<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1997
REGISTRATION NOS. 333-
333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSUMERS ENERGY COMPANY
(Exact name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
38-0442310
(I.R.S. Employer Identification No.)
CONSUMERS ENERGY COMPANY FINANCING II
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
38-6696294
(I.R.S. Employer Identification No.)
212 WEST MICHIGAN AVENUE
JACKSON, MICHIGAN 49201
(517) 788-0550
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
------------------------
ALAN M. WRIGHT
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
212 WEST MICHIGAN AVENUE
JACKSON, MICHIGAN 49201
(517) 788-0351
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
It is respectfully requested that the Commission send copies of all notices,
orders and communications to:
<TABLE>
<C> <C>
MICHAEL D. VAN HEMERT, ESQ. CATHERINE C. HOOD, ESQ.
CMS ENERGY CORPORATION REID & PRIEST LLP
330 TOWN CENTER DRIVE 40 WEST 57TH STREET
DEARBORN, MICHIGAN 48126 NEW YORK, NEW YORK 10019
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(2)(3) OFFERING PRICE(2)(3) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Securities of Consumers Energy
Company Financing II....................... 4,800,000 $25.00 $120,000,000 $36,363.64
- ---------------------------------------------------------------------------------------------------------------------------------
Subordinated Deferrable Interest Notes of
Consumers Energy Company(1)(4).............
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Guarantee of Preferred Securities of
Consumers Energy Company Financing II and
other back-up obligations of Consumers
Energy Company(4)..........................
- ---------------------------------------------------------------------------------------------------------------------------------
Total........................................ 4,800,000 $120,000,000 $36,363.64
=================================================================================================================================
</TABLE>
(1) The Subordinated Deferrable Interest Notes will be purchased by, and
constitute assets of, Consumers Energy Company Financing II.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Exclusive of accrued interest and distributions, if any.
(4) The Registration is deemed to include the rights of the holders of the
Preferred Securities under the Guarantee of Preferred Securities by
Consumers Energy Company, the Declaration (as defined herein), the
Subordinated Deferrable Interest Notes and the Indenture (as defined
herein), taken together constituting the back-up undertakings as described
in this Registration Statement. No separate consideration will be received
for Consumers Energy Company's Subordinated Deferrable Interest Notes, its
Guarantee of Preferred Securities by Consumers Energy Company or its other
back-up obligations with respect to Consumers Energy Company Financing II
Preferred Securities.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PRELIMINARY PROSPECTUS DATED AUGUST 5, 1997
PROSPECTUS
- ----------
(SUBJECT TO COMPLETION)
4,800,000 PREFERRED SECURITIES
CONSUMERS ENERGY COMPANY FINANCING II
% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPRS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
CONSUMERS ENERGY COMPANY
------------------------
The % Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby evidence preferred undivided beneficial interests in the assets
of Consumers Energy Company Financing II, a statutory business trust created
under the laws of the State of Delaware (the "Trust"). Consumers Energy Company,
a Michigan corporation ("Consumers" or the "Company"), will own all the common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities") representing common undivided beneficial interests in
the assets of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in an equivalent principal
amount of % Subordinated Deferrable Interest Notes due 2027 (the
"Subordinated Notes") of Consumers. The Subordinated Notes will be unsecured
obligations of Consumers and will be subordinate and junior in right of payment
to certain other indebtedness of Consumers, as described herein. Upon an event
of default under the Declaration (as defined herein), the holders of the
Preferred Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions and payments
upon liquidation, redemption and otherwise.
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
------------------------
An application has been filed to list the Preferred Securities on the New
York Stock Exchange, Inc. (the "New York Stock Exchange"). If such application
is approved, trading of the Preferred Securities on the New York Stock Exchange
is expected to commence within a 30-day period after the date of this
Prospectus. See "Underwriting."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Per Preferred Security........................... $ (3) $
- ----------------------------------------------------------------------------------------------------------------------
Total............................................ $ (3) $
======================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from , 1997.
(2) Consumers and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Subordinated Notes, Consumers has agreed to
pay to the Underwriters as compensation for their arranging the investment
therein of such proceeds, $ per Preferred Security (or $ in
the aggregate); provided, that such compensation for sales of or more
Preferred Securities to a single purchaser will be $ per Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by Consumers are estimated to be
$ .
------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company on or about ,
1997.
------------------------
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus is , 1997.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
<PAGE> 3
(continued from previous page)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year commencing , 1997 ("distributions"). The payment of
distributions out of moneys held by the Trust, and payments on liquidation of
the Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by Consumers (the "Preferred Securities Guarantee") to the extent the
Trust has funds available therefor as described under "Description of the
Preferred Securities Guarantee." The obligations of Consumers under the
Preferred Securities Guarantee are subordinate and junior in right of payment to
all other liabilities of Consumers and will rank pari passu with the most senior
preferred stock issued by Consumers. The obligations of Consumers under the
Subordinated Notes are subordinate and junior in right of payment to all present
and future Senior Indebtedness (as defined herein) of Consumers. The Senior
Indebtedness of Consumers aggregated approximately $2,210 million at March 31,
1997.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and other
payment dates on the Subordinated Notes, which will be the sole assets of the
Trust. As a result, if principal or interest is not paid on the Subordinated
Notes, no amounts will be paid on the Preferred Securities. If Consumers does
not make principal or interest payments on the Subordinated Notes, the Trust
will not have sufficient funds to make distributions on the Preferred
Securities, in which event the Preferred Securities Guarantee will not apply to
such distributions until the Trust has sufficient funds available therefor.
Consumers has the right to defer payments of interest on the Subordinated
Notes by extending the interest payment period on the Subordinated Notes, at any
time, for up to 20 consecutive quarters (each, an "Extension Period"). If
interest payments are so deferred, distributions on the Trust Securities will
also be deferred. Despite such deferral, distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at an annual
rate of % per annum, compounded quarterly, and during any Extension Period,
holders of Preferred Securities will be required to include deferred interest
income in their gross income for United States federal income tax purposes in
advance of receipt of the cash interest payments attributable to such deferred
income. There could be multiple Extension Periods of varying lengths throughout
the term of the Subordinated Notes. See "Description of the Subordinated Notes
Option to Extend Interest Payment Period," "Risk Factors -- Option to Extend
Interest Payment Period" and "Certain United States Federal Income Tax
Consequences -- Original Issue Discount, Premium and Market Discount." In the
event of any such deferral, the holders of the Preferred Securities will not
have the right to appoint a special representative or trustee or otherwise act
to protect their interests.
The Subordinated Notes are redeemable by Consumers (in whole or in part)
from time to time, on or after , 2002 or at any time in certain
circumstances upon the occurrence of a Special Event (as defined herein). If
Consumers redeems Subordinated Notes, the Trust must redeem on a pro rata basis
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Notes so redeemed at $25 per Trust Security
plus accrued and unpaid distributions thereon (the "Redemption Price") to the
date fixed for redemption. See "Description of the Preferred Securities --
Mandatory Redemption." The Preferred Securities will be redeemed upon maturity
of the Subordinated Notes. The Subordinated Notes mature on , 2027.
In addition, upon the occurrence of a Special Event arising from a change in law
or a change in legal interpretation, unless the Subordinated Notes are redeemed
in the limited circumstances described herein, the Trust shall be terminated
with the result that the Subordinated Notes will be distributed to the holders
of the Preferred Securities, on a pro rata basis, in lieu of any cash
distribution. If the Subordinated Notes are distributed to the holders of the
Preferred Securities, Consumers will use its best efforts to have the
Subordinated Notes listed on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Subordinated Notes."
2
<PAGE> 4
In the event of the voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless in connection with such dissolution, winding-up or
termination the Subordinated Notes are distributed to the holders of the
Preferred Securities. See "Description of the Preferred Securities --
Liquidation Distribution upon Termination."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF PREFERRED
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
3
<PAGE> 5
AVAILABLE INFORMATION
Consumers and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a combined registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Subordinated Notes, the Preferred
Securities and the Preferred Securities Guarantee offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement. Statements or extracts presented in this
Prospectus from financial statements, contracts, agreements or other documents
included as exhibits to the Registration Statement are not necessarily complete.
With respect to each such financial statement, contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is hereby
made to the exhibit for a more complete description of the matter involved.
Consumers is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, information statements and other information with the
Commission. Such reports, information statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a Web
site (http://www.sec.gov) that contains reports, proxy statements and other
information regarding Consumers. Such reports, information statements and other
information concerning Consumers may also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, the securities
exchange on which certain of Consumers' securities are listed.
No separate financial statements of the Trust are included herein.
Consumers and the Trust do not consider that such financial statements would be
material to holders of the Preferred Securities because the Trust is a newly
created special purpose entity, has no operating history and no independent
operations and is not engaged in, and does not propose to engage in, any
activity other than as set forth below. See "Consumers Energy Company Financing
II."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Consumers with the Commission (File No.
1-5611) are incorporated in this Prospectus by reference and made a part hereof:
(i) Consumers' Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) Consumers' Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997; and
(iii) Consumers' Current Reports on Form 8-K dated March 7, 1997,
dated June 5, 1997 and dated June 11, 1997.
All documents subsequently filed by Consumers pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act shall be deemed to be incorporated into
this Prospectus by reference and to be a part hereof from the respective dates
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference in this Prospectus shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
4
<PAGE> 6
Consumers will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents that have been or
may be incorporated in this Prospectus by reference, other than certain exhibits
to such documents. Such requests should be directed to Consumers Energy Company
at its principal executive offices located at 212 West Michigan Avenue, Jackson,
Michigan 49201 Attention: Senior Vice President and Chief Financial Officer;
telephone: (517) 788-0550.
5
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
Preferred Securities Offered. 4,800,000 % Trust Originated Preferred
Securities evidencing preferred undivided beneficial interests in the assets of
the Trust are offered hereby. Holders of the Preferred Securities are entitled
to receive cumulative cash distributions at an annual rate of % of the
liquidation amount of $25 per Preferred Security, accruing from the date of
original issuance and payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year commencing on , 1997. The
distribution rate and the distribution and other payment dates for the Preferred
Securities will correspond to the interest rate and interest and other payment
dates on the Subordinated Notes, which will be the sole assets of the Trust. As
a result, if principal or interest is not paid on the Subordinated Notes, no
amounts will be paid on the Preferred Securities. See "Description of the
Preferred Securities."
Subordinated Notes. The Trust will invest the proceeds from the issuance of
the Preferred Securities and Common Securities in an equivalent amount of %
Subordinated Deferrable Interest Notes due 2027 of Consumers. The Subordinated
Notes will be subordinate and junior in right of payment to all Senior
Indebtedness of Consumers. See "Description of the Subordinated Notes --
Subordination."
Preferred Securities Guarantee. Payment of distributions out of moneys held
by the Trust, and payments on liquidation of the Trust or the redemption of
Preferred Securities are guaranteed by Consumers to the extent the Trust has
funds available therefor. If Consumers does not make principal or interest
payments on the Subordinated Notes, the Trust will not have sufficient funds to
make distributions on the Preferred Securities, in which event the Preferred
Securities Guarantee will not apply to such distributions until the Trust has
sufficient funds available therefor. See "Description of the Preferred
Securities Guarantee" and "Effect of Obligations under the Subordinated Notes
and the Preferred Securities Guarantee" herein. The obligations of Consumers
under the Preferred Securities Guarantee are subordinate and junior in right of
payment to all other liabilities of Consumers and will rank pari passu with the
most senior preferred stock issued by Consumers. See "Risk Factors -- Ranking of
Preferred Securities Guarantee and Subordinated Notes" and "Description of the
Preferred Securities Guarantee."
Interest Deferral. Consumers has the right to defer payments of interest on
the Subordinated Notes by extending the interest payment period on the
Subordinated Notes, at any time, for up to 20 consecutive quarters. If interest
payments on the Subordinated Notes are so deferred, distributions on the
Preferred Securities will also be deferred. During any deferral, distributions
will continue to accrue with interest thereon (to the extent permitted by law)
as described herein. There could be multiple Extension Periods of varying
lengths throughout the term of the Subordinated Notes. During an Extension
Period, holders of Preferred Securities will be required to include deferred
interest income in their gross income in advance of receipt of the cash interest
payments attributable thereto. See "Description of the Subordinated Notes --
Option to Extend Interest Payment Period" and "Certain United States Federal
Income Tax Consequences -- Original Issue Discount."
Redemption. The Subordinated Notes are redeemable by Consumers (in whole or
in part) from time to time, on or after , 2002, or at any time in
certain circumstances upon the occurrence of a Special Event. If the
Subordinated Notes are redeemed, the Trust must redeem Trust Securities having
an aggregate liquidation amount equal to the aggregate principal amount of
Subordinated Notes so redeemed. The Preferred Securities will be redeemed upon
maturity of the Subordinated Notes. See "Description of the Preferred Securities
- -- Mandatory Redemption."
6
<PAGE> 8
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained or incorporated by reference elsewhere in this Prospectus
and should particularly consider the following matters:
RANKING OF PREFERRED SECURITIES GUARANTEE AND SUBORDINATED NOTES
Consumers' obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all liabilities of Consumers and
pari passu with the most senior preferred stock now or hereafter issued by
Consumers and with any guarantee now or hereafter entered into by Consumers in
respect of any preferred stock of any affiliate of Consumers. The obligations of
Consumers under the Subordinated Notes are subordinate and junior in right of
payment to all present and future Senior Indebtedness (as defined herein) of
Consumers. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on, the Subordinated Notes may be made if (a) any
Senior Indebtedness of Consumers is not paid when due, or (b) the maturity of
any Senior Indebtedness has been accelerated because of a default. At March 31,
1997, Senior Indebtedness of Consumers aggregated approximately $2,210 million.
There are no terms in the Preferred Securities, the Subordinated Notes or the
Preferred Securities Guarantee that limit Consumers' ability to incur additional
indebtedness, including indebtedness that ranks senior to the Subordinated Notes
or the Preferred Securities Guarantee. See "Description of the Preferred
Securities Guarantee" and "Description of the Subordinated Notes --
Subordination."
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
which are required to be paid on the Preferred Securities, to the extent the
Trust has funds available therefor, (ii) the Redemption Price, including all
accrued and unpaid distributions, to the date of the redemption, to the extent
the Trust has funds available therefor, with respect to any Preferred Securities
called for redemption by the Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Subordinated Notes to the holders of Preferred
Securities) the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of
payment therefor and (b) the amount of assets of the Trust remaining available
for distribution to holders of Preferred Securities in liquidation of the Trust.
The holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Preferred Guarantee Trustee (as defined herein) or
to direct the exercise of any trust or power conferred upon the Preferred
Guarantee Trustee under the Preferred Securities Guarantee. In addition, any
holder of Preferred Securities may institute a legal proceeding directly against
Consumers to enforce its rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity. If Consumers were to default in
its obligation to pay amounts payable on the Subordinated Notes, the Trust would
lack available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and in such event holders
of the Preferred Securities would not be able to rely upon the Preferred
Securities Guarantee for payment of such amounts. Instead, holders of the
Preferred Securities would either (i) rely on the enforcement by the Property
Trustee (as defined herein) of its rights as registered holder of the
Subordinated Notes against Consumers, pursuant to the terms of the Subordinated
Notes or (ii) enforce the Property Trustee's rights directly against Consumers.
See "Description of the Preferred Securities -- Voting Rights," "Description of
the Preferred Securities Guarantee -- Status of the Preferred Securities
Guarantee" and "Description of the Subordinated Notes -- Indenture Events of
Default." The Declaration (as defined herein) provides that each holder of
Preferred Securities by acceptance thereof agrees to the provisions of the
Preferred Securities Guarantee and the Indenture (as defined herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
7
<PAGE> 9
Subordinated Notes against Consumers. In addition, the holders of a majority in
aggregate liquidation amount of the Preferred Securities will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it as
a holder of the Subordinated Notes. A holder of Preferred Securities may also
directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on Subordinated Notes having a
principal amount equal to the aggregate liquidation preference amount of the
Preferred Securities of such holder on or after the respective due dates
specified in the Subordinated Notes. With respect to the Property Trustee's
rights other than its rights to receive payment on the Subordinated Notes, if
the Property Trustee fails to enforce its other rights under the Declaration, to
the fullest extent permitted by law, a holder of Preferred Securities may
institute a legal proceeding directly against Consumers to enforce the Property
Trustee's rights under the Declaration, without first instituting any legal
proceeding against the Property Trustee or any other person or entity, including
the Trust. See "Description of the Preferred Securities -- Voting Rights" and
"Description of the Subordinated Notes -- Indenture Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Consumers has the right under the Indenture to defer payments of interest
on the Subordinated Notes by extending the interest payment period at any time,
and from time to time, on the Subordinated Notes. As a consequence of such an
extension, quarterly distributions on the Preferred Securities would be deferred
(but despite such deferral would continue to accrue with interest thereon
compounded quarterly) by the Trust during any such extended interest payment
period. Such right to extend the interest payment period for the Subordinated
Notes is limited to a period not exceeding 20 consecutive quarters for any such
extension. In the event that Consumers exercises this right to defer payments of
interest, then (a) Consumers shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation payment
with respect to, any of its capital stock, (b) Consumers shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by Consumers which rank
pari passu with or junior to the Subordinated Notes and (c) Consumers shall not
make any guarantee payments with respect to the foregoing (other than pursuant
to the Preferred Securities Guarantee), provided, however, Consumers may declare
and pay a stock dividend where the dividend stock is the same stock as that on
which the dividend is being paid. Prior to the termination of any such Extension
Period, Consumers may further defer payments of interest by further extending
the interest payment period, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the maturity of the Subordinated Notes. Upon the
termination of any Extension Period and the payment of all amounts then due,
Consumers may select a new Extension Period, as if no Extension Period had
previously been declared, subject to the above requirements. See "Description of
the Preferred Securities -- Distributions" and "Description of the Subordinated
Notes -- Option to Extend Interest Payment Period."
Despite Consumers' general right to defer the payment of interest on the
Subordinated Notes at any time for up to 20 consecutive quarters, under income
tax regulations that recently became effective, Consumers believes that the
Subordinated Notes will not be treated as issued with original issue discount
("OID"). It should be noted that these regulations have not yet been addressed
in any rulings or other interpretations by the Internal Revenue Service ("IRS").
Accordingly, it is possible that the IRS could take a position contrary to the
interpretation described herein. However, should Consumers exercise its rights
to defer payments of interest, the Subordinated Notes would be treated as issued
with OID and all the stated interest payments on the Subordinated Notes would
thereafter be treated as OID for so long as they remained outstanding. As a
result, all Holders (as defined herein) would, in effect, be required to accrue
interest income even if such Holders use a cash method of accounting.
Consequently, in the event that the payment of interest is deferred, a Holder
could be required to include OID in income on an economic accrual basis,
notwithstanding that Consumers will not make any interest payments during such
Extension Period of the Subordinated Notes.
8
<PAGE> 10
Consumers has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Notes. However, should Consumers determine to exercise such right
in the future, the market price of the Preferred Securities is likely to be
affected. A holder that disposes of its Preferred Securities during an Extension
Period, therefore, might not receive the same return on its investment as a
holder that continues to hold its Preferred Securities. In addition, as a result
of the existence of Consumers' right to defer interest payments, the market
price of the Preferred Securities (which represent an undivided beneficial
interest in the Subordinated Notes) may be more volatile than other securities
that are not subject to such rights. In addition, if the issue price of the
Subordinated Notes at the time of the issuance of the Preferred Securities is
less than their stated principal amount, the difference will be OID, a pro rata
share of which will be includible in the gross income of the holders of the
Preferred Securities over the term of the Preferred Securities. See "Certain
United States Federal Income Tax Consequences -- Original Issue Discount."
SPECIAL EVENT DISTRIBUTION
In the case of a Special Event, in certain circumstances Consumers shall
have the right to redeem the Subordinated Notes, in whole or in part, in which
event the Trust will redeem the Trust Securities on a pro rata basis to the same
extent as the Subordinated Notes are redeemed. Otherwise, upon the occurrence of
a Special Event, the Trust will be terminated, with the result that the
Subordinated Notes would be distributed to the holders of the Trust Securities
in connection with the liquidation of the Trust. See "Description of the
Preferred Securities -- Special Event Redemption or Distribution" and "Certain
United States Federal Income Tax Consequences."
There can be no assurance as to the market prices at such time for the
Preferred Securities or the Subordinated Notes that may be distributed in
exchange for Preferred Securities if a termination or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Subordinated Notes that the investor may receive on termination
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Subordinated Notes upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Subordinated Notes and
should carefully review all the information regarding the Subordinated Notes
contained herein. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution" and "Description of the Subordinated Notes."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, Consumers Trustees (as defined herein), which voting
rights are vested exclusively in Consumers as the holder of the Common
Securities. See "Description of the Preferred Securities -- Voting Rights."
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Notes. A holder who disposes of his Preferred Securities between
record dates for payments of distributions thereon may be required to include
accrued but unpaid interest on the Subordinated Notes through the date of
disposition in income as ordinary income (i.e., OID), and to add such amount to
its adjusted tax basis in its pro rata share of the underlying Subordinated
Notes deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which may include, in the form of OID, all accrued
but unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain United States
Federal Income Tax Consequences -- Original Issue Discount" and "-- Sale of
Preferred Securities."
