Rule 424(b)(2)
Registration No. 33-70466
PRICING SUPPLEMENT NO. 16, DATED June 20, 1995
(To Prospectus dated November 8, 1993 and Prospectus
Supplement dated November 9, 1993)
ALABAMA GAS CORPORATION
Medium-Term Notes, Series A
CUSIP# 01028QAN8
FIXED RATE NOTE
Trade Date: June 20, 1995
Principal Amount: $1,000,000.00
Original Issue Date: 6/23/95
Issue Price: 100% (Par)
Commission Rate: 0.75%
Net Proceeds: $992,500.00
Interest Rate Per Annum: 7.55%
Stated Maturity Date: 6/23/15
Interest Payment Dates: May 1 and November 1
Presenting Agent: Salomon Brothers, Inc. , as agent
Additional Terms: Callable after 10 years with
payment of a premium of 3.775%
declining pro-rata annually to 16
years when no premium is
required.
CERTAIN TAX CONSIDERATIONS: The attached discussion
under the heading "Certain Tax Considerations" supersedes, in
all respects, the discussion set forth under the heading "Certain
Tax Considerations" on page S-11 of the Prospectus Supplement
of Alabama Gas Corporation dated November 9, 1993.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Prospectus Supplement dated
November 9, 1993.
<PAGE>
CERTAIN TAX CONSIDERATIONS
The following summary of certain United States Federal
income tax consequences of the purchase, ownership and
disposition of the Notes is based upon laws, regulations, rulings
and decisions now in effect, all of which are subject to change
(including changes in effective dates) and possible differing
interpretations. This discussion deals only with Notes held as
capital assets and does not purport to deal with persons in
special tax situations such as financial institutions, insurance
companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge
against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United
States dollar. This discussion also does not deal with holders
other than original purchasers (except where otherwise
specifically noted). Persons considering the purchase of the
Notes should consult their own tax advisors concerning the
application of United States Federal income tax laws to their
particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under
the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial
owner of a Note that is for United States Federal income tax
purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or the entity created or organized in or
under the laws of the United States or of any political subdivision
thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Note
is effectively connected with the conduct of a United States trade
or business. As used herein, the term "non-U.S. Holder" means
a holder of a Note that is not a U.S. Holder.
U. S. Holders
Payments of Interest
Payments of interest on a Note generally will be taxable
to a U.S. Holder as ordinary income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting).
Original Issue Discount
The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders
of the purchase, ownership and disposition of Notes issued with
<PAGE>
original issue discount ("OID"). The following summary is based
on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and on certain final and temporary
regulations (the "OID Regulations") issued by the U.S.
Department of Treasury (the "Treasury") on January 27, 1994.
The OID Regulations generally apply to debt instruments issued
on or after April 4, 1994. On December 15, 1994, certain
proposed regulations were issued by the Treasury (the "Proposed
OID Regulations") that interpret the original issue discount
provisions of the Code primarily as they apply to instruments that
provide for one or more contingent payments. However, the
Proposed OID Regulations will not apply to instruments issued
prior to the expiration of the 60-day period immediately following
the date on which such Regulations are published in the Federal
Register, which publication has not yet occurred. As a result, the
effect, if any, of the Proposed OID Regulations on a series of
Notes will be discussed in the applicable Pricing Supplement, if
such regulations have been finalized by the time such Pricing
Supplement is issued.
For United States Federal income tax purposes, a Note
will have OID to the extent that the Note's stated redemption price
at maturity exceeds its issue price, if such excess equals or
exceeds a de minimis amount (generally 1/4 of 1% of the Note's
stated redemption price at maturity multiplied by the number of
complete years from its issue date to maturity). The issue price
of each Note in an issuance of Notes is the initial offering price to
the public at which a substantial amount of such Notes has been
sold (excluding sales to bond houses, brokers, and similar
persons and sales to organizations acting in the capacity of
underwriters, placement agents, or wholesalers). The "stated
redemption price at maturity" of a Note is the sum of all payments
due on the Note other than qualified stated interest payments.
"Qualified stated interest" is stated interest that is unconditionally
payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate that appropriately
takes into account for the length of the interval between
payments. In addition, under the OID Regulations, if a Note bears
interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the
resulting foregone interest on such Note or any "true" discount on
such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds the specified de minimis
amount, then the stated interest on the Note would be treated as
OID rather than qualified stated interest.
