The opinion of the court was delivered by: HAROLD BAER, JR., District Judge
Plaintiff, Blue Ridge Investments, LLC ("Blue Ridge"), filed
the instant action to recover the prepayment penalty of
$784,731.93 triggered by Defendant's, Anderson-Tully Company
("ATCO") early redemption of ATCO shares held by Blue Ridge. Blue
Ridge moves for summary judgment pursuant to Fed.R.Civ.P. 56.
For the reasons set forth below, the motion for summary judgment
ATCO is a timber company currently organized under the laws of
the State of Mississippi. (Springer Decl. at ¶ 3). An affiliate
of Bank of America ("Bank"), Blue Ridge was created to purchase
equity that, because of regulatory restrictions, the Bank was not
permitted to purchase directly. (Springer 11/11/2004 Dep. Tr.
A. Certificate of Designation
In May 1999, ATCO's Board of Directors adopted and filed with
the Mississippi Secretary of State a Certificate of Designation
(the "Certificate") which, inter alia, issued "25 Class A
Voting Cumulative Participating Mandatory Redeemable Preferred
Shares,*fn1 with a par value of $1.00 per share."
("Preferred Shares") (Springer Decl. Ex. 1, Certificate at 1).
The Certificate also articulated two ways ATCO could redeem the
Preferred Shares once sold: (1) Mandatory Redemption and (2)
Optional Redemption. (Certificate, (vi)(A) at 10).
"Mandatory Redemption" required ATCO to repurchase the
Preferred Shares from the holder by June 15, 2004 (the "Mandatory Redemption Date") or upon
certain events such as:
[T]he aggregate value of all outstanding shares of
Class A Preferred Stock held by the Original Holder
[ATCO] . . . is equal to or exceeds 25% (the
"Preferred Percentage") . . . in which case, only
those number of shares of Class A Preferred Stock
held by the Original Holder (as defined herein) . . .
shall be redeemed as is necessary to reduce the
Preferred Percentage to 24.9%.
(Certificate, (vi)(A) at 10) ("Mandatory Redemption Event").
"Optional Redemption" granted ATCO the option of redeeming the
Preferred Shares before the Mandatory Redemption Date or Event.
To invoke the Optional Redemption, ATCO would be required to pay
a set price equal to: (i) "Liquidation Preference" plus (ii) a
prepayment penalty equal to the "Make-Whole Amount."
(Certificate, (vi)(B) at 11). The "Liquidation Preference" was
$3,000,000 per share of Preferred Stock "plus an amount equal to
all dividends accumulated, accrued and unpaid on the Preferred
Stock as of the date of final distribution" (Certificate, (iv) at
6) and the:
"Make Whole Amount" means, with respect to any Class
A Preferred Stock, an amount equal to the excess, if
any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called
Preferred Stock over the Discounted Value of the
Adjusted Remaining Scheduled Payments with respect to
the Called Preferred Stock, provided that the Make
Whole Amount may in no event less than zero . . .
(Certificate, (vi)(B) at 11).
B. Subscription Agreement
On May 11, 1999, ATCO and Blue Ridge agreed to Blue Ridge's
purchase of $75,000,000 of ATCO Preferred Shares. (Springer Dec.
Ex. 2, at 2) (herein, "Subscription Agreement"). The Subscription
Agreement included a "governing law" clause, "[t]his Subscription
agreement . . . shall be governed by and construed in accordance
with the law of the state of New York." (Subscription Agreement §
5(d), at 7). Also included in the Subscription Agreement was a
clause that prohibited oral modifications:
. . . No amendment, modification or waiver of any
provision of this Subscription Agreement and no
consent by any party to departure herefrom shall be
effective unless and until such amendment,
modification or waiver shall be in writing and duly
executed by both of the parties hereto. (Subscription Agreement § f(g), at 8). Pursuant to
the terms of the Subscription Agreement, the
Certificate controlled the terms and conditions of
both Blue Ridge's ownership rights and ATCO's
Mandatory and Optional Redemption rights.*fn2
(Certificate, (vi)(A)-(B), at 10-11).
C. "Optional Redemption" Negotiations
According to ATCO Executive Vice-President-Treasurer, E. David
Coombs, Jr. ("Coombs"), approximately two years after the
issuance of the Preferred Shares, Managing Director of Bank,
David Springer ("Springer"), contacted Coombs regarding ATCO's
ability to redeem the Preferred Shares from Blue Ridge before the
Mandatory Redemption date:
Springer told me that that he had assumed all along
that ATCO had no intention of leaving the shares in
Blue Ridge's hands for the full five years . . . that
Blue Ridge had an interest in terminating its
investment [and] asked what the Bank could do to help
facilitate ATCO's early redemption of the Preferred
Shares. At that time, I told Springer that we could
not do anything prior to June 15, 2001, pursuant to
the terms of the Certificate of Designation.
(Coombs Aff. at ¶ 10).
On January 24, 2003, representatives from Bank and ATCO met in
Chicago.*fn3 (Coombs Aff. at ¶ 15). According to Coombs,
during the meeting, ATCO made clear that it did not want to
purchase the Preferred Shares back from Blue Ridge if the Make
Whole Amount was included. (Coombs Aff. at ¶ 15). The Bank
acquiesced. (Coombs Aff. at ¶ 15).*fn4
In accordance with Blue Ridge's early redemption request,
Coombs and others explored the various methods to achieve the
necessary financing to redeem the Preferred shares. Ten months
later, in October 2003, ATCO signed an Agricultural Mortgage Loan
Application for $115 million with Citigroup to provide funds for
the redemption. (Coombs Aff. at ¶ 27), and, in November 2003,
Springer advised Blue Ridge of the Citigroup loan agreement.
(Coombs Aff. at ¶ 19). On Friday, December 12, 2003, Coombs called Springer and
Stokes. (Coombs Aff. at ¶ 31). After Coombs stated that the
agreement would not include the Make-Whole Amount, ...