9
<PAGE> 11
CONSUMERS ENERGY COMPANY
Consumers is a public utility serving almost six million of Michigan's nine
and a half million residents in 68 counties in Michigan's Lower Peninsula.
Consumers conducts its principal operations through two business segments:
electric utility operations and gas utility operations. The electric operations
include the generation, purchase, transmission and distribution of electricity
in 61 of the 68 counties in the Lower Peninsula of Michigan. The gas operations
include the purchase, transportation, storage and distribution of gas serving 54
of the 68 counties in the Lower Peninsula of Michigan. Consumers' principal
executive offices are located at 212 West Michigan Avenue, Jackson, Michigan
49201, telephone (517) 788-0550.
CONSUMERS ENERGY COMPANY FINANCING II
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State on
July 30, 1997. The Trust's business is defined in a Declaration of Trust,
executed by Consumers, as sponsor (the "Sponsor"), and the Consumers Trustees.
The Declaration of Trust will be amended and restated in its entirety (as so
amended and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities.
Consumers will acquire all of the Common Securities in an aggregate liquidation
amount equal to not less than 3% of the total capital of the Trust. The Trust
exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Subordinated Notes
and (iii) engaging in only those other activities necessary, appropriate,
convenient or incidental thereto. The Trust has a term of approximately 35
years, but may terminate earlier as provided in the Declaration.
The Trust's business and affairs will be conducted by the trustees (the
"Consumers Trustees") appointed by Consumers, as holder of the Common
Securities. The duties and obligations of the Consumers Trustees shall be
governed by the Declaration. Pursuant to the Declaration, the number of
Consumers Trustees will initially be five. Three of the Consumers Trustees (the
"Regular Trustees") will be persons who are employees or officers of, or
affiliated with, Consumers. The fourth trustee will be a financial institution
unaffiliated with Consumers which maintains a principal place of business in the
State of Delaware (the "Delaware Trustee"). The Bank of New York (Delaware) will
act as the Delaware Trustee until removed or replaced by the holder of the
Common Securities. The fifth trustee will serve as property trustee under the
Declaration and as indenture trustee for purposes of the Trust Indenture Act
(the "Property Trustee"). The Bank of New York will act as the Property Trustee
until removed or replaced by the holder of the Common Securities. The Bank of
New York will also act as indenture trustee under the Preferred Securities
Guarantee (the "Preferred Guarantee Trustee"). See "Description of the Preferred
Securities Guarantee."
The Property Trustee will hold title to the Subordinated Notes for the
benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers and privileges under the Indenture (as defined
herein) as the holder of the Subordinated Notes. In addition, the Property
Trustee will maintain exclusive control of a segregated non-interest bearing
bank account (the "Property Account") to hold all payments made in respect of
the Subordinated Notes for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Preferred Guarantee Trustee will hold
the Preferred Securities Guarantee for the benefit of the holders of the
Preferred Securities. Consumers, as the holder of all the Common Securities,
will have the right to appoint, remove or replace any Consumers Trustee and to
increase the number of Consumers Trustees, provided that the number of Consumers
Trustees shall be at least five, a majority of which shall be Regular Trustees.
Consumers will pay all fees and expenses related to the Trust, the offering of
the Trust Securities and the issuance of the Subordinated Notes. See
"Description of the Subordinated Notes -- Miscellaneous."
10
<PAGE> 12
The rights of the holders of the Preferred Securities, including rights to
information and voting rights, are as set forth in the Declaration, the Delaware
Business Trust Act, as amended (the "Trust Act"), and the Trust Indenture Act.
See "Description of the Preferred Securities."
The principal place of business of the Trust shall be c/o Consumers Energy
Company, 212 West Michigan Avenue, Jackson, Michigan 49201 (telephone number
(517) 788-0550).
11
<PAGE> 13
SELECTED FINANCIAL INFORMATION OF CONSUMERS ENERGY COMPANY
The following information is qualified in its entirety by the information
appearing elsewhere in this Prospectus and by the information and financial
statements incorporated in this Prospectus by reference.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue (in millions)........ $3,754 $3,770 $3,511 $3,356 $3,243 $2,978
Net Income (Loss) (in millions)........ $ 290 $ 296 $ 255 $ 226 $ 198 $ (244)
Net Income (Loss) after Preferred
Dividends (in millions).............. $ 254 $ 260 $ 227 $ 202 $ 187 $ (255)
Ratios of Earnings to:
Fixed Charges........................ 3.20 3.27 2.82 2.81 2.46 (a)
Fixed Charges & Preferred
Dividends......................... 2.48 2.54 2.30 2.32 2.26 (b)
</TABLE>
- -------------------------
(a) For the year ended December 31, 1992, fixed charges exceeded earnings by
$360 million. Earnings as defined include a $520 million pre-tax loss on the
settlement of cost recovery issues relating to power purchases from the MCV
Partnership partially offset by $(15) million for potential customer refunds
and other reserves related to 1992 but recorded in 1991. The ratio of
earnings to fixed charges would have been 1.78 excluding these amounts.
(b) For the year ended December 31, 1992, fixed charges and preferred dividends
exceeded earnings by $377 million. Earnings as defined include a $520
million pre-tax loss on the settlement of cost recovery issues relating to
power purchases from the MCV Partnership partially offset by $(15) million
for potential customer refunds and other reserves related to 1992 but
recorded in 1991. The ratio of earnings to fixed charges and preferred
dividends would have been 1.63 excluding these amounts.
12
<PAGE> 14
CAPITALIZATION OF CONSUMERS ENERGY COMPANY
The following table sets forth the unaudited consolidated capitalization of
Consumers at March 31, 1997, and as adjusted to reflect the sale of the
Preferred Securities offered hereby and the application of the estimated net
proceeds from such sale. See "Use of Proceeds." The table should be read in
conjunction with Consumers' consolidated financial statements and notes thereto
included in the documents incorporated by reference herein. See "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
AT MARCH 31,1997
---------------------
ACTUAL AS ADJUSTED
------ -----------
IN MILLIONS
(UNAUDITED)
<S> <C> <C>
Short-term debt (includes notes payable and current portion
of long-term debt and capital leases).................... $ 436 $ 436
====== ======
Non-current portion of capital leases...................... $ 97 97
Long-term debt (excluding current maturities).............. 1,652 1,652
Company-obligated mandatorily redeemable preferred
securities of:
Consumers Power Company Financing I...................... 100 100
Consumers Energy Company Financing II.................... -- 120
Preferred Stock with no mandatory redemption............... 356 356
Common stockholders' equity................................ 1,766 1,766
------ ------
Total stockholders' equity............................... 2,122 2,242
------ ------
Total Capitalization $3,971 $4,091
====== ======
</TABLE>
- -------------------------
(1) As described in this Prospectus, the sole assets of the Trust will be the
% Subordinated Deferrable Interest Notes due 2027 of Consumers with a
principal amount of approximately $ , and upon redemption of such
debt, the Preferred Securities will be mandatorily redeemable.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with Consumers'
financial statements, with the Preferred Securities shown on Consumers'
consolidated financial statements as Company-obligated mandatorily redeemable
preferred securities. Note disclosures will discuss, among other things, the
Consumers' guarantee of the Preferred Securities and that the Subordinated Notes
will be the sole asset of Consumers Energy Company Financing II.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by
the Trust in the Subordinated Notes of Consumers. Consumers will use the net
proceeds from the sale of such Subordinated Notes to redeem, refinance or refund
existing long-term securities, which may include first mortgage bonds, stocks,
preferred securities or notes.
13
<PAGE> 15
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee will act as the indenture trustee for
purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act. The following
summary of the principal terms and provisions of the Preferred Securities does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration, a copy of which is filed as an exhibit to the
Registration Statement, of which this Prospectus is a part, the Trust Act and
the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the Trust, to
issue the Preferred Securities, which represent preferred undivided beneficial
interests in the assets of the Trust, and the Common Securities, which represent
common undivided beneficial interests in the assets of the Trust. All of the
Common Securities will be owned by Consumers. The Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with the Preferred
Securities, except that upon the occurrence and during the continuation of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights to payment of the
holders of the Preferred Securities. The Declaration does not permit the
incurrence of any indebtedness by the Trust or the issuance by the Trust of any
securities other than the Trust Securities. Pursuant to the Declaration, the
Property Trustee will hold legal title to the Subordinated Notes for the Trust
and for the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust, are guaranteed by
Consumers to the extent described under "Description of the Preferred Securities
Guarantee." The Preferred Guarantee Trustee will hold the Preferred Securities
Guarantee for the benefit of the holders of the Preferred Securities. The
Preferred Securities Guarantee does not cover payment of distributions on the
Preferred Securities when the Trust does not have sufficient available funds in
the Property Account to make such distributions.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears will bear interest at such rate per annum (to the
extent permitted by applicable law). The term "distributions" as used herein
includes any such interest payable unless otherwise stated.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1997 and will be payable quarterly in arrears on March 31, June
30, September 30, and December 31 of each year to the holders of record on the
applicable record date, commencing , 1997, as and if available for
payment by the Property Trustee, except as otherwise described below. The amount
of distributions payable for any full quarterly period will be computed on the
basis of a 360-day year of twelve 30-day months, and for any period shorter than
a full quarter, on the basis of the actual number of days elapsed in such a
90-day quarter.
Consumers has the right under the Indenture to defer payments of interest
on the Subordinated Notes by extending the interest payment period from time to
time on the Subordinated Notes which, if exercised, would defer quarterly
distributions on the Preferred Securities (though such distributions would
continue to accrue interest since interest would continue to accrue on the
Subordinated Notes) during any such extended interest payment period. In the
event that Consumers exercises this right, then (a) Consumers shall not declare
or pay any dividend on, make any distributions with respect to, or redeem,
purchase or make a liquidation payment with respect to, any of its capital
stock, (b) Consumers shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by Consumers which rank pari passu with or junior
to the Subordinated Notes, and (c) Consumers shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities
14
<PAGE> 16
Guarantee), provided, however, Consumers may declare and pay a stock dividend
where the dividend stock is the same stock as that on which the dividend is
being paid. Prior to the termination of any such Extension Period, Consumers may
further extend the interest payment period, provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarters or extend beyond the maturity of the Subordinated Notes.
Upon the termination of any Extension Period and the payment of all amounts then
due, Consumers may select a new Extension Period as if no Extension Period had
previously been declared, subject to the above requirements. See "-- Option to
Extend Interest Payment Period" and "Description of the Subordinated Notes --
Interest." If distributions are deferred, the deferred distributions and accrued
interest thereon shall be paid to holders of record of the Preferred Securities,
if funds are available therefor, as they appear on the books and records of the
Trust on the record date next following the termination of such Extension
Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Subordinated Notes. See "Description of the
Subordinated Notes." The payment of distributions out of moneys held by the
Trust is guaranteed by Consumers to the extent set forth under "Description of
the Preferred Securities Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Notes. Such distributions will be paid through the Property
Trustee, who will hold amounts received in respect of the Subordinated Notes in
the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "-- Book-Entry
Only Issuance -- The Depository Trust Company" below. In the event the Preferred
Securities shall not continue to remain in book-entry only form, the Regular
Trustees shall have the right to select relevant record dates which shall be at
least one Business Day, but less than 60 Business Days, prior to the relevant
payment dates. In the event that any date on which distributions are to be made
on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. A "Business
Day" shall mean any day other than a day on which banking institutions in
Delaware or New York, New York are authorized or required by law to close.
MANDATORY REDEMPTION
The Subordinated Notes will mature on , 2027 and may be redeemed,
in whole or in part, at any time on or after , 2002, or at any time in
certain circumstances upon the occurrence of a Special Event. Upon the repayment
of the Subordinated Notes, whether at maturity or upon acceleration, redemption
or otherwise, the proceeds from such repayment or payment shall simultaneously
be applied to redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Notes so repaid or
redeemed at the Redemption Price; provided that, except in the case of payments
upon maturity, holders of Trust Securities shall be given not less than 30 nor
more than 60 days' notice of such redemption. See "Description of the
Subordinated Notes." In the event that fewer than all of the outstanding
Preferred Securities are to be redeemed, the Preferred Securities will be
redeemed pro rata as described under "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
from independent tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
15
<PAGE> 17
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein or (b) any amendment to, or change in, an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority, which amendment or
change is enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after the date of this Prospectus, there is more than an insubstantial risk
that (i) the Trust would be subject to United States federal income tax with
respect to interest accrued or received on the Subordinated Notes, (ii) interest
payable to the Trust on the Subordinated Notes would not be deductible in whole
or in part by Consumers for United States federal income tax purposes or (iii)
the Trust would be subject to more than a de minimis amount of other taxes,
duties or other governmental charges, which change or amendment becomes
effective on or after the date of this Prospectus.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
Investment Company Act of 1940, as amended (the "1940 Act") to the effect that,
as a result of the occurrence of a change in law or regulation or a written
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the 1940 Act.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
shall, except in the circumstances described below, be terminated with the
result that, after satisfaction of liabilities to creditors, Subordinated Notes
with an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Trust Securities would be distributed to the holders of the Trust Securities, in
liquidation of such holders' interests in the Trust on a pro rata basis, within
90 days following the occurrence of such Special Event; provided, however, that
in the case of the occurrence of a Tax Event, as a condition of such termination
and distribution, the Regular Trustees shall have received a No Recognition
Opinion (as defined below); and, provided, further, that, if at the time there
is available to the Trust the opportunity to eliminate, within such 90-day
period, the Special Event by taking some ministerial action which has no adverse
effect on the Trust, Consumers or the holders of the Trust Securities, the Trust
will pursue such measure in lieu of dissolution.
Furthermore, (i) if a Tax Event has occurred and, (a) Consumers has
received a Redemption Tax Opinion (as defined below) or (b) the Regular Trustees
shall have been informed by independent tax counsel that a No Recognition
Opinion cannot be delivered, or (ii) if an Investment Company Event has
occurred, then Consumers shall have the right, upon not less than 30 nor more
than 60 days' notice, to redeem the Subordinated Notes in whole or in part for
cash within 90 days following the occurrence of such Tax Event or Investment
Company Event, as the case may be, and, following such redemption, Trust
Securities with an aggregate liquidation amount equal to the aggregate principal
amount of the Subordinated Notes so redeemed shall be redeemed by the Trust at
the Redemption Price on a pro rata basis; provided, however, that, if at the
time there is available to Consumers or the Trust the opportunity to eliminate,
within such 90-day period, such Tax Event or Investment Company Event by taking
some ministerial action which has no adverse effect on the Trust, Consumers or
the holders of the Trust Securities, Consumers or the Trust will pursue such
measure in lieu of redemption.
"No Recognition Opinion" means an opinion from independent tax counsel
experienced in such matters to the effect that the holders of the Trust
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of a dissolution of the Trust and the distribution of
the Subordinated Notes. "Redemption Tax Opinion" means an opinion from
independent tax counsel experienced in such matters to the effect that, as a
result of a Tax Event, there is more than an insubstantial risk that Consumers
would be precluded from deducting the interest on the Subordinated Notes for
United States income tax purposes even after the Subordinated Notes were
distributed to the holders of the Trust Securities.
If Subordinated Notes are distributed to the holders of the Preferred
Securities, Consumers will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange, on which the
Preferred Securities are then listed.
16
<PAGE> 18
After the date for any distribution of Subordinated Notes upon termination
of the Trust, (i) the Preferred Securities and Preferred Securities Guarantee
will no longer be deemed to be outstanding, (ii) the depositary or its nominee,
as the record holder of the Preferred Securities, will receive a registered
global certificate or certificates representing the Subordinated Notes to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities and Preferred Securities Guarantee not held by the
depositary or its nominee will be deemed to represent Subordinated Notes having
an aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to Consumers or its agent for
transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Notes that may be distributed in exchange for the
Preferred Securities if a termination and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Subordinated Notes that the investor may receive on termination and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Securities for all quarterly distribution periods terminating on or prior
to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that Consumers has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Subordinated Notes, the Trust will irrevocably
deposit with the depositary funds sufficient to pay the applicable Redemption
Price and will give the depositary irrevocable instructions and authority to pay
the Redemption Price to the holders of the Preferred Securities. See "--
Book-Entry Only Issuance -- The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day. In
the event that payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the Trust or
by Consumers pursuant to the Preferred Securities Guarantee, distributions on
such Preferred Securities will continue to accrue, from the original redemption
date to the actual date of payment, in which case the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed pro rata as
described under "-- Book-Entry Only Issuance -- The Depository Trust Company"
below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), Consumers or its affiliates
may, at any time and from time to time, purchase outstanding Preferred
Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON TERMINATION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities at that time
will be entitled to receive out of the assets of the Trust, after satisfaction
of liabilities to creditors, distributions in an amount equal to the aggregate
of the stated liquidation amount of $25 per Preferred Security plus accrued and
unpaid distributions thereon to the date of payment
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(the "Liquidation Distribution"), unless, in connection with such dissolution,
winding-up or termination, after satisfaction of liabilities to creditors,
Subordinated Notes in an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Preferred Securities have been distributed on a pro
rata basis to the holders of Preferred Securities in exchange for such Preferred
Securities.
If, upon any such dissolution, winding-up or termination, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Preferred Securities shall be paid
on a pro rata basis. The holders of the Common Securities will be entitled to
receive distributions upon any such dissolution, winding-up or termination pro
rata with the holders of the Preferred Securities, except that if a Declaration
Event of Default has occurred and is continuing, the Preferred Securities shall
have a preference over the Common Securities.
Pursuant to the Declaration, the Trust shall terminate (i) on July 30,
2032, the expiration of the term of the Trust, (ii) upon the bankruptcy of
Consumers, (iii) upon the filing of a certificate of dissolution or its
equivalent with respect to Consumers, or the revocation of the charter of
Consumers and the expiration of 90 days after the date of revocation without a
reinstatement thereof, (iv) upon the distribution of the Subordinated Notes
following the occurrence of a Special Event, (v) upon the entry of a decree of a
judicial dissolution of Consumers or the Trust or (vi) upon the redemption of
all of the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
(see "Description of the Subordinated Notes -- Indenture Events of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"), provided that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities or its
consequences until all Declaration Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Preferred Securities have been
so cured, waived or otherwise eliminated, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred Securities and only
the holders of the Preferred Securities will have the right to direct the
Property Trustee with respect to certain matters under the Declaration, and
therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property
Trustee, as the sole holder of the Subordinated Notes, will have the right under
the Indenture to declare the principal of, and interest on, the Subordinated
Notes to be immediately due and payable. In addition, holders of Preferred
Securities will have certain rights to institute proceedings directly against
Consumers for payment defaults under the Indenture. See "-- Voting Rights."
VOTING RIGHTS
Except as provided below, under the Trust Act, the Trust Indenture Act and
under "Description of the Preferred Securities Guarantee -- Amendments and
Assignment" and as otherwise required by law, the holders of the Preferred
Securities will have no voting rights. In the event Consumers elects to defer
payments of interest on the Subordinated Notes as described above under "--
Distributions," the holders of the Preferred Securities do not have the right to
appoint a special representative or trustee or otherwise act to protect their
interests.
The holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as the holder
of the Subordinated Notes, to (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debt Trustee (as
hereinafter defined) under the Indenture with respect to the Subordinated Notes,
(ii) waive any past Indenture Event of Default which is waivable under the Base
Indenture (as defined herein), or
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(iii) exercise any right to rescind or annul a declaration that the principal of
all the Subordinated Notes shall be due and payable. In addition, a holder of
Preferred Securities may directly institute a proceeding for enforcement of
payment to such holder directly of the principal of or interest on Subordinated
Notes having a principal amount equal to the aggregate liquidation preference
amount of the Preferred Securities of such holder on or after the respective due
dates specified in the Subordinated Notes. With respect to the Property
Trustee's rights other than its rights to receive payment on the Subordinated
Notes, if the Property Trustee fails to enforce its other rights under the
Declaration, to the fullest extent permitted by law, a holder of Preferred
Securities may institute a legal proceeding directly against Consumers to
enforce the Property Trustee's rights under the Declaration, without first
instituting any legal proceeding against the Property Trustee or any other
person or entity, including the Trust. The Property Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Debt Trustee with respect to the Subordinated Notes; provided that, except for a
default in the payment of principal of (or premium, if any) or interest on any
of the Subordinated Notes, the Property Trustee shall be protected in
withholding such notice if the Property Trustee in good faith determines that
the withholding of such notice is in the interests of the holders of the
Preferred Securities. Such notice shall state that such Indenture Event of
Default also constitutes a Declaration Event of Default. The Property Trustee
shall not take any action described in clauses (i), (ii) or (iii) above unless
the Property Trustee has obtained an opinion of independent tax counsel to the
effect that, as a result of such action, the Trust will not be classified as
other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Notes, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination. The Property Trustee shall vote
with respect to such amendment, modification or termination as directed by a
majority in liquidation amount of the Preferred Securities and, if no
Declaration Event of Default has occurred and is continuing, a majority in
liquidation amount of the Common Securities, voting together as a single class,
provided that where a consent under the Indenture would require the consent of
more than a majority of the holders in principal amount of Subordinated Notes
affected thereby (a "Super-Majority"), the Property Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Preferred Securities and Common Securities,
respectively, which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Notes outstanding. The Property Trustee
shall not take any such action in accordance with the directions of the holders
of the Trust Securities unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Preferred
Securities will be required for the Trust to redeem and cancel Preferred
Securities or distribute Subordinated Notes in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by Consumers or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Consumers shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
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The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company."