Payments of qualified stated interest on a Note are
taxable to a U.S. Holder as ordinary income at the time such<PAGE>
payments are
accrued or are received (in accordance with the
U.S. Holder's regular method of tax accounting). A U.S. Holder
of a Note issued with OID and a maturity of more than one year
must include OID in income as ordinary income over the term of
the Note, regardless of such U.S. Holder's regular method of tax
accounting. In general, a U.S. Holder must include in gross
income the sum of the daily portions of OID that accrue on the
Note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder held the Note.
Accordingly, a U.S. Holder of a Note issued with OID must include
in income amounts attributable to OID before receiving cash
attributable to that income.
To determine the "daily portion" of OID on any Note with
OID, OID accruing during an accrual period (generally, the period
between dates on which interest is paid) is divided by the number
of days in the accrual period. An "accrual period" may be of any
length and may vary in length over the term of the Note, provided
that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the
final day of an accrual period or on the first day of an accrual
period. The amount of OID accruing during an accrual period is
generally determined by using the constant yield to maturity
method, and is equal to the excess of (i) the product of the Note's
adjusted issue price at the beginning of the accrual period and its
yield to maturity (determined on the basis of compounding at the
close of each accrual period and appropriately adjusted to take
into account the length of the particular accrual period) over (ii)
the amount of any qualified stated interest payments allocable to
the accrual period. The Note's "adjusted issue price" at the
beginning of any accrual period generally equals the sum of (i) the
issue price of the Note plus (ii) the aggregate amount of OID
includible in the gross income of the holder of the Note in all prior
accrual periods, reduced by the amount of any payments on the
Note in prior accrual periods other than payments of qualified
stated interest. Under these rules, U.S. Holders generally will
have to include in income increasingly greater amounts of OID in
successive accrual periods.
A. U.S. Holder of a Note with OID that purchases the Note
for an amount that is greater than the Note's revised issue price
as of the purchase date but less than the stated redemption price
at maturity, will be considered to have purchased the Note at an
"acquisition premium." The "revised issue price" of a Note is the
sum of (i) the issue price of Note, and (ii) the aggregate amount
of OID previously includible in the gross income of all holders of
the Note (without regard to the reduction of such OID by any
acquisition premium). Under the acquisition premium rules, the
amount of OID which such U.S. Holder must include in its gross<PAGE>
income with
respect to such Note for any taxable year (or portion
thereof in which the U.S. Holder holds the Note) will be reduced
(but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes are either
treated as variable rate debt instruments or contingent payment
debt obligations and are subject to special rules. A Note is a
"variable rate debt instrument" if (a) its issue price does not
exceed the total noncontingent principal payments due under the
Note by more than a specified de minimis amount and (b) it
provides for stated interest, paid or compounded at least
annually, at current values of (i) one or more qualified floating
rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a
single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any floating rate that can
reasonably be expected to measure contemporaneous variations
in the cost of newly borrowed funds in the currency in which the
Note is denominated (for example, LIBOR). Although a multiple
of a qualified floating rate will generally not constitute a qualified
floating rate, a variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than zero but not
more than 1.35 will constitute a qualified floating rate. A variable
rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than zero but not more than 1.35,
increased or decreased by a fixed rate, will also constitute a
qualified floating rate. In addition, under the OID Regulations, two
or more qualified floating rates that can reasonably be expected
to have approximately the same values throughout the term of the
note together will constitute a single qualified floating rate. Two
or more qualified floating rates will be conclusively presumed to
meet the requirements of the preceding sentence if the value of
all rates on the issue date are within 25 basis points of each
other.
The OID Regulations provide that an otherwise qualified
floating rate that has restrictions will not be a qualified floating
rate unless the restrictions fall into one of the following
categories: (a) a cap, a floor or a periodic adjustment restriction
(a "governor") that is fixed throughout the term of the note, (b) a
cap or similar restriction that is not reasonably expected as of the
issue date significantly to decrease the expected yield on the note
determined without the cap, (c) a floor or similar restriction that is
not reasonably expected as of the issue date to significantly
increase the expected yield on the note determined without the
floor, or (d) a governor or similar restriction that is not reasonably
expected as of the issue date significantly to increase or decrease
<PAGE>
the expected yield on the note without the governor. Floating
Rate Notes subject to caps, floors, or governors that do not meet
the above requirements could be treated as debt instruments
providing for contingent payments.
