasurer
THE BANK OF NEW YORK
By: \s\ Robert Dietz
--------------------------------
Name: Robert Dietz
Title: Assistant Vice President
<PAGE> 5
IN WITNESS WHEREOF, the Company and the Rights Agent have
caused this Amendment No. 1 to be duly executed as of the day and year first
above written.
THE WASHINGTON WATER POWER COMPANY
By: \s\ Ronald R. Peterson
--------------------------------
Name: Ronald R. Peterson
Title: Treasurer
THE BANK OF NEW YORK
By:
--------------------------------
Name: Robert Dietz
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 12
THE WASHINGTON WATER POWER COMPANY
<TABLE>
<CAPTION>
Computation of Ratio of Earnings to Fixed Charges and Preferred Dividend Requirements (1)
Consolidated
(Thousands of Dollars)
12 Mos. Ended Years Ended December 31
March 31 -----------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt $ 46,562 $ 47,129 $ 51,727 $ 52,801 $ 56,202
Amortization of debt expense
and premium - net 3,327 3,004 1,814 1,751 1,558
Interest portion of rentals 957 924 1,105 1,018 1,012
-------- -------- -------- -------- --------
Total fixed charges $ 50,846 $ 51,057 $ 54,646 $ 55,570 $ 58,772
======== ======== ======== ======== ========
Earnings, as defined:
Net income from continuing ops. $ 73,436 $ 82,776 $ 72,267 $ 70,631 $ 72,147
Add (deduct):
Income tax expense 37,702 42,503 41,330 38,086 33,150
Total fixed charges above 50,846 51,057 54,646 55,570 58,772
-------- -------- -------- -------- --------
Total earnings $161,984 $176,336 $168,243 $164,287 $164,069
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 3.19 3.45 3.08 2.96 2.79
Fixed charges and preferred
dividend requirements:
Fixed charges above $ 50,846 $ 51,057 $ 54,646 $ 55,570 $ 58,772
Preferred dividend requirements (2) 12,570 12,615 10,716 14,302 12,287
-------- -------- -------- -------- --------
Total $ 63,416 $ 63,672 $ 65,362 $ 69,872 $ 71,059
======== ======== ======== ======== ========
Ratio of earnings to fixed charges
and preferred dividend requirements 2.55 2.77 2.57 2.35 2.31
</TABLE>
(1) Calculations have been restated to reflect the results from continuing
operations (ie. excluding discontinued coal mining operations).
(2) Preferred dividend requirements have been grossed up to their pre-tax
level.