Holders of the Preferred Securities will have no rights to appoint or
remove the Consumers Trustees, who may be appointed, removed or replaced solely
by Consumers, as the direct or indirect holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed by a
majority of the Regular Trustees (and in certain circumstances the Property
Trustee or the Delaware Trustee), provided that if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the Trust
Securities will be entitled to vote as a single class on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby, provided that a reduction of the principal amount or the
distribution rate, or a change in the payment dates or maturity of the Preferred
Securities, shall not be permitted without the consent of each holder of
Preferred Securities. In the event any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed to be an "investment
company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any business trust or other business entity (as
defined in the Trust Act), except as described below. The Trust may, with the
consent of a majority of the Regular Trustees and without the consent of the
holders of the Trust Securities, consolidate, amalgamate, merge with or into, or
be replaced by, a trust organized as such under the laws of any State; provided,
that (i) such successor entity either (x) expressly assumes all of the
obligations of the Trust with respect to the Trust Securities or (y) substitutes
for the Trust Securities other securities having substantially the same terms as
the Trust Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Securities rank in priority with respect
to distributions and payments upon liquidation, redemption, maturity and
otherwise, (ii) Consumers expressly acknowledges a trustee of such successor
entity which possesses the same powers and duties as the Property Trustee as the
holder of the Subordinated Notes, (iii) the Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
material rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose substantially identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation or replacement,
Consumers has received an opinion from independent counsel to the Trust
experienced in such matters to the effect that (A) such merger, consolidation,
amalgamation or replacement does not adversely affect the material rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect
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(other than with respect to any dilution of the holders' interest in the new
entity), (B) following such merger, consolidation, amalgamation or replacement,
neither the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (C) following such merger,
consolidation, amalgamation or replacement, the Trust (or the successor entity)
will continue to be classified as a grantor trust for United States federal
income tax purposes, and (viii) Consumers guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Preferred Securities Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in liquidation amount of
the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified for United States federal income tax purposes as other
than a grantor trust.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Preferred Securities. The Preferred Securities will be issued only as fully
registered securities registered in the name of Cede & Co. (DTC's partnership
nominee). One or more fully registered Preferred Securities certificates will be
issued, representing in the aggregate the total number of Preferred Securities,
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Preferred Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial
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Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount of
the interest of each Direct Participant in the Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will consent or
vote with respect to Preferred Securities. Under its usual procedures, DTC would
mail an Omnibus Proxy to the Trust as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Preferred Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and will be the responsibility of such Participant and not of DTC, the Trust,
any trustee, the Underwriters or Consumers, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trust, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Except as provided below, a Beneficial Owner in a Preferred Security will
not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
Consumers) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depository) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources, including DTC, that Consumers and the Trust
believe to be reliable, but Consumers and the Trust take no responsibility for
the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of all such defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby; but the foregoing shall not relieve the Property Trustee, upon the
occurrence of a Declaration Event of Default, from exercising the rights and
powers vested in it by the Declaration. The Property Trustee also serves as
trustee under the Preferred Securities Guarantee.
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REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers of
Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Regular
Trustees may require) in respect of any tax or other government charges which
may be imposed in relation to it. The Trust will not be required to register or
cause to be registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized for United States
federal income tax purposes as other than a grantor trust. Consumers is
authorized and directed to conduct its affairs so that the Subordinated Notes
will be treated as indebtedness of Consumers for United States federal income
tax purposes. In this connection, the Regular Trustees and Consumers are
authorized to take any action, not inconsistent with applicable law and the
restated articles of incorporation of Consumers, that each of the Regular
Trustees and Consumers determines in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially and
adversely affect the interests of the holders of the Preferred Securities.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by Consumers for the
benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Bank of New York will act as the Preferred Guarantee Trustee.
The terms of the Preferred Securities Guarantee will be those set forth therein
and those made part thereof by the Trust Indenture Act. The following summary
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the Preferred Securities
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. The Preferred
Securities will be held by the Preferred Guarantee Trustee for the benefit of
the holders of the Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, Consumers will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full to
the holders of the Preferred Securities the Guarantee Payments (as defined
herein) (without duplication of amounts theretofore paid by the Trust), to the
extent not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The following payments or
distributions with respect to the Preferred Securities to the extent not paid or
made by the Trust (the "Guarantee Payments") will be subject to the Preferred
Securities Guarantee (without duplication): (i) any accrued and unpaid
distributions that are required to be paid on the Preferred Securities, to the
extent the Trust has funds available therefor, (ii) the Redemption Price,
including all accrued and unpaid distributions to the date of the redemption, to
the extent the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Subordinated Notes to the holders of
Preferred Securities in exchange for Preferred Securities), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred
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Securities to the date of payment and (b) the amount of assets of the Trust
remaining available for distribution to holders of Preferred Securities in
liquidation of the Trust. Consumers' obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by Consumers to the
holders of Preferred Securities or by causing the Trust to pay such amounts to
such holders.
The Preferred Securities Guarantee will be a guarantee of the Guarantee
Payments with respect to the Preferred Securities from the time of issuance of
the Preferred Securities, but will not apply to the payment of distributions and
other payments on the Preferred Securities when the Property Trustee does not
have sufficient funds in the Property Account to make such distributions or
other payments. If Consumers does not make interest payments on the Subordinated
Notes held by the Property Trustee, the Trust will not make distributions on the
Preferred Securities issued by the Trust and will not have funds available
therefor. See "Description of the Subordinated Notes -- Certain Covenants."
Consumers will also agree separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Preferred
Securities Guarantee, except that upon the occurrence and during the
continuation of an Indenture Event of Default, holders of Preferred Securities
shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF CONSUMERS
In the Preferred Securities Guarantee, Consumers will covenant that, so
long as the Preferred Securities remain outstanding, if there shall have
occurred and is continuing any event that would constitute an event of default
under the Preferred Securities Guarantee or the Declaration, then (a) Consumers
shall not declare or pay any dividend on, or make any distribution with respect
to, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock, (b) Consumers shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by Consumers which rank pari passu with
or junior to the Subordinated Notes and (c) Consumers shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantee); provided, however, Consumers may declare and
pay a stock dividend where the dividend stock is the same stock as that on which
the dividend is being paid.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Preferred Securities Guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the outstanding
Preferred Securities. The manner of obtaining any such approval of holders of
the Preferred Securities is set forth under "Description of the Preferred
Securities -- Voting Rights." All guarantees and agreements contained in the
Preferred Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of Consumers and shall inure to the benefit of the
Preferred Guarantee Trustee and the holders of the Preferred Securities then
outstanding.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities upon full payment of the
Redemption Price of all Preferred Securities, or upon distribution of the
Subordinated Notes to the holders of the Preferred Securities, and will
terminate completely upon full payment of the amounts payable upon liquidation
of the Trust. See "Description of the Subordinated Notes -- Indenture Events of
Default" for a description of the events of default and enforcement rights of
the holders of Subordinated Notes. The Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must repay to the Trust or Consumers, or
their successors, any sums paid to them under such Preferred Securities or the
Preferred Securities Guarantee.
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EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur
upon the failure of Consumers to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Preferred Guarantee Trustee in respect of the
Preferred Securities Guarantee or to direct the exercise of any trust or power
conferred upon the Preferred Guarantee Trustee under the Preferred Securities
Guarantee. In addition, any holder of Preferred Securities may institute a legal
proceeding directly against Consumers to enforce its rights under the Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Trust, the Preferred Guarantee Trustee or any other person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
Consumers' obligations under the Preferred Securities Guarantee to make the
Guarantee Payments will constitute an unsecured obligation of Consumers and will
rank (i) subordinate and junior in right of payment to all other liabilities of
Consumers, including the Subordinated Notes, except those liabilities of
Consumers made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred stock now or hereafter issued by Consumers and with
any guarantee now or hereafter entered into by Consumers in respect of any
preferred stock of any affiliate of Consumers, and (iii) senior to Consumers'
common stock. The terms of the Preferred Securities provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity). The Preferred Securities Guarantee will be deposited with the Preferred
Guarantee Trustee to be held for the benefit of the holders of the Preferred
Securities. Except as otherwise noted herein, the Preferred Guarantee Trustee
has the right to enforce the Preferred Securities Guarantee on behalf of the
holders of the Preferred Securities. The Preferred Securities Guarantee will not
be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Trust).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the Preferred Securities Guarantee and after the curing of all such
defaults that may have occurred, undertakes to perform only such duties as are
specifically set forth in the Preferred Securities Guarantee and, after default,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Preferred
Guarantee Trustee is under no obligation to exercise any of the powers vested in
it by the Preferred Securities Guarantee at the request of any holder of
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby; but the foregoing
shall not relieve the Preferred Guarantee Trustee, upon the occurrence of an
event of default under the Preferred Securities Guarantee, from exercising the
rights and powers vested in it by the Preferred Securities Guarantee. The
Preferred Guarantee Trustee also serves as Property Trustee.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of Michigan.
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DESCRIPTION OF THE SUBORDINATED NOTES
Set forth below is a description of the terms of the Subordinated Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Indenture (the "Base
Indenture"), dated as of January 1, 1996, between Consumers and Bank of New York
as Trustee (the "Debt Trustee"), as supplemented from time to time by one or
more supplemental indentures thereto, including by a Second Supplemental
Indenture relating to the Subordinated Notes, dated as of , 1997
(the Base Indenture, as so supplemented, is hereinafter referred to as the
"Indenture"), the forms of which are filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The terms of the Subordinated
Notes will include those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act. Certain capitalized terms
used herein are defined in the Indenture.
Under certain circumstances involving the termination of the Trust
following the occurrence of a Special Event, Subordinated Notes may be
distributed to the holders of Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
If the Subordinated Notes are distributed to the holders of the Trust
Securities, Consumers will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange on which the
Preferred Securities are then listed.
GENERAL
The Subordinated Notes will be issued as a series of unsecured subordinated
debt securities under the Indenture. The Subordinated Notes will be limited in
aggregate principal amount to approximately $123.711 million, such amount being
the sum of the aggregate stated liquidation amount of the Preferred Securities
and the capital contributed by Consumers in exchange for the Common Securities
(the "Payment").
The Subordinated Notes are not entitled to the benefit of any sinking fund.
Unless redeemed earlier, the entire principal amount of the Subordinated Notes
will mature and become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as defined herein), if any, on
, 2027.
If Subordinated Notes are distributed to holders of the Preferred
Securities in liquidation of such holders' interests in the Trust, it is
anticipated that such distribution would occur in book-entry form and that DTC,
or any successor depository for the Preferred Securities, would act as
depository for the Subordinated Notes and that the depository arrangements for
the Subordinated Notes would be substantially identical to those in effect for
the Preferred Securities. For a description of DTC and the terms of the
depository arrangements relating to payments, transfers, voting rights,
redemption and other notices and other matters, see "Description of the
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company."
Except under certain limited circumstances as described under "Description
of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" for delivery of certificates evidencing beneficial ownership in
Preferred Securities, the Subordinated Notes would not be issuable as, or
exchangeable for, Subordinated Notes in definitive certificated form. In the
event Subordinated Notes are issued in certificated form, such Subordinated
Notes will be in denominations of $25 and integral multiples thereof, and
principal and interest will be payable, the transfer of the Subordinated Notes
will be registrable and Subordinated Notes will be exchangeable for Subordinated
Notes of authorized denominations of a like aggregate principal amount as
described under "-- Exchange and Transfer" and "-- Payment" below.
SUBORDINATION
The Indenture provides (and each holder of Subordinated Notes by acceptance
thereof agrees) that the Subordinated Notes will be subordinated and junior in
right of payment to the prior payment in full of all Senior Indebtedness of
Consumers. No payment on account of principal of, premium, if any, or interest
on the Subordinated Notes and no acquisition of, or payment on account of any
sinking fund for, the Subordinated Notes may be made unless full payment of
amounts then due for principal, premium, if any, and interest then due on all
Senior Indebtedness by reason of the maturity thereof (by lapse of time,
acceleration or otherwise)
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has been made or duly provided for in cash in a manner satisfactory to the
holders of such Senior Indebtedness. In addition, the Indenture provides that
upon the happening and during the continuation of any default in payment of the
principal of, premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable or in the event any judicial proceeding shall be
pending with respect to any such default, then unless and until such default
shall have been cured or waived or shall have ceased to exist, no payment shall
be made by Consumers with respect to the principal of, premium, if any, or
interest on Subordinated Notes or to acquire any Subordinated Notes or on
account of any sinking fund provision applicable to Subordinated Notes.
Consumers shall give prompt written notice to the Debt Trustee of any default
under any Senior Indebtedness or under any agreement pursuant to which Senior
Indebtedness may have been issued. The Indenture provisions described in this
paragraph, however, do not prevent Consumers from making a sinking fund payment
with Subordinated Notes acquired prior to the maturity of Senior Indebtedness.
Upon any distribution of its assets in connection with any dissolution,
winding-up, liquidation or reorganization of Consumers, whether voluntary, or
involuntary, in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise, all Senior Indebtedness
must be paid in full before the holders of the Subordinated Notes are entitled
to any payments whatsoever. Any payment or distribution, whether in cash,
securities or other property, which would otherwise (but for the subordination
provisions) be payable or deliverable in respect of the Subordinated Notes shall
be paid or delivered directly to the holders of such Senior Indebtedness (or
their representative or trustee) in accordance with the priorities then existing
among such holders until all Senior Indebtedness shall have been paid in full
before any payment or distribution is made to the holders of Subordinated Notes.
In the event that notwithstanding such subordination provisions any payment or
distribution of assets of any kind or character is made on the Subordinated
Notes before all Senior Indebtedness is paid in full, the Debt Trustee or the
holders of Subordinated Notes receiving such payment will be required to pay
over such payment or distribution to the holders of such Senior Indebtedness.
The rights of the holders of the Subordinated Notes will be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Subordinated Notes are paid in full. As a result of these subordination
provisions, in the event of Consumers' insolvency, holders of the Subordinated
Notes may recover ratably less than senior creditors of Consumers.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on the following, whether outstanding on the date of execution of the
Indenture or thereafter incurred, created or assumed: (i) indebtedness of
Consumers for money borrowed by Consumers (including purchase money obligations)
or evidenced by debentures (other than the Subordinated Notes), notes, bankers'
acceptances or other corporate debt securities or similar instruments issued by
Consumers; (ii) all capital lease obligations of Consumers; (iii) all
obligations of Consumers issued or assumed as the deferred purchase price of
property, all conditional sale obligations of Consumers and all obligations of
Consumers under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) obligations with
respect to letters of credit; (v) all indebtedness of others of the type
referred to in the preceding clauses (i) through (iv) assumed by or guaranteed
in any manner by Consumers or in effect guaranteed by Consumers; or; (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of Consumers (whether or
not such obligation is assumed by Consumers), except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Notes, as the case may be, including all other debt securities and
guarantees in respect of those debt securities, issued to any other trusts,
partnerships or other entities affiliated with Consumers which act as a
financing vehicle of Consumers in connection with the issuance of preferred
securities by such entity or other securities which rank pari passu with, or
junior to, the Preferred Securities, and (2) any indebtedness between or among
Consumers and its affiliates and (vii) renewals, extensions or refunding of any
of the indebtedness referred to in the preceding clauses unless, in the case of
any particular indebtedness, renewal, extension or refunding, under the express
provisions of the instrument creating or evidencing the same or the assumption
or guarantee of the same, or pursuant to which the same is outstanding, such
indebtedness or such renewal, extension or refunding thereof is not superior in
right of payment to the Subordinated Notes.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued. As of March 31, 1997, Senior Indebtedness of Consumers
aggregated approximately $2,210 million.
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CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an
Indenture Event of Default or (ii) Consumers shall be in default with respect to
its payment of any obligations under the Preferred Securities Guarantee or the
Common Securities Guarantee, then (a) Consumers shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or make
a liquidation payment with respect to, any of its capital stock, (b) Consumers
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
Consumers which rank pari passu with or junior to the Subordinated Notes and (c)
Consumers shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Preferred Securities Guarantee).
If Consumers shall have given notice of its election of an Extension Period
as provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) Consumers shall not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock, (b) Consumers shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities (including guarantees) issued by Consumers which
rank pari passu with or junior to the Subordinated Notes and (c) Consumers shall
not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantee) provided, however, Consumers may
declare and pay a stock dividend where the dividend stock is the same stock as
that on which the dividend is being paid. Any Extension Period with respect to
payment of interest on the Subordinated Notes will also apply to distributions
with respect to the Preferred Securities.
For so long as the Trust Securities remain outstanding, Consumers will
covenant (i) to maintain 100% direct or indirect ownership of the Common
Securities of the Trust; provided, however, that any permitted successor of
Consumers under the Indenture may succeed to Consumers' ownership of such Common
Securities, (ii) not to cause, as sponsor of the Trust, or to permit, as holder
of the Common Securities, the dissolution, winding-up or termination of the
Trust, except in connection with a distribution of the Subordinated Notes as
provided in the Declaration and in connection with certain mergers,
consolidations or amalgamations and (iii) to use its reasonable efforts to cause
the Trust (a) to remain a statutory business trust, except in connection with
the distribution of Subordinated Notes to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration, and (b) to otherwise continue to be classified as a grantor
trust for United States federal income tax purposes.
OPTIONAL REDEMPTION
Consumers shall have the right to redeem the Subordinated Notes, in whole
or in part, from time to time, on or after , 2002, or at any time in
certain circumstances upon the occurrence of a Special Event as described under
"Description of the Preferred Securities -- Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days' notice, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Subordinated Notes would result in the
delisting of the Preferred Securities, Consumers may only redeem the
Subordinated Notes in whole.
INTEREST
Each Subordinated Note shall bear interest at the rate of % per annum
from the original issue date, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing , 1997, to the person in whose name such Subordinated
Note is registered, subject to certain exceptions, at the close of business on
the Business Day next preceding such Interest Payment Date. In the event the
Subordinated Notes shall not continue to remain in book-entry only form the
relevant record date shall be the fifteenth day of the month in which the
applicable Interest Payment Date occurs.
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The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis of
the actual number of days elapsed in such 90-day quarter. In the event that any
date on which interest is payable on the Subordinated Notes is not a Business
Day, then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Consumers shall have the right at any time, and from time to time, during
the term of the Subordinated Notes to defer payments of interest by extending
the interest payment period for a period not exceeding 20 consecutive quarters,
at the end of which Extension Period, Consumers shall pay all interest then
accrued and unpaid (including any Additional Interest, together with interest
thereon at the rate specified for the Subordinated Notes to the extent permitted
by applicable law); provided, that, during any such Extension Period, (a)
Consumers shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, (b) Consumers shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by Consumers which rank pari passu with
or junior to the Subordinated Notes and (c) Consumers shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Securities Guarantee), provided, however, Consumers may declare and
pay a stock dividend where the dividend stock is the same stock as that on which
the dividend is being paid. Prior to the termination of any such Extension
Period, Consumers may further defer payments of interest by extending the
interest payment period, provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity of the Subordinated Notes. Upon the
termination of any Extension Period and the payment of all amounts then due,
Consumers may select a new Extension Period, as if no Extension Period had
previously been declared, subject to the above requirements. No interest during
an Extension Period shall be due and payable, except at the end thereof.
Consumers has no present intention of exercising its rights to defer payments of
interest by extending the interest payment period on the Subordinated Notes. If
the Property Trustee shall be the sole registered holder of the Subordinated
Notes, Consumers shall give the Regular Trustees and the Property Trustee notice
of its election of such Extension Period one Business Day prior to the earlier
of (i) the next succeeding date on which distributions on the Preferred
Securities are payable or (ii) the date the Trust is required to give notice to
the New York Stock Exchange or other applicable self-regulatory organization or
to holders of the Preferred Securities of the record date or the date such
distribution is payable, but in any event not less than one Business Day prior
to such record date. The Regular Trustees shall give notice of Consumers'
selection of such Extension Period to the holders of the Preferred Securities.
If the Property Trustee shall not be the sole holder of the Subordinated Notes,
Consumers shall give the holders of the Subordinated Notes notice of its
selection of such Extension Period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date Consumers is required to give notice
to the New York Stock Exchange or other applicable self-regulatory organization
or to holders of the Subordinated Notes of the record or payment date of such
related interest payment, but in any event at least two Business Days before
such record date.
ADDITIONAL INTEREST
If at any time the Trust or the Property Trustee shall be required to pay
any taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, Consumers will pay as additional interest
("Additional Interest") such additional amounts as shall be required so that the
net amounts received and retained by the Trust and the Property Trustee after
paying any such taxes, duties, assessments or other governmental charges will be
equal to the amounts the Trust and the Property Trustee would have received had
no such taxes, duties, assessments or other governmental charges been imposed.