An "objective rate" is a rate other than a qualified floating
rate, that is determined by a single fixed formula and is based on
(i) one or more qualified floating rates, (ii) one or more rates each
of which would be a qualified floating rate for a debt instrument
denominated in a currency other than the currency in which the
Note is denominated, (iii) the yield or the changes in the price of
one or more items of actively traded personal property (other than
stock or debt of the issuer or a related party), (iv) a combination
of these objective rates, or (v) other rates designated from time
to time by the Internal Revenue Service (the "IRS"). Despite the
foregoing, a variable rate of interest on a Floating Rate Note will
not constitute an objective rate if it is reasonably expected that
the average value of the rate during the first half of the Floating
Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the
final half of the Note's term.
A "qualified inverse floating rate" is any objective rate that
is equal to a fixed rate minus a qualified floating rate, and that
reasonably can be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds disregarding
permissible restrictions discussed above in the definition of a
qualified floating rate.
The OID Regulations also provide that if a variable rate
debt instrument provides for stated interest at a fixed rate for an
initial period of less than one year followed by a variable rate that
is either a qualified floating rate or an objective rate and if the
variable rate on such instrument's issue date is intended to
approximate the fixed rate, then the fixed rate and the variable
rate together will constitute either a single qualified floating rate
or an objective rate, as the case may be. A fixed rate and a
variable rate will be conclusively presumed to meet the
requirements of the preceding sentence if the value of the
variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points.
If a Floating Rate Note that provides for stated interest at
either a single qualified floating rate or a single objective rate
throughout the term thereof qualifies as a "variable rate debt
instrument" under the OID Regulations, then any stated interest
on the Floating Rate Note which is unconditionally payable in
cash or property (other than debt instruments of the issuer) at
least annually will constitute qualified stated interest and will be<PAGE>
taxed
accordingly. Thus, a Floating Rate Note that provides for
stated interest at either a single qualified floating rate or a single
objective rate throughout the term of the Floating Rate Note and
that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued
with OID unless the Floating Rate Note is issued at a "true"
discount (i.e., at a price below the Floating Rate Note's stated
principal amount) in excess of the specified de minimis amount.
OID on such a Floating Rate Note arising from "true" discount is
allocated to an accrual period using the constant yield method
described above by assuming that the variable rate is a fixed rate
equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date, of the
qualified floating rate or qualified inverse floating rate, or (ii) in the
case of any objective rate (other than a qualified inverse floating
rate), a fixed rate that reflects the yield that is reasonably
expected for the Floating Rate Note.
To determine the amount and accrual of OID and qualified
stated interest on any Floating Rate Note that qualifies as a
"variable rate debt instrument" other than those described above,
the OID Regulations provide that the Floating Rate Note is to be
hypothetically converted into an "equivalent" fixed rate debt
instrument that has terms identical to the Floating Rate Note,
except that the equivalent Floating Rate Note has a fixed rate
substituted for the qualified floating rate or objective rate provided
under the Floating Rate Note. Any objective rate (other than a
qualified inverse floating rate) provided for under the terms of the
Floating Rate Note is converted into a fixed rate that reflects the
yield that is reasonably expected for the Floating Rate Note. In
the case of a Floating Rate Note that qualifies as a "variable rate
debt instrument" and provides for stated interest at a fixed rate in
addition to either one or more qualified floating rates or a qualified
inverse floating rate, the Floating Rate Note is treated as if it
provided for a qualified floating rate (or a qualified inverse floating
rate, if the Floating Rate Note provides for a qualified inverse
floating rate) rather than the fixed rate. Under such
circumstances, the qualified floating rate or qualified inverse
floating rate that replaces the fixed rate must be such that the fair
market value of the Floating Rate Note as of the issue date is
approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed
rate. Subsequent to replacing the fixed rate with either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate
Note is then hypothetically converted into an "equivalent" fixed
rate debt instrument in the manner described above.
Once the Floating Rate Note is hypothetically converted<PAGE>
into an
"equivalent" fixed rate debt instrument pursuant to the
foregoing rules, the amount of OID and qualified stated interest,
if any, are determined for the "equivalent" fixed rate debt
instrument by applying the general OID rules to the "equivalent"
fixed rate debt instrument. A U.S. Holder of the Floating Rate
Note will account for such OID and qualified stated interest as if
the U.S. Holder held the "equivalent" fixed rate debt instrument.