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INDENTURE EVENTS OF DEFAULT
The occurrence of any of the following events will constitute an "Indenture
Event of Default" with respect to the Subordinated Notes: (a) default for 30
days in the payment of any interest on any of the Subordinated Notes (including
any Additional Interest) provided, however, that a valid extension of the
interest payment period as described above shall not constitute a default in the
payment of interest for this purpose; (b) default in the payment when due of any
of the principal of or the premium, if any, on any of the Subordinated Notes,
whether at maturity, upon redemption, acceleration or otherwise; (c) default in
the deposit or payment of any sinking fund or analogous payment in respect of
any Subordinated Notes; (d) default for 60 days by Consumers in the observance
or performance of any other covenant or agreement contained in the Subordinated
Notes or the Indenture after written notice thereof as provided in the
Indenture; (e) certain events of bankruptcy, insolvency or reorganization
relating to Consumers; (f) the voluntary or involuntary dissolution, winding-up
or termination of the Trust, except in connection with the distribution of
Subordinated Notes to the holders of Preferred Securities in liquidation of the
Trust, the redemption of all outstanding Trust Securities of the Trust and
certain mergers, consolidations or amalgamations permitted by the Declaration.
If an Indenture Event of Default on Subordinated Notes shall have occurred
and be continuing, either the Debt Trustee or the holders of not less than 25%
in aggregate principal amount of the Subordinated Notes then outstanding may
declare the principal of all Subordinated Notes and the interest, if any,
accrued thereon to be due and payable immediately. Accordingly, the Property
Trustee, as the holder of the Subordinated Notes, will have the right to declare
the principal of and the interest on the Subordinated Notes (including any
Additional Interest, if any) and any other amounts payable under the Indenture
to be forthwith due and payable and to enforce its other rights as a creditor
with respect to the Subordinated Notes.
Upon certain conditions, any such declarations may be rescinded and
annulled if all Indenture Events of Default, other than the nonpayment of
accelerated principal, with respect to the Subordinated Notes of all such and
Securities of other affected series then outstanding under the Indenture shall
have been cured or waived as provided in the Indenture by the holders of a
majority in aggregate principal amount of the Subordinated Notes and Securities
of other affected series then outstanding under the Indenture.
The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of the holders of the Subordinated Notes, unless such holders shall
have offered to the Debt Trustee reasonable indemnity. Subject to such
provisions for indemnity and certain other limitations contained in the
Indenture, the holders of a majority in aggregate principal amount of the
Subordinated Notes of each affected series then outstanding (voting as one
class) will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Debt Trustee, or exercising any
trust or power conferred on the Debt Trustee, with respect to the Subordinated
Notes of such affected series.
The Indenture provides that no holder of Subordinated Notes may institute
any action against Consumers under the Indenture (except actions for payment of
overdue principal, premium or interest) unless such holder previously shall have
given to the Debt Trustee written notice of default and continuance thereof and
unless the holders of not less than 25% in aggregate principal amount of the
Subordinated Notes and Securities of other affected series then outstanding
under the Indenture (voting as one class) shall have requested the Debt Trustee
to institute such action and shall have offered the Debt Trustee reasonable
indemnity, the Debt Trustee shall not have instituted such action within 60 days
of such request and the Debt Trustee shall not have received direction
inconsistent with such request by the holders of a majority in aggregate
principal amount of the Subordinated Notes and Securities of other affected
series then outstanding under the Indenture (voting as one class).
The Indenture requires Consumers to furnish to the Debt Trustee annually a
statement as to Consumers' compliance with all conditions and covenants under
the Indenture. The Indenture provides that the Debt Trustee may withhold notice
to the holders of the Subordinated Notes of any series of any default affecting
such series (except defaults as to payment of principal, premium or interest on
the Subordinated Notes of
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such series) if it considers such withholding to be in the interests of the
holders of the Subordinated Notes of such series.
EXCHANGE AND TRANSFER
If the book-entry only system is not in effect, Subordinated Notes may be
presented for exchange and registered Subordinated Notes may be presented for
registration of transfer at the office or agency of the Debt Trustee subject to
the restrictions set forth therein, without service charge, but upon payment of
any taxes or other governmental charges due in connection therewith, subject to
any applicable limitations contained in the Indenture.
PAYMENT
If the book-entry only system is not in effect, payment of the principal of
and the premium and interest, if any, on all Subordinated Notes will be made at
the office or agency of the Debt Trustee in the Borough of Manhattan, the City
of New York except that, at the option of Consumers, payment of any interest may
be made (i) by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or (ii) by wire transfer to
an account maintained by the Person entitled thereto as specified in the
Security Register. Payment of any interest due on Subordinated Notes in
registered form will be made to the Persons in whose name such Subordinated
Notes are registered at the close of business on the record date for such
interest payments.
MODIFICATION OF THE INDENTURE
The Indenture permits Consumers and the Debt Trustee to enter into
supplemental indentures thereto without the consent of the holders of the
Subordinated Notes to: (a) secure the Subordinated Notes, (b) evidence the
assumption by a successor corporation of the obligations of Consumers under the
Indenture and the Subordinated Notes then outstanding, (c) add covenants for the
protection of the holders of the Subordinated Notes, (d) cure any ambiguity or
correct any inconsistency in the Indenture, (e) establish the form and terms of
any series of securities under the Indenture and (f) evidence the acceptance of
appointment by a successor Debt Trustee.
The Indenture also permits Consumers and the Debt Trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
Subordinated Notes and other Indenture securities of all series then outstanding
and affected (voting as one class), to add any provisions to, or change in any
manner or eliminate any of the provisions of, the Indenture or modify in any
manner the rights of the holders of the Subordinated Notes and other Indenture
securities; provided, however, that Consumers and the Debt Trustee may not,
without the consent of the holder of each such security then outstanding and
affected thereby: (a) change the time of payment of the principal (or any
installment) of any such security, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or impair the
right to institute suit for the enforcement of any payment on any Subordinated
Note when due or (b) reduce the percentage in principal amount of the Indenture
securities, the consent of whose holders is required for any such modification
or for any waiver provided for in the Indenture.
Prior to the acceleration of the maturity of any Subordinated Note or other
securities outstanding under the Indenture, the holders of a majority in
aggregate principal amount of Subordinated Notes and other securities
outstanding under the Indenture with respect to which a default or an Event of
Default shall have occurred and be continuing (voting as one class) may on
behalf of the holders of all such affected securities (including the
Subordinated Notes) waive any past default or Event of Default and its
consequences, except a default or an Event of Default in respect of a covenant
or provision of the Indenture or of any Subordinated Note or other Indenture
security which cannot be modified or amended without the consent of the holder
of each Subordinated Note or other Indenture security affected.
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CONSOLIDATION, MERGER OR SALE OF ASSETS
The Indenture provides that Consumers may consolidate with or merge into,
or sell, lease or convey its property as an entirety or substantially as an
entirety to, any other corporation if such corporation assumes the obligations
of Consumers under the Subordinated Notes and the Indenture and is organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia.
DEFEASANCE AND DISCHARGE
The Indenture provides that, at the option of Consumers: Consumers will be
discharged from any and all obligations in respect of the Subordinated Notes
(except for certain obligations to register the transfer of or exchange the
Subordinated Notes of such series, to replace stolen, lost or mutilated
Subordinated Notes, to maintain paying agencies and to maintain the trust
described below), if Consumers irrevocably deposits in trust with the Debt
Trustee money, and/or securities backed by the full faith and credit of the
United States which, through the payment of the principal thereof and the
interest thereon in accordance with their terms, will provide money in an amount
sufficient to pay all the principal of and premium, if any, and interest on the
Subordinated Notes of such series on the stated maturity of such Subordinated
Notes (which may include one or more redemption dates designated by Consumers)
in accordance with the terms thereof. If such deposit occurs more than one year
prior to the stated maturity or redemption date of such Subordinated Notes,
Consumers is required, among other things, to deliver to the Debt Trustee an
opinion of independent counsel to the effect that the exercise of such option
would not cause the holders of the Subordinated Notes to recognize income, gain
or loss for United States federal income tax purposes as a result of such
defeasance, and such holders will be subject to United States federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred.
Consumers may also obtain a discharge of the Indenture with respect to all
securities then outstanding under the Indenture including Subordinated Notes
(except for certain obligations to register the transfer of or exchange such
Subordinated Notes, to replace stolen, lost or mutilated Subordinated Notes, to
maintain paying agencies and to maintain the trust described below) by
irrevocably depositing in trust with the Debt Trustee money, and/or securities
backed by the full faith and credit of the United States which, through the
payment of the principal thereof and the interest thereon in accordance with
their terms, will provide money in an amount sufficient to pay all the principal
of and premium, if any, and interest on the Subordinated Notes on the stated
maturities thereof (including one or more redemption dates), provided that such
Subordinated Notes are by their terms due and payable, or are to be called for
redemption, within one year.
For United States federal income tax purposes, any deposit contemplated in
the preceding paragraph would be treated as an exchange of the Subordinated
Notes outstanding for other property. Accordingly, holders of Subordinated Notes
outstanding may be required to recognize a gain or loss for United States
federal income tax purposes upon such exchange. In addition, such holders
thereafter may be required to recognize income from such property which could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors as to
the specific consequences to them of such deposit.
GOVERNING LAW
The Indenture and Subordinated Notes will be governed by, and construed in
accordance with, the laws of the State of Michigan; provided, however, that the
rights, duties and obligations of the Trustee are governed and constructed in
accordance with the laws of the State of New York.
MISCELLANEOUS
The Indenture will provide that Consumers will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Subordinated Notes,
(ii) the organization, maintenance and dissolution of the Trust, (iii) the
retention of the Consumers Trustees and (iv) the enforcement by the Property
Trustee of the rights of holders of Preferred Securities.
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EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED NOTES
AND THE PREFERRED SECURITIES GUARANTEE
As set forth in the Declaration, the sole purposes of the Trust are to (i)
issue Trust Securities, (ii) invest the proceeds thereof in the Subordinated
Notes and (iii) engage in only those other activities necessary or incidental
thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Notes, such payments will be sufficient to cover distributions and
payments due on the Trust Securities primarily because (i) the aggregate
principal amount of Subordinated Notes will be equal to the sum of the aggregate
stated liquidation amount of the Trust Securities; (ii) the interest rate and
interest and other payment dates on the Subordinated Notes will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) Consumers shall pay for all costs and expenses of the Trust;
and (iv) the Declaration provides that the Consumers Trustees shall not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by Consumers as and to the extent set forth under
"Description of the Preferred Securities Guarantee." If Consumers does not make
interest payments on the Subordinated Notes purchased by the Trust, it is
expected that the Trust will not have sufficient funds to pay distributions on
the Preferred Securities. The Preferred Securities Guarantee does not apply to
any payment of distributions unless and until the Trust has sufficient funds for
the payment of such distributions.
If Consumers fails to make interest or other payments on the Subordinated
Notes when due (taking into account any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities -- Voting
Rights," may direct the Property Trustee to enforce its rights under the
Subordinated Notes. In addition, a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder directly of the
principal of or interest on Subordinated Notes having a principal amount equal
to the aggregate liquidation preference amount of the Preferred Securities of
such holder on or after the respective due dates specified in the Subordinated
Notes. If the Property Trustee fails to enforce its other rights under the
Subordinated Notes, to the fullest extent permitted by law, a holder of
Preferred Securities may institute a legal proceeding directly against Consumers
to enforce the Property Trustee's rights under the Subordinated Notes without
first instituting any legal proceeding against the Property Trustee or any other
person or entity, including the Trust.
If Consumers fails to make payments under the Preferred Securities
Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities may direct the Preferred Guarantee Trustee
to enforce its rights thereunder. In addition, any holder of Preferred
Securities may institute a legal proceeding directly against Consumers to
enforce its rights under the Preferred Securities Guarantee, without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee or any other person or entity.
The obligations of Consumers with respect to the Preferred Securities under
the Subordinated Notes, the Indenture, the Preferred Securities Guarantee and
the Declaration (including its obligation to pay the expenses of the Trust),
taken together, constitute a full and unconditional guarantee by Consumers of
payments due on the Preferred Securities. See "Description of the Preferred
Securities Guarantees -- General."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities to a holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States or any state thereof or the District of Columbia,
an estate or trust the income of which is subject to United States federal
income taxation regardless of its source, or a trust the administration of which
is subject
33
<PAGE> 35
to the primary supervision of a court within the United States and for which one
or more United States individuals have the authority to control all substantial
decisions (a "Holder"), represents the opinion of Reid & Priest LLP, special tax
counsel to Consumers and the Trust. Investors should be aware that the opinion
of Reid & Priest LLP does not address any other issue and is not binding on the
Internal Revenue Service (the "Service") or the courts. This summary does not
address the United States federal income tax consequences to persons other than
Holders.
This summary is based on the United States federal income tax laws,
regulations and rulings and decisions now in effect, all of which are subject to
change, possibly on a retroactive basis. This summary does not address the tax
consequences applicable to investors that may be subject to special tax rules
such as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors or persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a Holder. In
addition, this summary does not address the tax consequences to persons who
purchase Preferred Securities other than pursuant to their initial issuance and
distribution. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to a Holder.
CLASSIFICATION OF THE SUBORDINATED NOTES
In connection with the issuance of the Subordinated Notes, Reid & Priest
LLP, special tax counsel to Consumers and the Trust, will render its opinion
generally to the effect that, although not entirely free from doubt, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Subordinated Notes held by the Trust will be classified for
United States federal income tax purposes as indebtedness of Consumers.
There can be no assurance, however, that legislation will not be enacted
into law or that other developments will not occur after the date hereof that
would adversely affect the tax treatment of the Subordinated Notes or otherwise
give rise to a Special Event that could result in the exchange of the
Subordinated Notes for Preferred Securities or, in certain limited
circumstances, the redemption of the Subordinated Notes by Consumers and the
distribution of the resulting cash in redemption of the Preferred Securities.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution."
CLASSIFICATION OF CONSUMERS ENERGY COMPANY FINANCING II
Reid & Priest LLP, special tax counsel to Consumers and to the Trust, is of
the opinion that, under current law and assuming full compliance with the terms
of the Indenture and the Declaration (and certain other documents), the Trust
will be classified as a "grantor trust" for federal income tax purposes and will
not be classified as an association taxable as a corporation. Each Holder will
be treated as owning an undivided beneficial interest in the Subordinated Notes.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on the Subordinated Notes will
be taxable to Holders of Preferred Securities as ordinary income at the time it
is paid or accrued in accordance with the Holder's method of accounting for tax
purposes.
ORIGINAL ISSUE DISCOUNT
Under income tax regulations that recently became effective, Consumers
believes that the Subordinated Notes will not be treated as issued with OID.
This conclusion is based upon certain assumptions, including the assumption that
the issue price of the Preferred Securities is not less than the stated
principal amount of the Subordinated Notes. It should be noted that these
regulations have not yet been addressed in many rulings or
34
<PAGE> 36
other interpretations by the IRS. Accordingly, it is possible that the IRS could
take a position contrary to the interpretation described herein.
Consumers generally has the right to defer the payment of interest on the
Subordinated Notes at any time for up to 20 consecutive quarters. Should
Consumers exercise its rights to defer payments of interest, the Subordinated
Notes would be treated as issued with OID and all the stated interest payments
on the Subordinated Notes would thereafter be treated as OID for so long as they
remained outstanding. As a result, all Holders would, in effect, be required to
accrue interest income even if such Holders are on a cash method of accounting.
Consequently, in the event that the payment of interest is deferred, a Holder
could be required to include OID in income on an economic accrual basis,
notwithstanding that Consumers will not make any interest payments during such
Extension Period of the Subordinated Notes.
RECEIPT OF SUBORDINATED NOTES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution,"
Subordinated Notes may be distributed to Holders in exchange for the Preferred
Securities and in liquidation of the Trust. Such a distribution would be treated
as a non-taxable event to each Holder and each Holder would receive an aggregate
tax basis in the Subordinated Notes equal to such Holder's aggregate tax basis
in the Preferred Securities. A Holder's holding period in the Subordinated Notes
so received in liquidation of the Trust would include the period for which the
Preferred Securities were held by such Holder.
RECEIPT OF CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution," the
Subordinated Notes may be redeemed for cash and the proceeds of such redemption
distributed to Holders in redemption of the Preferred Securities. Under current
law, such a redemption would, for United States federal income tax purposes,
constitute a taxable disposition of the Preferred Securities, and a Holder would
recognize gain or loss as if such Holder had sold such redeemed Preferred
Securities. See "--Sale of Preferred Securities," below.
SALE OF PREFERRED SECURITIES
A Holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis and the amount realized on the
sale with respect to Preferred Securities. Any such gain or loss generally will
be capital gain or loss and will be long-term capital gain or loss if at the
time of sale the Preferred Securities have been held for the required holding
period.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Notes. During an Extension Period, a Holder disposing of its
Preferred Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest through the date of
disposition in income as ordinary income (i.e. OID), and to add such amount to
its adjusted tax basis in its Preferred Securities. To the extent the selling
price is less than the Holder's adjusted tax basis (which will include, in the
form of OID, all accrued but unpaid interest), a Holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to Holders on Form 1099, which forms should be
mailed to Holders of Preferred Securities by January 31 following each calendar
year.
35
<PAGE> 37
The Trust will be obligated to report annually to Cede & Co., as Holder of
record of the Preferred Securities, the OID with respect to the Preferred
Securities that accrued during that year. The Trust currently intends to report
such information on Form 1099 prior to January 31 following each calendar year
even though the Trust is not legally required to report to record Holders until
April 15 following each calendar year. The Underwriters have indicated to the
Trust that, to the extent that they hold Preferred Securities as nominees for
beneficial Holders, they currently expect to report the OID that accrued during
the calendar year on such Preferred Securities to such beneficial Holders on
Forms 1099 by January 31 following each calendar year. Under current law,
Holders of Preferred Securities who hold as nominees for beneficial Holders will
not have any obligation to report information regarding the beneficial Holders
to the Trust. The Trust, moreover, will not have any obligation to report to
beneficial Holders who are not also record holders. Thus, beneficial Holders of
Preferred Securities who hold their Preferred Securities through the
Underwriters will receive Forms 1099 reflecting the income on their Preferred
Securities from such nominee Holders rather than the Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the Holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the Holder's federal income tax, provided that required
information is provided to the Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
36
<PAGE> 38
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as
representative (the "Representative"), has severally agreed to purchase the
number of Preferred Securities set forth opposite its name below. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Preferred
Securities offered hereby if any of the Preferred Securities are purchased. The
Underwriters are committed to take and pay for all of the Preferred Securities
if any such Preferred Securities are taken, provided that, under certain
circumstances relating to a default of one or more Underwriters, less than all
of such Preferred Securities may be purchased. Default by one or more
Underwriters would not relieve the non-defaulting Underwriters from their
several obligations, and in the event of such default, Consumers would have the
right to require the non-defaulting Underwriters to purchase the respective
number of Preferred Securities which agreed to purchase and, in addition, to
purchase Preferred Securities which the defaulting Underwriter or Underwriters
shall have so failed to purchase up to a number thereof equal to one-ninth of
the respective numbers of Preferred Securities which such non-defaulting
Underwriters have otherwise agreed to purchase.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Morgan Stanley & Co. Incorporated...........................
---------
Total..........................................
=========
</TABLE>
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price, as set forth on the cover
page of this Prospectus, and in part to certain securities dealers at such price
less a concession of $ per Preferred Security. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representative.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Notes of Consumers, the
Underwriting Agreement provides that Consumers will agree to pay as compensation
("Underwriters' Compensation") to the Underwriters for the Underwriters'
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $ per Preferred Security (or $ in
the aggregate) for the accounts of the several Underwriters, provided that such
compensation for sales of or more Preferred Securities to any single
purchaser will be $ per Preferred Security. Therefore, to the extent of
such sales, the actual amount of Underwriters' Compensation will be less than
the aggregate amount specified in the preceding sentence.
During a period of 60 days from the date of the pricing of the Preferred
Securities, neither the Trust nor Consumers will, without the prior written
consent of the Representative, directly or indirectly, sell, offer to sell,
contract to sell, grant any option for the sale of, or otherwise dispose of, any
Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or the Subordinated Notes or any debt
securities substantially similar to the Subordinated Notes or any equity
securities substantially similar to the Preferred Securities (except for the
Subordinated Notes and the Preferred Securities).
An application has been filed with the New York Stock Exchange for the
listing of the Preferred Securities, subject to official notice of issuance. If
approved for listing, trading of the Preferred Securities on
37
<PAGE> 39
the New York Stock Exchange is expected to commence within a 30 day period after
the date of this Prospectus. The Representative has advised the Trust that the
Underwriters intend to make a market in the Preferred Securities prior to the
commencement of trading on the New York Stock Exchange. The Underwriters will
have no obligation to make a market in the Preferred Securities, however, and
may cease market making activities, if commenced, at any time.
Until the distribution of the Preferred Securities is completed, rules of
the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Preferred Securities. As an exception
to these rules, the Representative is permitted to engage in certain
transactions that stabilize the price of the Preferred Securities. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Preferred Securities.
If the Underwriters create a short position in the Preferred Securities in
connection with the offering, i.e., if they sell more Preferred Securities than
are set forth on the cover page of this Prospectus, the Representative may
reduce that short position by purchasing Preferred Securities in the open
market.
The Representative may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
Preferred Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Preferred Securities, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
None of Consumers, the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Preferred
Securities. In addition, none of Consumers, the Trust nor any of the
Underwriters makes any representation that the Representative will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Prior to this offering, there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell to a minimum of 400 beneficial holders.
Consumers and the Trust have agreed to indemnify the Underwriters against,
or to contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Consumers in the ordinary course of business.
38
<PAGE> 40
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Consumers and the Trust by Richards,
Layton & Finger, P.A., special Delaware counsel to Consumers and the Trust. The
validity of the Subordinated Notes, the Preferred Securities Guarantee and
certain matters relating thereto will be passed upon on behalf of Consumers by
Michael D. VanHemert, Esq, Assistant General Counsel for CMS Energy Corporation.
Certain legal matters will be passed upon on behalf of the Underwriters by Reid
& Priest LLP. Certain United States federal income taxation matters will be
passed upon for Consumers and the Trust by Reid & Priest LLP. Reid & Priest LLP
currently provides legal services to an affiliate of Consumers and has, from
time to time, provided legal services to CMS Energy Corporation, Consumers'
parent.
EXPERTS
The consolidated financial statements and schedule of Consumers as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996 included or incorporated by reference in this Prospectus have
been audited by Arthur Andersen LLP (formerly Arthur Andersen & Co.),
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
With respect to the unaudited interim consolidated financial information
for the periods ended March 31, 1997 and 1996, Arthur Andersen LLP have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report thereon states that they did
not audit and they did not express an opinion on that interim consolidated
financial information. Accordingly, the degree of reliance on their report on
that information should be restricted in light of the limited nature of the
review procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their report on the
unaudited interim consolidated financial information because that report is not
a "report" or "part" of the registration statement prepared or certified by the
accountants within the meanings of Sections 7 and 11 of the Securities Act.
39
<PAGE> 41
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CONSUMERS ENERGY COMPANY,
CONSUMERS ENERGY COMPANY FINANCING II OR THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CONSUMERS
ENERGY COMPANY OR CONSUMERS ENERGY COMPANY FINANCING II, SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents by
Reference........................... 4
Prospectus Summary.................... 6
Risk Factors.......................... 7
Consumers Energy Company.............. 10
Consumers Energy Company Financing
II.................................. 10
Selected Financial Information of
Consumers Energy Company............ 12
Capitalization of Consumers Energy
Company............................. 13
Accounting Treatment.................. 13
Use of Proceeds....................... 13
Description of the Preferred
Securities.......................... 14
Description of the Preferred
Securities Guarantee................ 23
Description of the Subordinated
Notes............................... 26
Effect of Obligations Under the
Subordinated Notes and the Preferred
Securities Guarantee................ 33
Certain United States Federal Income
Tax Consequences.................... 33
Underwriting.......................... 37
Legal Matters......................... 39
Experts............................... 39
</TABLE>
======================================================
======================================================
4,800,000
PREFERRED SECURITIES
CONSUMERS ENERGY
COMPANY
FINANCING II
% TRUST ORIGINATED
PREFERRED SECURITIES(SM)
("TOPRS(SM)")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
CONSUMERS ENERGY COMPANY
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
, 1997
======================================================
<PAGE> 42
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Securities and Exchange Commission filing fee............... $ 36,364.00
New York Stock Exchange listing fee......................... 47,800.00*
Rating Agency fees.......................................... 83,000.00*
Trustees expenses........................................... 15,000.00*
Printing and engraving fees................................. 200,000.00*
Accounting fees and expenses................................ 5,000.00*
Legal fees and expenses..................................... 35,000.00*
Miscellaneous............................................... 10,500.00*
-----------
Total.................................................. $432,664.00*
===========
</TABLE>
- -------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following resolution was adopted by the Board of Directors of Consumers
on May 6, 1987:
RESOLVED: That effective March 1, 1987 the Company shall indemnify to
the full extent permitted by law every person (including the estate, heirs
and legal representatives of such person in the event of the decease,
incompetency, insolvency or bankruptcy of such person) who is or was a
director, officer, partner, trustee, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer,
partner, trustee, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against all liability, costs,
expenses, including attorneys' fees, judgments, penalties, fines and
amounts paid in settlement, incurred by or imposed upon the person in
connection with or resulting from any claim or any threatened, pending or
completed action, suit or proceeding whether civil, criminal,
administrative, investigative or of whatever nature, arising from the
person's service or capacity as, or by reason of the fact that the person
is or was, a director, officer, partner, trustee, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. Such right of
indemnification shall not be deemed exclusive of any other rights to which
the person may be entitled under statute, bylaw, agreement, vote of
shareholders or otherwise.
Article XIII, Section 1 of Consumers Bylaws provides:
The Company may purchase and maintain liability insurance, to the full
extent permitted by law, on behalf of any person who is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity.
Article V of Consumers Restated Articles of Incorporation, as amended,
reads:
A director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty as a director except
(i) for a breach of the director's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for a violation
of Section 551(1) of the Michigan Business Corporation Act, and (iv) any
transaction from which the director derived an improper personal benefit.
No amendment to or repeal of this Article V, and no modification to its
provisions by law, shall apply to, or have any effect upon, the liability
or alleged liability of any director of the Company for or with respect to
any acts or omissions of such director occurring prior to such amendment,
repeal or modification.
II-1
<PAGE> 43
Article VI of Consumers Restated Articles of Incorporation, as amended,
reads:
Each director and each officer of the Company shall be indemnified by
the Company to the fullest extent permitted by law against expenses
(including attorneys' fees), judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense of any proceeding in which he or she was or is a party or
is threatened to be made a party by reason of being or having been a
director or an officer of the Company. Such right of indemnification is not
exclusive of any other rights to which such director or officer may be
entitled under any now or thereafter existing statute, any other provision
of these Articles, bylaw, agreement, vote of shareholders or otherwise. If
the Business Corporation Act of the State of Michigan is amended after
approval by the shareholders of this Article VI to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Company shall be eliminated or
limited to the fullest extent permitted by the Business Corporation Act of
the State of Michigan, as so amended. Any repeal or modification of this
Article VI by the shareholders of the Company shall not adversely affect
any right or protection of a director of the Company existing at the time
of such repeal or modification.
Sections 561 through 571 of the Michigan Business Corporation Act provide
Consumers with the power to indemnify directors, officers, employees and agents
against certain expenses and payments, and to purchase and maintain insurance on
behalf of directors, officers, employees and agents.
Officers, directors and Regular Trustees are covered within specified
monetary limits by insurance against certain losses arising from claims made by
reason of their being directors or officers of Consumers or of Consumers'
subsidiaries and Consumers' officers and directors are indemnified against such
losses by reason of their being or having been directors or officers of another
corporation, partnership, joint venture, trust or other enterprise at Consumers'
request. In addition, Consumers has indemnified each of its present directors by
contracts that contain affirmative provisions essentially similar to those in
sections 561 through 571 of the Michigan Business Corporation Act cited above.
Section 10.4 of the Declaration of Trust provides that:
(a)(i) Consumers shall indemnify, to the full extent permitted by law,
any Company Indemnified Person (as defined therein) who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Company Indemnified Person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) Consumers shall indemnify, to the full extent permitted by law,
any Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or
in the right of the Trust to procure a judgment in its favor by reason of
the fact that he is or was a Company Indemnified Person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as
to which such Company Indemnified Person shall have been adjudged to be
liable to the Trust unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
II-2
<PAGE> 44
(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of Section 10.4(a), or in defense of any claim,
issue or matter therein, he shall be indemnified, to the full extent
permitted by law, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of Section
10.4(a) (unless ordered by a court) shall be made by Consumers only as
authorized in the specific case upon a determination that indemnification
of the Company Indemnified Person is proper in the circumstances because he
has met the applicable standard of conduct set forth in paragraphs (i) and
(ii). Such determination shall be made (1) by the Regular Trustees by a
majority vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested Regular
Trustees so directs, by independent legal counsel in a written opinion, or
(3) by the Common Security Holder of the Trust.
(v) To the fullest extent permitted by applicable law, expenses
(including attorneys' fees) incurred by a Company Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit
or proceeding referred to in paragraphs (i) and (ii) of Section 10.4(a)
shall be paid by Consumers in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf
of such Company Indemnified Person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by
Consumers as authorized in Section 10.4(a). Notwithstanding the foregoing,
no advance shall be made by Consumers if a determination is reasonably and
promptly made (i) by the Regular Trustees by a majority vote of a quorum of
disinterested Regular Trustees, (ii) if such a quorum is not obtainable,
or, even if obtainable, if a quorum of disinterested Regular Trustees so
directs, by independent legal counsel in a written opinion or (iii) the
Common Security Holder of the Trust, that, based upon the facts known to
the Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Company Indemnified Person acted in bad
faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect to any
criminal proceeding, that such Company Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall any
advance be made in instances where the Regular Trustees, independent legal
counsel or Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Preferred
Security Holders.
(vi) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of Section 10.4(a) shall not be
deemed exclusive of any other rights to which those seeking indemnification
and advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of Consumers or Preferred Security
Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
All rights to indemnification under Section 10.4(a) shall be deemed to be
provided by contract between Consumers and each Company Indemnified Person
who serves in such capacity at any time while Section 10.4(a) is in effect.
Any repeal or modification of Section 10.4(a) shall not affect any rights
or obligations then existing.
(vii) Consumers or the Trust may purchase and maintain insurance on
behalf of any person who is or was a Company Indemnified Person against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not Consumers would have the
power to indemnify him against such liability under the provisions of
Section 10.4(a).
(viii) For purposes of Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of
II-3
<PAGE> 45
Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate
existence had continued.
(ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, Section 10.4(a) shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) Consumers agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for,
and to hold each Fiduciary Indemnified Person harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
II-4
<PAGE> 46
ITEM 16. EXHIBITS.
The following exhibits are filed herewith.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
(1) -- Form of Underwriting Agreement
(4)-1 -- Certificate of Trust.
(4)-2 -- Form of Amended and Restated Declaration of Trust.
*(4)-3 -- Indenture dated as of January 1, 1996 between Consumers
and The Bank of New York, as Trustee. (Designated in
Consumers' Form 10-K for the fiscal year ended December
31, 1995, File No. 1-5611, as Exhibit (4)(b).
First Supplemental Indenture dated as of January 18, 1996
between Consumers and The Bank of New York, as Trustee.
(Designated in Consumers' Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5611, as Exhibit
(4)(b).
(4)-4 -- Form of Second Supplemental Indenture to Indenture to be
used in connection with the issuance of Subordinated Notes
(4)-5 -- Form of Preferred Security (included in (4)-2).
(4)-6 -- Form of Subordinated Note Security (included in (4)-4).
(4)-7 -- Form of Preferred Securities Guarantee Agreement.
(5)-1 -- Opinion re legality of Preferred Securities.
(5)-2 -- Opinion re legality of Subordinated Notes and the
Preferred Securities Guarantee.
(8) -- Opinion re tax matters.
(12) -- Statement re Computation of Ratios of Earnings to Fixed
Charges and Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends.
(15) -- Letter re unaudited interim financial information
(23)-1 -- Consent of Richards, Layton & Finger, P.C. (included in
(5)-1).
(23)-2 -- Consent of Michael D. VanHemert, Esq. (included in
(5)-2).
(23)-3 -- Consent of Reid & Priest LLP (included in (8)).
(23)-4 -- Consent of Arthur Andersen LLP.
(24) -- Powers of attorney of Directors whose names are signed
to this registration statement pursuant to such powers and
resolution.
(25)-1 -- Statement of Eligibility of Property Trustee.
(25)-2 -- Statement of Eligibility of Debt Trustee.
(25)-3 -- Statement of Eligibility of Preferred Guarantee Trustee.
- -------------------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by reference with the same effect as
if filed with this Registration Statement.
ITEM 17. UNDERTAKINGS.
The Undersigned Registrants Hereby Undertake:
(1) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(2) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
II-5
<PAGE> 47
(3) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrants pursuant to the provisions described in Item 15
above, or otherwise, the registrants have been advised that in the opinion
of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by a registrant of expenses incurred or paid by a director, officer or
controlling person of such registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, such
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(5) The undersigned Trust registrant hereby undertakes to provide to
the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
II-6
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Form S-3
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Jackson, and State of Michigan, on the 5th day
of August, 1997.
CONSUMERS ENERGY COMPANY
By: /s/ A.M. WRIGHT
-------------------------------
A. M. Wright
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Form S-3
Registration Statement has been signed below by the following persons in the
capacities and on the 5th day of August, 1997.
NAME TITLE
---- -----
(i) Principal executive officer:
/s/ MICHAEL G. MORRIS President and Chief Executive Officer
- -----------------------------------------
Michael G. Morris
(ii) Principal financial officer:
/s/ A.M. WRIGHT Senior Vice President and Chief
- ----------------------------------------- Financial Officer
Alan M. Wright
(iii) Controller or principal accounting
officer:
/s/ DENNIS DAPRA Vice President and Controller
- -----------------------------------------
Dennis DaPra
* Director
- -----------------------------------------
(James J. Duderstadt)
Director
- -----------------------------------------
(John M. Deutch)
* Director
- -----------------------------------------
(Kathleen R. Flaherty)
* Director
- -----------------------------------------
(Victor J. Fryling)
* Director
- -----------------------------------------
(Earl D. Holton)
II-7
<PAGE> 49
NAME TITLE
---- -----
* Director
- ---------------------------------------------
(Michael G. Morris)
* Director
- ---------------------------------------------
(William T. McCormick, Jr.)
* Director
- ---------------------------------------------
(William U. Parfet)
* Director
- ---------------------------------------------
(Percy A. Pierre)
Director
- ---------------------------------------------
(Kenneth Whipple)
* Director
- ---------------------------------------------
(John B. Yasinsky)
*By /s/ A.M. WRIGHT
----------------------------------------
Alan M. Wright
Attorney-in-fact
II-8
<PAGE> 50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Consumers
Energy Company Financing II certifies that is has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has duly caused
this Form S-3 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Michigan, on the 5th day of August, 1997.
Consumers Energy Company Financing II
By /s/ A.M. WRIGHT
-----------------------------------
Trustee
By /s/ DORIS F. GALVIN
------------------------------------
Trustee
By /s/ THOMAS A. MCNISH
------------------------------------
Trustee
II-9
<PAGE> 51
EXHIBIT INDEX
The following exhibits are filed herewith.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
(1) -- Form of Underwriting Agreement
(4)-1 -- Certificate of Trust.
(4)-2 -- Form of Amended and Restated Declaration of Trust.
*(4)-3 -- Indenture dated as of January 1, 1996 between Consumers
and The Bank of New York, as Trustee. (Designated in
Consumers' Form 10-K for the fiscal year ended December
31, 1995, File No. 1-5611, as Exhibit (4)(b).
First Supplemental Indenture dated as of January 18, 1996
between Consumers and The Bank of New York, as Trustee.
(Designated in Consumers' Form 10-K for the fiscal year
ended December 31, 1995, File No. 1-5611, as Exhibit
(4)(b).
(4)-4 -- Form of Second Supplemental Indenture to Indenture to be
used in connection with the issuance of Subordinated Notes
(4)-5 -- Form of Preferred Security (included in (4)-2).
(4)-6 -- Form of Subordinated Note Security (included in (4)-4).
(4)-7 -- Form of Preferred Securities Guarantee Agreement.
(5)-1 -- Opinion re legality of Preferred Securities.
(5)-2 -- Opinion re legality of Subordinated Notes and the
Preferred Securities Guarantee.
(8) -- Opinion re tax matters.
(12) -- Statement re Computation of Ratios of Earnings to Fixed
Charges and Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends.
(15) -- Letter re unaudited interim financial information
(23)-1 -- Consent of Richards, Layton & Finger, P.C. (included in
(5)-1).
(23)-2 -- Consent of Michael D. VanHemert, Esq. (included in
(5)-2).
(23)-3 -- Consent of Reid & Priest LLP (included in (8)).
(23)-4 -- Consent of Arthur Andersen LLP.
(24) -- Powers of attorney of Directors whose names are signed
to this registration statement pursuant to such powers and
resolution.
(25)-1 -- Statement of Eligibility of Property Trustee.
(25)-2 -- Statement of Eligibility of Debt Trustee.
(25)-3 -- Statement of Eligibility of Preferred Guarantee Trustee.
- ------------------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by Reference with the same effect as
if filed with this Registration Statement.
II-10
<PAGE> 1
EXHIBIT 1
_________ Preferred Securities
CONSUMERS ENERGY COMPANY FINANCING II
(a Delaware trust)
____% Trust Originated Preferred Securities(SM) ("TOPrS(SM)")
(Liquidation Amount of $25 Per Preferred Security)
UNDERWRITING AGREEMENT
_______ __, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
as Representative of the several Underwriters
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Consumers Energy Company Financing II (the "Trust"), a statutory business
trust organized under the Business Trust Act (the "Delaware Act") of the State
of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Sections
3801 et seq.), and Consumers Energy Company, a Michigan corporation (the
"Company" and, together with the Trust, the "Offerors") confirm their agreement
(the "Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named
in Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch is acting as representative (in such capacity,
Merrill Lynch shall
____________________
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE> 2
hereinafter be referred to as the "Representative"), with respect to the sale
by the Trust and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of ____% Trust Originated Preferred
Securities (liquidation amount of $25 per preferred security) of the Trust
("Preferred Securities") set forth in said Schedule A except as may otherwise
be provided in the Pricing Agreement, as hereinafter defined. The Preferred
Securities will be guaranteed by the Company with respect to distributions and
payments upon liquidation, redemption and otherwise (the "Preferred Securities
Guarantee") pursuant to the Preferred Securities Guarantee Agreement (the
"Preferred Securities Guarantee Agreement"), dated as of _______ __, 1997,
between the Company and The Bank of New York, as trustee (the "Guarantee
Trustee"), and in certain circumstances described in the Prospectus, the Trust
will distribute Subordinated Debt Securities (as defined herein) to holders of
Preferred Securities. The Preferred Securities, the related Preferred
Securities Guarantee and the Subordinated Debt Securities are referred to
herein as the "Securities".
Prior to the purchase and public offering of the Preferred Securities by the
several Underwriters, the Offerors and the Representative, acting on behalf of
the several Underwriters, shall enter into an agreement substantially in the
form of Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may
take the form of an exchange of any standard form of written telecommunication
between the Offerors and the Representative and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Preferred
Securities will be governed by this Agreement, as supplemented by the Pricing
Agreement. From and after the date of the execution and delivery of the
Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing
Agreement.
The Offerors have filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (Nos. 333-_____ and
333-_____) and a related preliminary prospectus for the registration under the
Securities Act of 1933, as amended (the "1933 Act") of up to a combination of
$120,000,000 of (i) Preferred Securities, (ii) guarantees of the Preferred
Securities, and (iii) the Subordinated Debt Securities, have filed such
amendments thereto, if any, and such amended preliminary prospectuses as may
have been required to the date hereof, and will file such additional amendments
thereto and such amended prospectuses as may hereafter be required. Such
registration statement at the time it initially became effective and the
prospectus constituting a part thereof (including, in each case, all documents
incorporated or deemed to be incorporated by reference therein pursuant to Item
12 of Form S-3 under the 1933 Act and the information, if any, deemed to be
part thereof pursuant to Rule 430A(b) of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations")), are hereinafter
referred to as the "Registration Statement" and the "Prospectus", respectively,
except that, if any revised prospectus (including a prospectus revised by
filing any
2
<PAGE> 3
documents pursuant to Section 13, 14 or 15 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), prior to the execution and delivery of this
Agreement) shall be provided to the Underwriters by the Offerors for use in
connection with the offering of the Preferred Securities which differs from the
Prospectus on file at the Commission at the time the Registration Statement
becomes effective, the term "Prospectus" shall refer to such revised prospectus
so provided to the Underwriters for such use. All references in this Agreement
to financial statements and schedules and other information that is
"contained," "included" or "stated" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
that are or are deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement or the
Prospectus shall be deemed to mean and include the filing of any document under
the 1934 Act that is or is deemed to be, after the execution and delivery of
this Agreement, incorporated by reference in the Registration Statement or the
Prospectus, as the case may be.