Appropriate adjustments will be made in each accrual period in
the amount of qualified stated interest or OID assumed to have
been accrued or paid with respect to the "equivalent" fixed rate
debt instrument in the event that such amounts differ from the
actual amount of interest accrued or paid on the Floating Rate
Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate
debt instrument" under the OID Regulations, then the Floating
Rate Note would be treated as a contingent payment debt
obligation. As mentioned in the introductory paragraph, it is not
entirely clear under current law how a Floating Rate Note would
be taxed if such Note were treated as a contingent payment debt
obligation. The proper United States Federal income tax
treatment of Floating Rate Notes that are treated as contingent
payment debt obligations will be more fully described in the
applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option
of the Company prior to their stated maturity (a "call option")
and/or (ii) may be repayable at the option of the holder prior to
their stated maturity (a "put option"). Notes containing such
features may be subject to rules that differ from the general rules
discussed above. Investors intending to purchase Notes with
such features should consult their own tax advisors, since the
OID consequences will depend, in part, on the particular terms
and features of the purchased Notes.
Under the OID Regulations, the IRS can apply or depart
from the OID Regulations as necessary or appropriate to achieve
a reasonable result where a principal purpose in structuring a
Note or applying the regulations described above is to achieve a
result that is unreasonable in light of the purpose of the applicable
statutes (which generally are intended to achieve the clear
reflection of income for both borrowers and lenders).
U.S. Holders may generally, upon election, include in
income all interest (including stated interest, acquisition discount,
OID, de minimis OID, market discount, de minimis market
discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to OID,<PAGE>
subject to
certain limitations and exceptions.
Short-Term Notes
Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with
OID. U.S. Holders that do not use the accrual method of
accounting for tax purposes generally will not be required to
recognize OID on Short-Term Notes until they receive payment on
such Notes. U.S. Holders on the accrual method, regulated
investment companies, common trust funds, and certain others,
however, must accrue OID on Short-Term Notes on a straight-line
basis unless they elect to accrue the OID on a constant yield
basis with daily compounding. For this purpose, OID on a Short-
Term Note is the amount by which the total principal and interest
payments on such Note exceed its issue price. U.S. Holders may
elect to include OID on Short-Term Notes in income based on
acquisition discount rather than OID. Acquisition discount is the
excess of a Short-Term Note's stated redemption price at maturity
over the U.S. Holder's basis in the Note. Gain recognized on the
sale or exchange of a Short-Term Note by a U.S. Holder that has
not accrued OID or acquisition discount on the Short-Term Note
to the extent attributable to accrued interest and OID (or
acquisition discount), is treated as ordinary income. Such a U.S.
Holder also must defer deductions for net interest expense on any
borrowing attributable to the Short-Term Note to the extent that
the expense does not exceed accrued but unrecognized interest
and OID (or acquisition discount) on the Note.
Market Discount
If a U.S. Holder purchases a Note, other than a Note
issued with OID, for an amount that is less than its issue price (or,
in the case of a subsequent purchase, its stated redemption price
at maturity) or purchases a Note issued with OID for an amount
that is less than the Note's revised issue price as of the purchase
date, the amount of the difference will be treated as "market
discount." A Note is not treated as purchased at a market
discount, however, if the market discount is less than 1/4 of 1
percent of the Note's stated redemption price at maturity (or the
revised issue price in the case of a Note issued with OID)
multiplied by the number of complete years remaining to maturity
("de minimis market discount"). The revised issue price of a Note
issued with OID is the Note's initial issue price increased by the
amount of OID includible in the gross income of previous holders.
A U.S. Holder of a Note purchased at a market discount
(other than a de minimis market discount) will be required to treat
<PAGE>
any partial principal payment (or, in the case of a Note issued
OID, any payment that does not constitute qualified stated
interest) on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to
the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on
such Note at the time of such payment or disposition. Market
discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note,
unless the U.S. Holder elects to accrue market discount on the
basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of
all or a portion of the interest paid or accrued on any
indebtedness incurred or maintained to purchase or carry a Note
with market discount until the maturity of the Note or its earlier
disposition in a taxable transaction, because a current deduction
is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to
include market discount in income currently as it accrues (on
either a ratable or semiannual compounding basis), in which case
the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the
receipt of certain cash payments and regarding the deferral of
interest deductions will not apply. Generally, such currently
included market discount is treated as ordinary income and as
interest for United States Federal income tax purposes. This
election to include market discount in income currently, once
made, applies to all market discount obligations acquired in or
after the first taxable year to which the election applies, and may
not be revoked without the consent of the IRS.