The Offerors understand that the Underwriters propose to make a public
offering of the Securities as soon as the Representative deems advisable after
the Pricing Agreement has been executed and delivered, and the Declaration (as
defined herein), the Indenture (as defined herein), and the Preferred
Securities Guarantee Agreement have been qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act"). The entire proceeds from the sale of
the Preferred Securities will be combined with the entire proceeds from the
sale by the Trust to the Company of its common securities (the "Common
Securities," and together with the Preferred Securities, the "Trust
Securities"), as guaranteed by the Company, to the extent set forth in the
Prospectus, with respect to distributions and payments upon liquidation and
redemption (the "Common Securities Guarantee" and together with the Preferred
Securities Guarantee, the "Guarantees") pursuant to the Common Securities
Guarantee Agreement (the "Common Securities Guarantee Agreement" and, together
with the Preferred Securities Guarantee Agreement, the "Guarantee Agreements"),
dated as of _______ __, 1997, between the Company and Guarantee Trustee, as
Trustee, and will be used by the Trust to purchase $___________ of ____%
subordinated deferrable interest debt securities (the "Subordinated Debt
Securities") issued by the Company. The Preferred Securities and the Common
Securities will be issued pursuant to the amended and restated declaration of
trust of the Trust, dated as of _______ __, 1997 (the "Declaration"), among the
Company, as Sponsor, [Alan M. Wright, Thomas A. McNish and Doris F. Galvin]
(the "Regular Trustees"), The Bank of New York, as property trustee (the
"Property Trustee"), and The Bank of New York (Delaware) (the "Delaware
Trustee," and, together with the Property Trustee and the Regular Trustees, the
"Trustees"), and the holders from time to time of undivided beneficial
interests in the assets of the
3
<PAGE> 4
Trust. The Subordinated Debt Securities will be issued pursuant to an
indenture, dated as of January 1, 1996 (the "Base Indenture"), between the
Company and The Bank of New York as trustee (the "Debt Trustee"), as amended
and supplemented, and the Second Supplemental Indenture to the Base Indenture,
dated as of _______ __, 1997 (the "Supplemental Indenture," and together with
the Base Indenture and any other amendments or supplements thereto, the
"Indenture"), between the Company and the Debt Trustee.
Section 1. Representations and Warranties.
(a) The Offerors jointly and severally represent and warrant to
each Underwriter as of the date hereof and as of the date of the Pricing
Agreement (such latter date being hereinafter referred to as the
"Representation Date") as follows:
(i) At the time the Registration Statement becomes
effective and at the Representation Date, the Registration Statement will
comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and the 1939 Act and the rules and regulations of
the Commission under the 1939 Act (the "1939 Act Regulations"), and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, at each Representation
Date and at the Closing Time referred to in Section 2 hereof, will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Offerors in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus or to
that part of the Registration Statement which consists of the statements of
eligibility of trustees on Form T-1 under the 1939 Act.
(ii) The documents incorporated by reference in the
Registration Statement or Prospectus, at the time they were filed with the
Commission (or, if an amendment with respect to any such document was
filed, at the time such amendment was filed), complied and will comply in
all material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission under the 1934 Act (the "1934 Act
Regulations"), as applicable, any further documents so filed and
incorporated by reference will, when they are filed with the Commission,
comply in all
4
<PAGE> 5
material respects to the requirements of the 1934 Act and the 1934 Act
Regulations, and none of such documents when filed (or if any amendment
with respect any such document was filed, at the time such amendment was
filed) contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(iii) Each of the Offerors meets, and at the respective times
of commencement and consummation of the offering of the Securities will
meet, the registrant requirements for use of Form S-3 under the 1933 Act
and the 1933 Act Regulations.
(iv) There has been no material adverse change in the
business, properties or financial condition of the Company or the Trust
from that set forth in the Registration Statement (other than changes
referred to in or contemplated by the Registration Statement or the
Prospectus).
(v) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Michigan with corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and Prospectus, to enter into and perform its obligations under
this Agreement, the Pricing Agreement, the Declaration, the Indenture and
each of the Guarantees and to purchase, own, and hold the Common Securities
issued by the Trust.
(vi) The capital stock of the Company conforms in all
material respects to the description thereof in the Prospectus.
(vii) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act with the power
and authority to own property and to conduct its business as described in
the Registration Statement and Prospectus and to enter into and perform its
obligations under this Agreement, the Pricing Agreement, the Preferred
Securities, the Common Securities and the Declaration; the Trust is duly
qualified to transact business as a foreign company and is in good standing
in any other jurisdiction in which such qualification is necessary, except
to the extent that the failure to so qualify or be in good standing would
not have a material adverse effect on the Trust; the Trust is not a party
to or otherwise bound by any agreement other than those described in the
Prospectus; the Trust is and will, under current law, be classified for
United States federal
5
<PAGE> 6
income tax purposes as a grantor trust and not as an association taxable as
a corporation.
(viii) The Common Securities have been duly authorized by the
Declaration and, when issued and delivered by the Trust to the Company
against payment therefor as described in the Registration Statement and
Prospectus, will be validly issued and will represent undivided beneficial
interests in the assets of the Trust and will conform in all material
respects to the description thereof contained in the Prospectus; the
issuance of the Common Securities is not subject to preemptive or other
similar rights; and at the Closing Time all of the issued and outstanding
Common Securities of the Trust will be directly owned by the Company free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equitable right.
(ix) This Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by each of the Offerors.
(x) The Declaration has been duly authorized by the Company
and, at the Closing Time, will have been duly executed and delivered by the
Company and the Trustees, and assuming due authorization, execution and
delivery of the Declaration by the Property Trustee and the Delaware
Trustee, the Declaration will, at the Closing Time, be a valid and binding
obligation of the Company and the Regular Trustees, enforceable against the
Company and the Regular Trustees in accordance with its terms, except to
the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless
of whether enforcement is considered in a proceeding at law or in equity)
(the "Bankruptcy Exceptions") and will conform in all material respects to
the description thereof contained in the Prospectus.
(xi) Each of the Guarantee Agreements has been duly
authorized by the Company and, when validly executed and delivered by the
Company, and, in the case of the Preferred Securities Guarantee Agreement,
assuming due authorization, execution and delivery of the Preferred
Securities Guarantee by the Guarantee Trustee, will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms except to the extent that enforcement thereof may
be limited by the Bankruptcy Exceptions, and each of the Guarantees and the
Guarantee Agreements will conform in all material respects to the
description thereof contained in the Prospectus.
6
<PAGE> 7
(xii) The Preferred Securities have been duly authorized and,
when issued and delivered against payment therefor as provided herein, will
be validly issued and fully paid and non-assessable undivided beneficial
interests in the assets of the Trust and will conform in all material
respects to the description thereof contained in the Prospectus; the
issuance of the Preferred Securities is not subject to preemptive or other
similar rights.
(xiii) The Indenture has been duly authorized by the Company
and, when validly executed and delivered by the Company, will constitute a
valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms except to the extent that enforcement thereof
may be limited by the Bankruptcy Exceptions; the Indenture will conform in
all material respects to the description thereof contained in the
Prospectus.
(xiv) The Subordinated Debt Securities have been duly
authorized by the Company and, at the Closing Time, will have been duly
executed by the Company and, when authenticated in the manner provided for
in the Indenture and delivered against payment therefor as described in the
Prospectus, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms except to
the extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and will be in the form contemplated by, and entitled to the
benefits of, the Indenture and will conform in all material respects to the
description thereof in the Prospectus.
(xv) Each of the Regular Trustees of the Trust is an
employee of the Company and has been duly authorized by the Company to
execute and deliver the Declaration.
(xvi) None of the Offerors is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act").
(xvii) The Trust is not in violation of the Declaration or its
certificate of trust filed with the State of Delaware on _______ __, 1997
(the "Certificate of Trust"); none of the execution, delivery and
performance of this Agreement, the Pricing Agreement, the Declaration, the
Preferred Securities, the Common Securities, the Indenture, the
Subordinated Debt Securities, the Guarantee Agreements and the Guarantees
and the consummation of the transactions contemplated herein and therein
and compliance by the Offerors with their respective obligations hereunder
and
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thereunder did or will result in a breach of any of the terms or provisions
of, or constitute a default or require the consent of any party under the
Certificate of Trust or the Company's Articles of Incorporation or by-laws,
any material agreement or instrument to which either Offeror is a party,
any existing applicable law, rule or regulation or any judgment, order or
decree of any government, governmental instrumentality or court, domestic
or foreign, having jurisdiction over either Offeror or any of its
properties or assets, or did or will result in the creation or imposition
of any lien on the properties or assets of either Offeror.
(xviii) No order, license, consent, authorization or approval
of, or exemption by, or the giving of notice to, or the registration with
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, and no filing, recording,
publication or registration in any public office or any other place, was or
is now required in connection with the issuance and sale of the Common
Securities or the offering of the Preferred Securities, the Subordinated
Debt Securities or the Guarantees hereunder, except for the order of the
Federal Energy Regulatory Commission, which has already been obtained, and
such as may be required under the 1933 Act or state securities laws and the
qualification of the Declaration, the Preferred Securities Guarantee
Agreement and the Indenture under the 1939 Act.
(xix) The Company has outstanding unsecured non-convertible
preferred securities rated by a nationally recognized statistical rating
organization in one of its four (4) highest generic rating categories.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Trust
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Trust, at
the price per security set forth in the Pricing Agreement, the number of
Preferred Securities set forth in Schedule A opposite the name of such
Underwriter (except as otherwise provided in the Pricing Agreement), plus any
additional number of Preferred Securities that such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
The purchase price per security to be paid by the several Underwriters for
the Preferred Securities shall be an amount equal to the initial public
offering price. The initial public offering price per Preferred Security shall
be a fixed price to be determined by agreement between the Representative and
the Offerors. The
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<PAGE> 9
initial public offering price and the purchase price, when so determined, shall
be set forth in the Pricing Agreement. In the event that such prices have not
been agreed upon and the Pricing Agreement has not been executed and delivered
by all parties thereto by the close of business on the fourth business day
following the date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party, unless otherwise agreed to
by the Offerors and the Representative. As compensation to the Underwriters
for their commitments hereunder and in view of the fact that the proceeds of
the sale of the Preferred Securities will be used to purchase the Subordinated
Debt Securities of the Company, the Company hereby agrees to pay at Closing
Time (as defined below) to the Representative, for the accounts of the several
Underwriters, a commission per Preferred Security determined by agreement
between the Representative and the Company for the Preferred Securities to be
delivered by the Trust hereunder at Closing Time. The commission, when so
determined, shall be set forth in the Pricing Agreement.
(b) Payment of the purchase price for, and delivery of
certificates for, the Preferred Securities shall be made at the office of Reid
& Priest LLP, or at such other place as shall be agreed upon by the
Representative and the Trust, at 10:00 A.M. New York time on the third business
day (unless postponed in accordance with the provisions of Section 10) after
execution of the Pricing Agreement, or such other time not later than ten
business days after such date as shall be agreed upon by the Representative,
the Trust and the Company (such time and date of payment and delivery being
herein called "Closing Time"). Payment shall be made to the Trust in Federal or
other immediately available funds payable to an account designated by the
Trust, against delivery to the Representative for the respective accounts of
the Underwriters of certificates for the Preferred Securities to be purchased
by them. Certificates for the Preferred Securities shall be in such
denominations and registered in such names as the Representative may request in
writing at least two business days before the Closing Time. It is understood
that each Underwriter has authorized the Representative, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for,
the Preferred Securities which it has agreed to purchase. Merrill Lynch,
individually and not as Representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Preferred
Securities to be purchased by any Underwriter whose payment has not been
received by the Closing Time, but such payment by Merrill Lynch shall not
relieve such Underwriter from its obligations hereunder.
The certificate(s) for the Preferred Securities will be made available for
examination and packaging by the Representative not later than 10:00 A.M. on
the last business day prior to the Closing Time.
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At the Closing Time, the Company will pay, or cause to be paid, the
commission payable at such time to the Underwriters under this Section 2 to
Merrill Lynch, Pierce, Fenner & Smith Incorporated in Federal or other
immediately available funds.
Section 3. Covenants of the Offerors. Each of the Offerors jointly
and severally covenant with each Underwriter as follows:
(a) The Offerors will promptly notify the Representative or
its counsel (i) of the effectiveness of the Registration Statement and any
amendment thereto (including any post-effective amendment), (ii) of the receipt
of any comments from the Commission or of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information, (iii) of any suspension of
qualification of the Preferred Securities for sale under Blue Sky or state
securities laws, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Offerors will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Prior to the termination of the offering of the Preferred
Securities, the Offerors will not file any amendment to the Registration
Statement or amendment or supplement to the Prospectus unless the
Representative and counsel to the Underwriters have been furnished with a copy
of such amendment or supplement for their review and comment a reasonable time
prior to such proposed filing and will not file any such amendment or
supplement to which counsel for the Underwriters shall reasonably object on
legal grounds in writing after consultation with the Representative. Subject
to the foregoing, the Offerors will promptly prepare a supplement to the
Prospectus to reflect the terms of the Preferred Securities and the terms of
the offering contemplated by this Agreement. The Offerors will file such
Prospectus as so supplemented pursuant to Rule 424(b) under the Act within the
time periods provided by such Rule and Rule 430A(a)(3) under the Act.
(c) The Offerors will deliver to the Representative one signed
and as many conformed copies of the Registration Statement, in each case as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) as the Representative may
reasonably request and will also deliver to the Representative a conformed
copy of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters.
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(d) The Offerors will furnish to each Underwriter, without charge,
from time to time during the period of time (not exceeding nine months) after
the date of the Prospectus when a Prospectus is required to be delivered under
the 1933 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for the purposes
contemplated by the 1933 Act or the respective applicable rules and regulations
of the Commission thereunder; and in case any Underwriter is required to
deliver a prospectus after the expiration of nine months after the date of the
Prospectus, to furnish to the Representative, upon request, at the expense of
such Underwriter, a reasonable quantity of a supplemental prospectus or of
supplements to the Prospectus complying with Section 10(a)(3) of the 1933 Act.
(e) If at any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Preferred Securities, any event
shall occur as a result of which it is necessary to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is to be delivered to a purchaser, or if
it shall be necessary at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Offerors will promptly prepare
and file with the Commission subject to paragraph (b) above such amendment or
supplement as may be necessary to correct such untrue statement or omission or
to make the Registration Statement or the Prospectus comply with such
requirements; and the Offerors will furnish to the Underwriters, without
charge, a reasonable number of copies of such amendment or supplement, except
that in case any Underwriter is required to deliver a prospectus in connection
with sales of the Preferred Securities after the expiration of nine months
after the date of the Prospectus the Offerors shall be required to furnish any
such amendments or supplements to such Underwriter only at the expense of such
Underwriter.
(f) The Offerors will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and the other jurisdictions of the
United States as the Representative may designate; provided, however, that none
of the Offerors shall be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to comply with any other
requirements deemed by the Company to be unduly burdensome.
(g) The Trust will make generally available to its security holders
as soon as practicable an earnings statement of the Company (which need not be
audited by independent public accountants) covering a twelve-month period
beginning after the "effective date" (as defined in Rule 158 of the 1933 Act
Regulations) of the Registration Statement and ending not later than 15 months
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<PAGE> 12
thereafter, that shall satisfy the provisions of Section 11(a) of the 1933 Act
and said Rule 158.
(h) For a period of 18 months after the Closing Time, the Company
will furnish to you and, upon request, to each Underwriter, copies of all
annual reports, quarterly reports and current reports filed with the Commission
on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated
by the Commission, and such other documents, reports and information as shall
be furnished by the Company to its stockholders or security holders generally.
(i) The Offerors will use best efforts to effect the listing of the
Preferred Securities (including the Preferred Securities Guarantee with respect
thereto) on the New York Stock Exchange; if the Preferred Securities are
exchanged for Subordinated Debt Securities, the Company will use its best
efforts to effect the listing of the Subordinated Debt Securities on the
exchange on which the Preferred Securities were then listed.
(j) During a period of 60 days from the date of the Pricing
Agreement, neither the Trust nor the Company will, without the Representative's
prior written consent, directly or indirectly, sell, offer to sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, any Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or the Subordinated Debt Securities or any debt
securities substantially similar to the Subordinated Debt Securities or equity
securities substantially similar to the Preferred Securities (except for the
Subordinated Debt Securities and the Preferred Securities issued pursuant to
this Agreement).
Section 4. Payment of Expenses. The Company will pay all expenses incident
to the performance of each Offeror's obligations under this Agreement,
including, but not limited to, (i) the printing and filing of the Registration
Statement as originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for the Preferred
Securities to the Underwriters, (iii) the fees and disbursements of the
Company's and the Trust's counsel and accountants, (iv) the qualification of
the Securities in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of any Blue Sky survey up to an aggregate amount not to exceed $5,000.00, (v)
the printing and delivery to the Underwriters of copies of the Registration
Statement as originally filed and of each amendment thereto, of each
preliminary prospectus, and of the Prospectus and any amendments or supplements
thereto, (vi) the delivery to the Underwriters of copies of any Blue Sky
survey, (vii) the fee, if any, of the National Association of Securities
Dealers, Inc., (viii) the fees and expenses of the Debt Trustee, the Property
Trustee and the Guarantee Trustee,
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including the fees and disbursements of counsel for such trustees, in
connection with the Indenture and the Subordinated Debt Securities, the
Declaration, the Certificate of Trust and the Guarantee (it being understood
that as among the Offerors and such trustees, such fees and expenses shall not
exceed $5,000.00), (ix) any fees payable in connection with the rating of the
Preferred Securities and Subordinated Debt Securities, (x) the fees and
expenses incurred in connection with the listing of the Preferred Securities
(and the related Preferred Securities Guarantee) and, if applicable, the
Subordinated Debt Securities on the New York Stock Exchange, (xi) the cost and
charges of any transfer agent or registrar and (xii) the cost of qualifying the
Preferred Securities with The Depository Trust Company.
If the Underwriter shall not take up and pay for the Securities due to the
failure of the Offerors to comply with any of the conditions specified in
Section 5 hereof, or, if this Agreement shall be terminated in accordance with
the provisions of Section 9 hereof, the Company will pay the reasonable fees
and disbursements of counsel to the Underwriters, and, if the Underwriters
shall not take up and pay for the Securities due to failure of the Offerors to
comply with the conditions specified in Section 5 hereof, the Company will also
reimburse the Underwriters for their reasonable out-of-pocket expenses, in an
aggregate amount not exceeding a total of $3,000.00, incurred in connection
with the offering contemplated by this Agreement.
Section 5. Conditions of Underwriters' Obligations. The obligations of the
Underwriters hereunder are subject to the accuracy of the representations and
warranties of the Offerors herein contained, to the performance by the Offerors
of their obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or with the consent of the Representative,
at a later time and date, not later, however, than 5:30 P.M. on the first
business day following the date hereof, or at such later time and date as may
be approved by the Representative; and at Closing Time no stop order suspending
the effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the Commission.
The Prospectus shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing by the 1933
Act Regulations.
(b) At Closing Time the Representative shall have received:
(1) The favorable opinion, dated as of Closing Time, of
Michael D. VanHemert, Esq., Assistant General Counsel of the Company and
counsel for the Offerors in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
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(i) The Company has been duly incorporated and is
validly existing in good standing under the laws of the State of Michigan
with corporate power and authority to carry on the public utility business
in which it is engaged and to own, lease and operate its properties and
conduct its business as described in the Prospectus.
(ii) The capital stock of the Company conforms in all
material respects to the description thereof in the Prospectus.
(iii) The Trust is not required to be qualified and in
good standing as a foreign company in Michigan, except to the extent that
the failure to so qualify or be in good standing would not have a material
adverse effect on the Trust; and the Trust is not a party to or otherwise
bound by any agreement other than those described in the Prospectus.
(iv) The Declaration has been duly authorized, executed
and delivered by the Company and the Trustees and is a valid and binding
obligation of the Company, enforceable against the Company and each of the
Regular Trustees in accordance with its terms, except as enforcement
thereof may be limited by the Bankruptcy Exceptions; and the Declaration
has been duly qualified under the 1939 Act.
(v) All legally required proceedings in connection with
the authorization, issuance and validity of the Securities and the sale of
the Securities in accordance with this Agreement (other than the filing of
post-issuance reports, the non-filing of which would not render the
Securities invalid) have been taken and all legally required orders,
consents or other authorizations or approvals of the Michigan Public
Service Commission and of any other public boards or bodies in connection
with the authorization, issuance and validity of the Securities and the
sale of the Securities in accordance with this Agreement (other than in
connection with or in compliance with the provisions of the securities or
Blue Sky laws of any jurisdictions, as to which no opinion need be
expressed) have been obtained and are in full force and effect.
(vi) The Registration Statement is effective under the
1933 Act and, to the best of his knowledge and information after due
inquiry, no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act, and no proceedings therefor
have been initiated or threatened by the Commission.
(vii) The Registration Statement as of its effective date
and the Prospectus and each amendment or supplement thereto as of its issue
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<PAGE> 15
date (in each case, other than the operating statistics, the financial
statements and the notes thereto, the financial schedules, and any other
financial and statistical data included or incorporated by reference
therein, as to which such counsel need express no belief), complied as to
form in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations; and the Declaration, the Indenture, the Preferred
Securities Guarantee Agreement and the Statements of Eligibility on Forms
T-1 with respect to each of the Property Trustee, the Debt Trustee, and the
Guarantee Trustee filed with the Commission as part of the Registration
Statement complied as to form in all material respects with the
requirements of the 1939 Act and the 1939 Act Regulations.
(viii) Each of the documents incorporated by reference in
the Registration Statement or the Prospectus at the time they were filed or
last amended (other than the financial statements and the notes thereto,
the financial schedules, and any other financial or statistical data
included or incorporated by reference therein, as to which such counsel
need express no belief) complied as to form in all material respects with
the requirements of the 1934 Act, and the 1934 Act Regulations, as
applicable.
(ix) Each of the Offerors meets the registrant
requirements for use of Form S-3 under the 1933 Act Regulations.
(x) The Common Securities, the Preferred Securities,
the Subordinated Debt Securities, each of the Guarantees, the Declaration,
the Indenture and each of the Guarantee Agreements conform in all material
respects to the descriptions thereof contained in the Prospectus.