Amortizable Bond Premium
If a U.S. Holder purchases a Note for an amount that is
greater than its stated redemption price at maturity, such U.S.
Holder will be considered to have purchased the Note with
"amortizable bond premium" equal in amount to such excess. A
U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may reduce
interest on the Note otherwise required to be included in income
during any taxable year by the amortizable premium allocable to
the taxable year. However, if the Note may be optionally
redeemed after the U. S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond
<PAGE>
premium until later in the term of the Note. Amortized bond
premium will reduce the U. S. Holder's basis in the Note. An
election to amortize bond premium will apply to certain other debt
instruments that the U. S. Holder acquired at a premium, and the
election may have different tax consequences depending on when
the debt instruments were issued or acquired.
Disposition of a Note
Except as discussed above and except to the extent that
gain or loss is attributable to accrued but unpaid interest or
accrued market discount, upon the sale, exchange or retirement of
a Note, a U. S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the
sale, exchange or retirement of the Note and such U. S. Holder's
adjusted tax basis in the Note. A U. S. Holder's adjusted tax basis
in a Note generally will equal such U. S. Holder's initial
investment in the Note increased by any OID included in income
(and accrued market discount or acquisition discount, if any, if the
U.S. Holder has included such market discount or acquisition
discount in income) and decreased by the amount of any payments
previously received, other than qualified stated interest payments,
and by any amortized bond premium with respect to such Note.
Except to the extent of any accrued market discount which has
not been included as income, such gain or loss generally will be
long-term if the Note were held for more than one year.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States
Federal income tax on payment of principal, premium (if any) or
interest (including OID, if any) on a Note, unless such non-U. S.
Holder directly or indirectly owns at least 10% of the voting
power in the Company's stock, or is a controlled foreign
corporation related to the Company or a bank receiving interest
described in section 881(c)(3)(A) of the Code, if the non-U.S.
Holder certifies, on IRS Form W-8 or other substantially similar
form, that the Holder is not a U. S. person. To qualify for the
exemption from taxation, the last United States payor in the chain
of payment prior to payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the
beneficial owner of the Note under penalties of perjury, (ii)
certifies that such owner is not a U.S. Holder and (iii) provides the
name and address of the beneficial owner. The statement may be
made on an Internal Revenue Service ("IRS") Form W-8 or a
substantially similar form, and the beneficial owner must inform
the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed
statement to the Withholding Agent. However, in such case, the
signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is
considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
Generally, a non-U.S. Holder will not be subject to United
States Federal income taxes on any amount which constitutes
capital gain upon retirement or disposition of a Note, provided the
gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder.
Additionally, a non-U.S. Holder who is a non-resident alien
individual who is present in the U. S. for 183 days or more during
the taxable year when the sale or exchange occurs may be subject
to federal income taxation on the gain realized on the disposition
if certain other conditions are met. In that case, the capital gain
is generally subject to a 30% tax. Certain other exceptions may
be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
A Note held by an individual who is not a citizen or
resident of the United States (as defined for United States federal
estate tax purposes) will not be subject to United States federal
estate tax as a result of such individual's death, if at the time of
death the individual did not directly or indirectly own 10% or
more of the total combined voting power of the Company's stock,
unless such individual held such Note in connection with the
conduct of a United States trade or business.
<PAGE>
Backup Withholding
In general, if a non-corporate holder of a note fails to
furnish a correct identification number or certification of foreign or
other exempt status, fails to report dividend and interest income
in full, or fails to certify that such holder has provided a correct
taxpayer identification number and is not subject to backup
withholding, 31% federal backup withholding tax may be withheld
on amounts of interest payable to the holder. An individual's
taxpayer identification number is his or her social security
number. In addition, upon the sale of a Note to (or through) a
broker, the broker must withhold 31% of the entire purchase
price, unless either (i) the broker determines that the seller is a
corporation or other exempt holder, or (ii) the seller provides, in
the required manner, certain identifying information. Such a sale
must also be reported by the broker to the IRS, unless the broker
determines that the seller is an exempt holder. The Backup
withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded
by the IRS where applicable.