(xi) The descriptions in the Registration Statement and
the Prospectus and each amendment or supplement thereto of franchises,
regulations, statutes, legal and governmental proceedings and contracts and
other documents are accurate and fairly present the information required to
be shown and such counsel does not know of any legal or governmental
proceedings required to be described in the Registration Statement or the
Prospectus or any amendment or supplement thereto that are not so described
(or the descriptions of which are not incorporated by reference) or of any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or any amendment or supplement
thereto or to be filed as exhibits to the Registration Statement or any
amendment thereto that are not so described (or the descriptions of which
are not incorporated by reference) or so filed.
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(xii) All of the issued and outstanding Common Securities
of the Trust are directly owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equitable
right.
(xiii) This Agreement and the Pricing Agreement have been
duly authorized, executed and delivered by each of the Trust and the
Company.
(xiv) Each of the Guarantee Agreements has been duly
authorized, executed and delivered by the Company; the Preferred Securities
Guarantee Agreement, assuming it is duly authorized, executed, and
delivered by the Guarantee Trustee, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforcement thereof may be
limited by Bankruptcy Exceptions; and the Preferred Securities Guarantee
Agreement has been duly qualified under the 1939 Act.
(xv) The Indenture has been duly executed and delivered
by the Company and, assuming due authorization, execution, and delivery
thereof by the Debt Trustee, is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions; and the Indenture has been duly qualified under the
1939 Act.
(xvi) The Subordinated Debt Securities are in the form
contemplated by the Indenture, have been duly authorized, executed and
delivered by the Company and, when authenticated by the Debt Trustee in the
manner provided for in the Indenture and delivered against payment therefor
as provided in this Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except to the extent that enforcement thereof may be
limited by the Bankruptcy Exceptions.
(xvii) Neither the Company nor the Trust is an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the 1940 Act.
(xviii) The execution, delivery and performance of this
Agreement, the Pricing Agreement, the Declaration, the Preferred
Securities, the Common Securities, the Indenture, the Subordinated Debt
Securities, the Guarantee Agreements, and the Guarantees; the consummation
of the
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<PAGE> 17
transactions contemplated herein and therein; and the compliance by each of
the Offerors with their respective obligations hereunder and thereunder do
not and will not result in any violation of the charter or bylaws of the
Company or the Declaration or the Certificate of Trust, and do not and will
not result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Trust or the
Company under (A) any contract, indenture, mortgage, loan agreement, note,
lease or any other agreement or instrument known to such counsel to which
the Trust or the Company is a party or by which it may be bound or to which
any of its properties may be subject (except for such breaches or defaults
or liens, charges or encumbrances that would not have a material adverse
effect on the business, property or financial condition of the Trust or the
Company), (B) any existing applicable law, rule or regulation (other than
the securities or blue sky laws of the various states, as to which such
counsel need express no opinion) or (C) any judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign,
or any regulatory body or administrative agency or other governmental body
having jurisdiction over the Trust, the Company or any of their respective
properties.
(xix) Nothing has come to attention of such counsel which
would lead him to believe that the Registration Statement or any amendment
thereto (except for the operating statistics, financial statements and
other financial and statistical data included or incorporated by reference
therein, or the statements of eligibility under the 1939 Act of trustees as
to which no opinion is expressed), when it became effective, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, as amended or supplemented or
modified by the filing of a document incorporated by reference therein
(except as aforesaid), on its issue date and on the date of such opinion
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The foregoing opinions may be limited to the laws of Delaware,
Michigan and the federal law of the United States. In giving such opinion,
such counsel may rely, as to matters of Delaware Law, upon the opinion of
Richards, Layton & Finger, P.A., special Delaware counsel to the Company, in
which case the opinion shall state that such counsel believes that you and he
are entitled to so rely.
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(2) The favorable opinion, dated as of Closing Time,
of Richards, Layton & Finger, P.A., special Delaware counsel to the Offerors,
in form and substance satisfactory to counsel for the Underwriters, to the
effect that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware Act, and
all filings required under the laws of the State of Delaware with respect
to the creation and valid existence of the Trust as a business trust have
been made.
(ii) Under the Delaware Act and the Declaration, the
Trust has the power and authority to own property and conduct its business,
all as described in the Prospectus.
(iii) The Declaration constitutes a valid and binding
obligation of the Company and the Trustees and is enforceable against the
Company and the Trustees in accordance with its terms, subject, as to
enforcement, to (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance and other similar laws
relating to or affecting the rights and remedies of creditors generally,
(ii) principles of equity, including applicable law relating to fiduciary
duties (regardless of whether considered and applied in a proceeding in
equity or at law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification and contribution.
(iv) Under the Delaware Act and the Declaration, the
Trust has the power and authority to (i) execute and deliver, and to
perform its obligations under, this Agreement and the Pricing Agreement and
(ii) issue, and perform its obligations under, the Trust Securities.
(v) Under the Delaware Act and the Declaration, the
execution and delivery by the Trust of this Agreement and the Pricing
Agreement, and the performance by the Trust of its obligations hereunder
and under the Pricing Agreement, have been duly authorized by all necessary
action on the part of the Trust.
(vi) The Preferred Securities have been duly authorized
by the Declaration and are duly and validly issued and, subject to
qualifications hereinafter expressed in this paragraph (vi), fully paid and
nonassessable undivided beneficial interests in the assets of the Trust;
the holders of the Preferred Securities, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation
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Law of the State of Delaware; said counsel may note that the holders of the
Preferred Securities may be obligated to make payments as set forth in the
Declaration.
(vii) The Common Securities have been duly authorized by
the Declaration and are duly and validly issued and represent undivided
beneficial interests in the assets of the Trust.
(viii) Under the Delaware Act and the Declaration, the
issuance of the Trust Securities is not subject to preemptive rights.
(ix) The issuance and sale by the Trust of the Trust
Securities, the purchase by the Trust of the Subordinated Debt Securities,
the execution, delivery and performance by the Trust of this Agreement and
the Pricing Agreement, the consummation by the Trust of the transactions
contemplated hereby and by the Pricing Agreement and compliance by the
Trust with its obligations hereunder and thereunder will not violate (i)
any of the provisions of the Certificate of Trust or the Declaration or
(ii) any applicable Delaware law or administrative regulation.
(3) The opinion of Reid & Priest LLP, special tax
counsel to the Company and the Trust, generally to the effect that the
discussion set forth in the Prospectus under the heading "CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES" is a fair and accurate summary of the matters
addressed therein, based upon current law and the assumptions stated or
referred to therein. Such opinion may be conditioned on, among other things,
the initial and continuing accuracy of the facts, financial and other
information, covenants and representations set forth in certificates of
officers of the Company and the Trust and other documents deemed necessary for
such opinion.
(4) The favorable opinion, dated as of Closing Time,
of Reid & Priest LLP, counsel for the Underwriters, in form and substance
satisfactory to the Underwriters with respect to the incorporation and legal
existence of the Company, the Preferred Securities, the Indenture, the
Preferred Securities Guarantee Agreement, this Agreement, the Pricing
Agreement, the Registration Statement, the Prospectus and other related matters
as the Representative may require. In giving its opinion, Reid & Priest LLP
may rely as to certain matters of Michigan and Delaware law upon the opinions
of Michael D. VanHemert, Esq. and Richards, Layton & Finger, P.A., counsel for
the Offerors, which shall be delivered in accordance with Section 5(b)(1) and
5(b)(2) hereto.
(c) Between the date of this Agreement and prior to the Closing Time,
no material adverse change shall have occurred in the business,
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properties or financial condition of the Company or the Trust, which in the
judgment of the Representative, after reasonable inquiries on the part of the
Representative, impairs the marketability of the Securities (other than changes
referred to in or contemplated by the Registration Statement or Prospectus).
(d) At Closing Time, the Representative shall have received a certificate
of an executive officer of the Company and a certificate of a Regular Trustee
of the Trust, and dated as of Closing Time, to the effect that to the best of
such person's knowledge, information and belief (i) there has been no material
adverse change in the business, properties or financial condition of the
Company or the Trust from that set forth in the Registration Statement or
Prospectus (other than changes referred to in or contemplated by the
Registration Statement or Prospectus), (ii) the representations and warranties
in Section 1 hereof are true and correct as though expressly made at and as of
Closing Time, (iii) the Trust and the Company have complied with all agreements
and satisfied all conditions on their part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been initiated or threatened by the Commission.
(e) At the Closing Time the Representative shall have received from
Arthur Andersen LLP a letter dated such date, in form and substance
satisfactory to the Representative, to the effect that: (i) they are
independent public accountants with respect to the Company and its consolidated
subsidiaries, within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) in their opinion, the financial statements examined by them and included
or incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the published rules and regulations of the Commission; and
(iii) covering, as of a date not more than five business days prior to the date
of such letter, such other matters as the Representative shall reasonably
request.
(f) Any additional documents or agreements reasonably requested by
counsel to the Underwriters to permit such counsel to deliver opinions
hereunder at Closing Time shall have been provided to them and all proceedings
taken by the Offerors in connection with the issuance and sale of the Preferred
Securities as herein contemplated shall be satisfactory in form and substance
to the Representative and Reid & Priest LLP, counsel for the Underwriters.
(g) (i) At Closing Time, the Preferred Securities shall be rated Ba1
Moody's Investors Service, Inc., BB+ by Standard & Poor's Rating Group, BBB- by
Duff & Phelps Credit Rating Co. and BBB by Fitch Investors Service, Inc., and
(ii) between the date of this Agreement and the Closing Time, there shall not
have occurred a downgrading of the investment ratings of any of the Company's
20
<PAGE> 21
securities by Standard & Poor's Rating Group, Moody's Investors Service, Inc.,
Duff & Phelps Credit Rating Co. or Fitch Investors Service, Inc., and the
Company shall not have been placed on "credit watch" or "credit review" with
negative implications by any of such nationally recognized statistical rating
organizations if, in the case of such placement on "credit watch" or "credit
review," such occurrence shall, in the reasonable judgment of the
Representative, after reasonable inquiries on the part of the Representative,
impair the marketability of the Securities.
(h) At the Closing Time, the Preferred Securities shall have been
approved for listing on the New York Stock Exchange upon notice of issuance.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representative by notice to the Offerors at any time at or prior to Closing
Time, and such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof.
Section 6. Conditions of Offerors' Obligations. The obligations of the
Offerors hereunder are subject to the following conditions:
(a) The Registration Statement shall be effective under the 1933 Act and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(b) The order of the Federal Energy Regulatory Commission in connection
with the authorization, issuance and sale of the Securities shall be in full
force and effect.
Section 7. Indemnification.
(a) The Offerors agree to the extent permitted by law to jointly and
severally indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the 1933 Act or otherwise, and, subject to and in accordance with Section
7(d) hereof, to reimburse the Underwriters and such controlling person or
persons, if any, for any legal or other expenses incurred by them in connection
with defending any action, suit or proceeding (including governmental
investigations) insofar as such losses, claims, damages, liabilities or
actions, suits or proceedings (including governmental investigations) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
21
<PAGE> 22
(or any amendment thereto), including the information deemed to be a part of
the Registration Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, any preliminary prospectus as of its issue date,
the Prospectus, or, if the Prospectus shall be amended or supplemented, in the
Prospectus as so amended or supplemented (if such Prospectus or such Prospectus
as amended or supplemented is used after the period of time referred to in
Section 3(e) hereof, it shall contain or be used with such amendments or
supplements as the Company deems necessary to comply with Section 10(a) of the
1933 Act), or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
which was made in such preliminary prospectus, Registration Statement
(or amendment thereto) or Prospectus, or in the Prospectus as so amended or
supplemented, in reliance upon and in conformity with information furnished in
writing to the Company by, or through Merrill Lynch on behalf of, any
Underwriter expressly for use therein, and except that this indemnity is
subject to the condition that, insofar as it relates to any untrue statement or
omission, or any alleged untrue statement or omission, made in a preliminary
prospectus but eliminated or remedied in the Prospectus, it shall not inure to
the benefit of any Underwriter (or any person controlling such Underwriter)
from whom the person asserting the claim purchased the Securities (or to the
benefit of any person who controls such Underwriter) if the Offerors have
complied with their Prospectus delivery obligations pursuant to Section 3 of
this Agreement and a copy of the Prospectus, excluding documents incorporated
therein by reference, was not sent or given to such person at or prior to the
time required by the 1933 Act and the receipt thereof would have constituted
the sole defense to the claim asserted by such person.
The Offerors' indemnity agreement contained in this Section 7(a), and the
covenants, representations and warranties of the Offerors contained in this
Agreement, shall remain in full force and effect regardless of any
investigation made by or on behalf of any person, and shall survive the
delivery of and payment for the Preferred Securities hereunder, and the
indemnity agreement contained in this Section 7 shall survive any termination
of this Agreement. The liabilities of the Offerors in this Section 7(a) are in
addition to any other liabilities of the Offerors under this Agreement or
otherwise.
(b) The Company agrees to indemnify the Trust against all loss,
liability, claim, damage and expense whatsoever, as due from the Trust under
Section 7(a) hereunder.
(c) Each Underwriter agrees, severally and not jointly, to the
extent permitted by law, to indemnify, hold harmless and reimburse the Offerors,
22
<PAGE> 23
their directors and such of their officers or trustees, as the case may be, as
shall have signed the Registration Statement, and each person, if any, who
controls the Offerors or any such other Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent
and upon the same terms as the indemnity agreement of the Offerors set forth in
Section 7(a) hereof, but only with respect to alleged untrue statements or
omissions made in the Registration Statement (or any amendment thereto), or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Offerors by such Underwriter through Merrill Lynch expressly for
use therein.
The indemnity agreement on the part of each Underwriter contained
in this Section 7(c) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Offerors or any other person, and
shall survive the delivery of and payment for the Preferred Securities
hereunder, and the indemnity agreement contained in this Section 7(c) shall
survive any termination of this Agreement. The liabilities of each Underwriter
in this Section 7(c) are in addition to any other liabilities of such
Underwriter under this Agreement or otherwise.
(d) If a claim is made or an action, suit or proceeding (including
governmental investigation) is commenced or threatened against any person as to
which indemnity may be sought under Section 7(a) or 7(c), such person (the
"Indemnified Person") shall notify the person against whom such indemnity may
be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 7(a) or 7(c) if the Indemnifying Person has not been
prejudiced in any material respect by such failure. Subject to the immediately
succeeding sentence, the Indemnifying Person shall assume the defense of any
such litigation or proceeding, including the employment of counsel and the
payment of all expenses counsel, with such being designated, subject to the
immediately succeeding sentence, in writing by the Representative in the case
of parties indemnified pursuant to Section 7(c) and by the Company in the case
of parties indemnified pursuant to Section 7(a). Any Indemnified Person shall
have the right to participate in such litigation or proceeding and to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the retention of such counsel
or (ii) the named parties to any such proceeding (including any impleaded
parties)
23
<PAGE> 24
include (x) the Indemnifying Person and (y) the Indemnified Person and, in the
written opinion of counsel to such Indemnified Person, representation of both
parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, in either of which cases the reasonable
fees and expenses of counsel (including disbursements) for such Indemnified
Person shall be reimbursed by the Indemnifying Person to the Indemnified
Person. If there is a conflict as described in clause (ii) above, and the
Indemnified Persons have participated in the litigation or proceeding utilizing
separate counsel whose fees and expenses have been reimbursed by the
Indemnifying Person and the Indemnified Persons, or any of them, are found to
be solely liable, such Indemnified Persons shall repay to the Indemnifying
Person such fees and expenses of such separate counsel as the Indemnifying
Person shall have reimbursed. It is understood that the Indemnifying Person
shall not be liable under this Agreement for the reasonable fees and
out-of-pocket expenses of more than one separate firm (together with not more
than one appropriate local counsel) for all such Indemnified Persons in
connection with any one action or separate but similar related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Subject to the next paragraph, all such fees and expenses shall be reimbursed
by payment to the Indemnified Persons of such reasonable fees and expenses of
counsel promptly after payment thereof by the Indemnified Persons.
In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the
Representative and the Offerors agree that the Indemnifying Person's
obligations to pay such fees and expenses shall be conditioned upon the
following:
(1) in case separate counsel is proposed to be retained by the
Indemnified Persons pursuant to clause (ii) of the preceding paragraph, the
Indemnified Persons shall in good faith fully consult with the Indemnifying
Person in advance as to the selection of such counsel; and
(2) reimbursable fees and expenses of such separate counsel shall be
detailed and supported in a manner reasonably acceptable to the
Indemnifying Person (but nothing herein shall be deemed to require the
furnishing to the Indemnifying Person of any information, including without
limitation, computer print-outs of lawyers' daily time entries, to the
extent that, in the judgment of such counsel, furnishing such information
might reasonably be expected to result in a waiver of any attorney-client
privilege); and
(3) the Company and the Representative shall cooperate in monitoring
and controlling the fees and expenses of separate counsel for Indemnified
Persons for which the Indemnifying Person is liable hereunder
24
<PAGE> 25
and the Indemnified Person shall use reasonable efforts to cause such
separate counsel to minimize duplication of activities between themselves
and counsel to the Indemnifying Person.
The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees, subject to the
provisions of this Section 7, to indemnify the Indemnified Person from and
against any loss, damage, liability or expenses by reason of such settlement or
judgment. The Indemnifying Person shall not, without the prior written consent
of the Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.
Section 8. Contribution. If the indemnification provided for in Section 7
above is unavailable to or insufficient to hold harmless an Indemnified Person
under such Section in respect of any losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental investigations) in
respect thereof) referred to therein, then each Indemnifying Person under
Section 7 shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Indemnifying Person on the one hand and the
Indemnified Person on the other from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each Indemnifying Person shall contribute to
such amount paid or payable by such Indemnified Person in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of each Indemnifying Person, if any, on the one hand and the Indemnified
Person on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions, suits or
proceedings (including governmental investigations) in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Offerors on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Offerors and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus, bear to the
aggregate public offering price of the Securities. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied
25
<PAGE> 26
by the Offerors on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Offerors and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8. The amount paid or payable
by an Indemnified Person as a result of the losses, claims, damages or
liabilities (or actions, suits or proceedings (including governmental
proceedings) in respect thereof) referred to above in this Section 8 shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any such
actions, suits or proceedings (including governmental proceedings) or claims,
provided that the provisions of Section 7 have been complied with (in all
material respects) in respect of any separate counsel for such Indemnified
Person. Notwithstanding the provisions of this Section 8, no Underwriter shall
be required to contribute any amount in excess of the total price at which the
Securities underwritten by it and distributed to the public were offered to the
public. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8 to contribute are several in
proportion to their respective underwriting obligations and not joint.
The agreement with respect to contribution contained in this Section 8 shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any Underwriter, and shall survive delivery of and
payment for the Preferred Securities hereunder and any termination of this
Agreement.
Section 9. Termination of Agreement.
(a) The Representative may terminate this Agreement, by notice to
the Offerors, at any time at or prior to Closing Time (i) if there has occurred
any material adverse disruption in the financial markets or any outbreak or
material escalation of hostilities or any other calamity or crisis the effect
of which is such as to impair, in the reasonable judgment of the Representative
after having made reasonable inquiry, the marketability of the Preferred
Securities, (ii) if trading in the Preferred Securities has been suspended by
the Commission, or if trading generally on the New York Stock Exchange has been
suspended, limited or restricted or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
said exchange or by order of the Commission or any other governmental
authority, (iii) if trading of any securities of the Company shall have been
suspended on any exchange or over-the-counter
26
<PAGE> 27
market, or (iv) if a general moratorium on commercial banking activities in New
York or Delaware has been declared by Federal, New York, or Delaware
authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except
as provided in Section 4 hereof.
Section 10. Substitution of Underwriters. If any Underwriter shall fail or
refuse (otherwise than for some reason sufficient to justify in accordance with
the terms hereof, the termination of its obligations hereunder) to purchase the
Securities which it had agreed to purchase at the Closing Time, the
Representative shall immediately notify the Company and the Representative and
the other Underwriters may, within 36 hours of the giving of such notice,
determine to purchase, or to procure one or more other members of the National
Association of Securities Dealers, Inc. ("NASD") (or, if not members of the
NASD, who are foreign banks, dealers or institutions not registered under the
1934 Act and who agree in making sales to comply with the NASD's Rules of Fair
Practice), satisfactory to the Company, to purchase, upon the terms herein set
forth, the number of Securities which the defaulting Underwriter had agreed to
purchase. If any non-defaulting Underwriter or Underwriters shall determine to
exercise such right, the Representative shall give written notice to the
Company of such determination within 36 hours after the Company shall have
received notice of any such default, and thereupon the Closing Time shall be
postponed for such period, not exceeding three business days, as the Company
shall determine. If in the event of such a default, the Representative shall
fail to give such notice, or shall within such 36-hour period give written
notice to the Company that no other Underwriter or Underwriters, or others,
will exercise such right, then this Agreement may be terminated by the Company,
upon like notice given to the Representative within a further period of 36
hours. If in such case the Company shall not elect to terminate this
Agreement, it shall have the right, irrespective of such default:
(a) to require such non-defaulting Underwriters to purchase and
pay for the respective number of Securities which they had severally agreed
to purchase hereunder, as hereinabove provided, and, in addition, the
Securities which the defaulting Underwriter shall have so failed to
purchase up to a number of Securities equal to one-ninth (1/9) of the
respective number of Securities which such non-defaulting Underwriters have
otherwise agreed to purchase hereunder; and/or
(b) to procure one or more other members of the NASD (or, if not
members of the NASD, who are foreign banks, dealers or institutions not
registered under the 1934 Act and who agree in making sales to comply with
27
<PAGE> 28
the NASD's Rules of Fair Practice), to purchase, upon the terms herein set
forth, the number of Securities which such defaulting Underwriter had
agreed to purchase, or that portion thereof which the remaining
Underwriters shall not be obligated to purchase pursuant to the foregoing
clause (a).
In the event the Company shall exercise its rights under clause (a) and/or
(b) above, the Company shall give written notice thereof to the Representative
within such further period of 36 hours, and thereupon the Closing Time shall be
postponed for such period, not exceeding five business days, as the Company
shall determine. In the event the Company shall be entitled to but shall not
elect to exercise its rights under clause (a) and/or (b), the Company shall be
deemed to have elected to terminate this Agreement.
Any action taken by the Company under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement. Termination by the Company under this
Section 10 shall be without any liability on the part of the Company or any
non-defaulting Underwriter.
In the computation of any period of 36 hours referred to in this Section 10,
there shall be excluded a period of 24 hours in respect of each Saturday,
Sunday or legal holiday which would otherwise be included in such period of
time.
Section 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representative at Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York
10281-1201, attention of Anthony V. Leness, Managing Director; notices to the
Trust and the Company shall be directed to them at 212 West Michigan Avenue,
Jackson, Michigan 49201, attention of Alan M. Wright, Senior Vice President and
Chief Financial Officer.
Section 12. Parties. This Agreement and the Pricing Agreement shall each
inure to the benefit of and be binding upon the Underwriters and the Trust and
the Company and their respective successors. Nothing expressed or mentioned in
this Agreement or the Pricing Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters and the Trust
and the Company and their respective successors and the controlling persons and
officers, directors and trustees referred to in Sections 7 and 8 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or the Pricing Agreement or any provision
herein or therein contained. This Agreement and the Pricing Agreement and all
conditions and provisions hereof and thereof are intended to be for the sole
and exclusive benefit
28
<PAGE> 29
of the Underwriters and the Trust and the Company and their respective
successors, and said controlling persons and officers, directors and trustees
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
Section 13. Governing Law and Time. This Agreement and the Pricing
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed in said
State. Except as otherwise set forth herein, specified times of day refer to
New York City time.
Section 14. Counterparts. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such respective counterparts shall
together constitute one and the same instrument.
29
<PAGE> 30
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Trust a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Trust and the Company in accordance with its
terms.
Very truly yours,
CONSUMERS ENERGY COMPANY
By
-------------------------------
Senior Vice President and Chief
Financial Officer
CONSUMERS ENERGY COMPANY FINANCING II
By
-------------------------------
Title: Regular Trustee
By
--------------------------------
Title: Regular Trustee
By
--------------------------------
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
-----------------------------
Authorized Signatory
For itself and as Representative of the other
Underwriters named in Schedule A hereto.
<PAGE> 31
SCHEDULE A
<TABLE>
<CAPTION>
Number
Name of Underwriter of Securities
------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ________
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ________
Total
========
</TABLE>
<PAGE> 32
EXHIBIT A
_________ Preferred Securities
CONSUMERS ENERGY COMPANY FINANCING II
(a Delaware trust)
_____% Trust Originated Preferred SecuritiesSM ("TOPrSSM")
(Liquidation Amount of $25 Per Security)
PRICING AGREEMENT
MERRILL LYNCH & CO. ___________ __, 1997
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
as Representative of the several
Underwriters named in the within-
mentioned Underwriting Agreement
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated ___ __,
1996 (the "Underwriting Agreement"), relating to the purchase by the several
Underwriters named in Schedule A thereto, for whom Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated is acting as representative (the
"Representative"), of the above ___% Trust Originated Preferred Securities (the
"Preferred Securities"), of CONSUMERS ENERGY COMPANY FINANCING II, a Delaware
business trust (the "Trust").
Pursuant to Section 2 of the Underwriting Agreement, the Trust
and Consumers Energy Company (the "Company"), a Michigan corporation, agree
with each Underwriter as follows:
____________________
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE> 33
1. The initial public offering price per security
for the Preferred Securities, determined as provided in said Section 2,
shall be $_____.
2. The purchase price per security for the Preferred
Securities to be paid by the several Underwriters shall be $_____, being
an amount equal to the initial public offering price set forth above.
3. The compensation per Preferred Security to be
paid by the Company to the several Underwriters in respect of their
commitments hereunder shall be $__________; provided, however, that the
compensation per Preferred Security for sales of 10,000 or more
Preferred Securities to a single purchaser shall be $_________.
2
<PAGE> 34
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Trust a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Trust and the Company in accordance
with its terms.
Very truly yours,
CONSUMERS ENERGY COMPANY
By
--------------------------------
Title:
CONSUMERS ENERGY COMPANY FINANCING II
By
--------------------------------
Title: Regular Trustee
By
--------------------------------
Title: Regular Trustee
By
--------------------------------
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
------------------------------
Authorized Signatory
For itself and as Representative of the other
Underwriters named in the Underwriting Agreement.
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF TRUST
The undersigned, constituting all of the trustees of Consumers Energy
Company Financing II, desiring to form a business trust pursuant to Delaware
Business Trust Act, 12 Del. C. Section 3801, et seq, hereby certify as
follows:
(a) Name. The name of the business trust being formed hereby (the
"Trust") is "Consumers Energy Company Financing II."
(b) Delaware Trustee. The name and business address of the
trustee of the Trust which has its principal place of
business in the State of Delaware is as follows:
The Bank of New York (Delaware),
a Delaware Banking Corporation
White Clay Center, Route 273
Newark, Delaware 19711
(c) Effective Date. This Certificate of Trust shall be effective
as of the date of filing.
Dated: July 30, 1997
<PAGE> 2
IN WITNESS WHEREOF, the undersigned, being the sole Trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
/s/A.M. Wright
----------------------------------------
Alan M. Wright, as Regular Trustee
/s/Thomas A. McNish
----------------------------------------
Thomas A. McNish, as Regular Trustee
/s/Doris F. Galvin
----------------------------------------
Doris F. Galvin, as Regular Trustee
The Bank of New York (Delaware),
as Delaware Trustee
By: Walter N. Gitlin
------------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED DECLARATION
OF TRUST
CONSUMERS ENERGY COMPANY FINANCING II
Dated as of ____________________
====================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS 1
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.3 Reports by the Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4 Periodic Reports to Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
ORGANIZATION
SECTION 3.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.5 Title to Property of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.6 Powers and Duties of the Regular Trustees 10
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.8 Powers and Duties of the Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.10 Certain Rights of Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.11 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.12 Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.14 Duration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.2 Responsibilities of the Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
1 This Table of Contents does not constitute part of the Amended and
Restated Declaration and shall not affect the interpretation of any
of its terms or provisions.
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE V
TRUSTEES
<S> <C> <C>
SECTION 5.1 Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.3 Property Trustee; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.5 Initial Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.6 Appointment, Removal and Resignation of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.7 Vacancies among Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.8 Effect of Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.9 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.10 Delegation of Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.2 Transfer of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9.3 Deemed Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9.4 Book Entry Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9.5 Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 9.7 Definitive Preferred Security Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.2 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 10.5 Outside Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE XI
ACCOUNTING
<S> <C> <C>
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.2 Certain Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 11.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 13.2 Representations and Warranties of Delaware Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 14.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 14.3 Intention of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 14.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 14.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14.6 Partial Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14.8 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ANNEX I TERMS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT A-1 FORM OF PREFERRED SECURITY
CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-1
EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A2-1
EXHIBIT B SPECIMEN OF DEBENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C UNDERWRITING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
iii
<PAGE> 5
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
- ------------------- -----------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annex I
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(e)
</TABLE>
- ---------------
* This Cross-Reference Table does not constitute part of the Declaration
and shall not affect the interpretation of any of its terms or
provisions.
iv
<PAGE> 6
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CONSUMERS ENERGY COMPANY FINANCING I
__________________, 199__
AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration")
dated as of_____________, 199__, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the assets of the Trust to be issued pursuant to this
Declaration;
WHEREAS, the Regular Trustees, the Delaware Trustee, the
Property Trustee and the Sponsor established Consumers Energy Company Financing
II (the "Trust"), a statutory business trust under the Business Trust Act (as
defined herein) pursuant to a Declaration of Trust dated as of July 30, 1997
(the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on July 30, 1997 (the "Certificate
of Trust"), for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Debentures of the Debenture Issuer;
WHEREAS, as of the date hereof, no interests in the Trust have
been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the
Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
<PAGE> 7
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the
same meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or amended from
time to time;
(d) all references in this Declaration to Articles,
Sections, Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified, and all references in
this Declaration to the "terms of the Securities" are to the terms of the
Securities as set forth in Annex I hereto;
(e) a term defined in the Trust Indenture Act has the
same meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and
vice versa.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a day on which banking
institutions in New York, New York or Delaware are authorized or required by
law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. Section 3801, et seq., as it may be amended from
time to time, or any successor legislation.
"Certificate" means a Common Security Certificate or a
Preferred Security Certificate.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.
2
<PAGE> 8
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means ______________.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities Guarantee" means the guarantee agreement to
be dated as of _______________, 199__ of the Sponsor in respect of the Common
Securities.
"Common Security" has the meaning specified in Section 7.1.
"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security substantially in the
form of Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee;
(b) any Affiliate of any Regular Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Regular Trustee; or (d) any officer, employee or agent of the Trust or its
Affiliates.
"Corporate Trust Office" means the office of the Property
Trustee at which the corporate trust business of the Preferred Guarantee
Trustee shall, at any particular time, be principally administered, which
office at the date of execution of this Agreement is located at 101 Barclay,
New York, New York 10286.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the
Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Consumers Energy Company in its
capacity as issuer of the series of Debentures to be acquired by the Trust.
"Debenture Trustee" means The Bank of New York, as trustee
under the Indenture until a successor is appointed thereunder, and thereafter
means such successor trustee.
"Debentures" means the series of Debentures to be issued by
the Debenture Issuer under the Indenture to be held by the Property Trustee, a
specimen certificate for such series of Debentures being Exhibit B.
"Definitive Preferred Security Certificates" has the meaning
set forth in Section 9.4.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
3
<PAGE> 9
"Event of Default" in respect of the Securities means an Event
of Default (as defined in the Indenture) has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Global Certificate" has the meaning set forth in Section 9.4.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of January 1, 1996,
between the Debenture Issuer and the Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued.
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in
Section 4(c) of Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Securities or by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the
relevant class.
"Ministerial Action" has the meaning set forth in Section 4(c)
of Annex I.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
4
<PAGE> 10
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 3.8(i).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, as
trustee under the Preferred Securities Guarantee until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Preferred Securities Guarantee" means the guarantee agreement
to be dated as of ______________, 199__, of the Sponsor in respect of the
Preferred Securities.
"Preferred Security" has the meaning specified in Section 7.1.
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A- 1.
"Pricing Agreement" means the pricing agreement between the
Trust, the Debenture Issuer, and the underwriters designated by the Regular
Trustees with respect to the offer and sale of the Preferred Securities.
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in
Section 3.8(c).
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both of them, or if there is only one Regular
Trustee, such Regular Trustee.
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
5
<PAGE> 11
"Responsible Officer" means, with respect to the Property
Trustee, any officer within the Corporate Trust Office of the Property Trustee,
including any vice-president, any assistant vice-president, any assistant
treasurer or other officer of the Corporate Trust Office of the Property
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended
from time to time or any successor legislation.
"Special Event" has the meaning set forth in Section 4(c) of
Annex I.
"Sponsor" means Consumers Energy Company, a Michigan
corporation, or any successor entity in a merger, consolidation or
amalgamation, in its capacity as sponsor of the Trust.
"Successor Property Trustee" has the meaning set forth in
Section 5.6(b).
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Tax Event" has the meaning set forth in Section 4(c) of
Annex I.
"10% in liquidation amount of the Securities" means, except as
provided in the terms of the Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as
the context may require, Holders of outstanding Preferred Securities or Holders
of outstanding Common Securities voting separately as a class, who are the
record owners of 10% or more of the aggregate liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all outstanding Securities of the relevant class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement for
the offering and sale of Preferred Securities in the form of Exhibit C
including any Pricing Agreement as contemplated therein.
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ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the
Trust Indenture Act that are required to be part of this Declaration and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which
is a trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Section
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees, on
behalf of the Trust, shall provide the Property Trustee (i) within 14 days
after each record date for payment of Distributions, a list, in such form as
the Property Trustee may reasonably require, of the names and addresses of the
Holders of the Securities ("List of Holders") as of such record date, provided
that neither the Sponsor nor the Regular Trustees, on behalf of the Trust,
shall be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Regular Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a
written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Property Trustee. The Property Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity), provided that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its
obligations under Section Section 311(a), 311(b) and 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 1 of each year, the Property Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees, on behalf of the
Trust, shall provide to the Property Trustee such documents, reports and
information as required by Section 314 (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
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SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with
any conditions precedent, if any, provided for in this Declaration that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the
Event of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than
a majority in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation amount of the
Preferred Securities that the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any
such default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the
Preferred Securities or impair any right consequent thereon. Any waiver by the
Holders of the Preferred Securities of an Event of Default with respect to the
Preferred Securities shall also be deemed to constitute a waiver by the Holders
of the Common Securities of any such Event of Default with respect to the
Common Securities for all purposes of this Declaration without any further act,
vote, or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of
the Common Securities may, by vote, on behalf of the Holders of all of the
Common Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except
where the Holders of the Common Securities are deemed to have waived
such Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super
Majority to be waived, except where the Holders of the Common
Securities are deemed to have waived such Event of Default under the
Declaration as provided below in this Section 2.6(b), the Event of
Default under the Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation
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amount of the Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding;
provided further, each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated,
and until such Events of Default have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf
of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of Section Section 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Section Section 316(a)(1)(A)
and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from
this Declaration and the Securities, as permitted by the Trust Indenture Act.
Subject to the foregoing provisions of this Section 2.6(b), upon such waiver,
any such default shall cease to exist and any Event of Default with respect to
the Common Securities arising therefrom shall be deemed to have been cured for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture
by the Property Trustee at the direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of Default under
this Declaration. The foregoing provisions of this Section 2.6(c) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of all defaults with respect
to the Securities actually known to a Responsible Officer of the Property
Trustee, unless such defaults have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section 2.7(a) being hereby
defined to be an Event of Default as defined in the Indenture, not including
any periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment of
principal of (or premium, if any) or interest on any of the Debentures or in
the payment of any sinking fund installment established for the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long
as a Responsible Officer of the Property Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders of the
Securities. Such notice shall state that such Event of Default also
constitutes a Declaration event of default.
(b) The Property Trustee shall not be deemed to have
knowledge of any default except:
(i) a default under Sections 5.1(a) and 5.1(b) of
the Indenture; or
(ii) any default as to which the Property Trustee
shall have received written notice or of which a Responsible Officer
of the Property Trustee charged with the administration of the
Declaration shall have actual knowledge.
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ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Consumers Energy Company Financing II," as
such name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o
Consumers Energy Company, 212 West Michigan Avenue, Jackson, Michigan 49201.
On ten Business Days' prior written notice to the Holders of Securities, the
Regular Trustees may designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only those
other activities necessary, appropriate, convenient or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to
the specific duties of the Property Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Legal title to all assets of the Trust shall be vested in the
Property Trustee and shall be administered by the Property Trustee for the
Trust and for the benefit of the Holders in accordance with this Declaration.
The Holders shall not have legal title to any part of the assets of the Trust,
but shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the
Common Securities in accordance with this Declaration; provided, however, that
the Trust may issue no more than one series of
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Preferred Securities and no more than one series of Common Securities, and,
provided further, that there shall be no interests in the Trust other than the
Securities, and the issuance of Securities shall be limited to a one-time,
simultaneous issuance of both the Preferred Securities and Common Securities on
the Closing Date;
(b) in connection with the issue and sale of the
Preferred Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission the
registration statement on Form S-3 prepared by the Sponsor, including
any amendments thereto, pertaining to, among other securities, the
Preferred Securities;
(ii) execute and file any documents prepared by
the Sponsor, or take any acts as determined by the Sponsor to be
necessary, appropriate, convenient or advisable in order to qualify or
register all or part of the Preferred Securities in any State in which
the Sponsor has determined to qualify or register such Preferred
Securities for sale;
(iii) execute and file an application, prepared by
the Sponsor, to the New York Stock Exchange or any other national
stock exchange or the Nasdaq Stock Market for listing upon notice of
issuance of any Preferred Securities;
(iv) execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act; and
(v) execute and enter into the Underwriting
Agreement providing for the sale of the Preferred Securities;
(c) to acquire the Debentures with the proceeds of the
sale of the Preferred Securities and the Common Securities; provided, however,
that the Regular Trustees shall cause legal title to the Debentures to be held
of record in the name of the Property Trustee for the benefit of the Holders of
the Preferred Securities and the Holders of the Common Securities;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Property Trustee before taking
or refraining from taking any Ministerial Action in relation to a Special
Event;
(e) to establish a record date with respect to all
actions to be taken hereunder that require a record date be established,
including and with respect to, for the purposes of Section 316(c) of the Trust
Indenture Act, Distributions, voting rights, redemptions and exchanges, and to
issue relevant notices to the Holders of Preferred Securities and Holders of
Common Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or demands of or
against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the
Property Trustee has the exclusive power to bring such Legal Action;
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(h) to employ or otherwise engage employees and agents
(who may be designated as officers with titles) and managers, contractors,
advisors, and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate required by Section
314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate
may be executed by any Regular Trustee;
(k) to incur expenses that are necessary, appropriate,
convenient or incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as,
registrar and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to take all action that may be necessary or
appropriate for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business trust
under the laws of the State of Delaware and of each other jurisdiction in which
such existence is necessary to protect the limited liability of the Holders of
the Preferred Securities or to enable the Trust to effect the purposes for
which the Trust was created;
(o) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine in
their discretion to be necessary, desirable, convenient or incidental in
carrying out the activities of the Trust as set out in this Section 3.6,
including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to
ensure that the Debentures will be treated as indebtedness of the
Debenture Issuer for United States federal income tax purposes,
provided that such action does not materially adversely affect the
interests of Holders;
(p) to take all action necessary to cause all applicable
tax returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular Trustees, on
behalf of the Trust; and
(q) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing.
The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular
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Trustees shall not take any action that is inconsistent with the purposes and
functions of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have
none of the powers or the authority of the Property Trustee set forth in
Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to this
Section 3.6 shall be paid by the Debenture Issuer.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property
Trustee) shall not, engage in any activity other than as required or authorized
by this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(a) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the Securities;
(b) acquire any assets other than as expressly provided
herein;
(c) possess Trust property for other than a Trust
purpose;
(d) make any loans or incur any indebtedness other than
loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as
to vary the Trust assets or the terms of the Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;
or
(g) other than as provided in this Declaration or Annex
I, (A) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (B) waive
any past default that is waivable under the Indenture, (C) exercise any right
to rescind or annul any declaration that the principal of all the Debentures
shall be due and payable, or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required unless the Trust shall have received an opinion of counsel to the
effect that such modification will not cause more than an insubstantial risk
that for United States federal income tax purposes the Trust will not be
classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by
and held of record in the name of the Property Trustee in trust for the benefit
of the Holders of the Securities. The right, title and interest of the
Property Trustee to the Debentures shall vest automatically in each Person who
may hereafter be appointed as Property Trustee in accordance with Section 5.6.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Debentures have been executed and
delivered.
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(b) The Property Trustee shall not transfer its right,
title and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated
non-interest bearing trust account (the "Property Trustee Account") in
the name of and under the exclusive control of the Property Trustee on
behalf of the Holders of the Securities and, upon the receipt of
payments of funds made in respect of the Debentures held by the
Property Trustee, deposit such funds into the Property Trustee Account
and make payments to the Holders of the Preferred Securities and
Holders of the Common Securities from the Property Trustee Account in
accordance with Section 6.1. Funds in the Property Trustee Account
shall be held uninvested until disbursed in accordance with this
Declaration. The Property Trustee Account shall be an account that is
maintained with a banking institution the rating on whose long- term
unsecured indebtedness is at least equal to the rating assigned to the
Preferred Securities by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule 436(g)(2)
under the Securities Act;
(ii) engage in such ministerial activities as
shall be necessary, appropriate, convenient or incidental to effect
the redemption of the Preferred Securities and the Common Securities
to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by
the Regular Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Debentures to Holders of
Securities upon the occurrence of certain special events (as may be
defined in the terms of the Securities) arising from a change in law
or a change in legal interpretation or other specified circumstances
pursuant to the terms of the Securities.
(d) The Property Trustee shall take all actions and
perform such duties as may be specifically required of the Property Trustee
pursuant to the terms of the Securities.
(e) The Property Trustee shall hold the Preferred
Securities Guarantee and the Common Securities Guarantee, for the benefit of
the Holders of the Preferred Securities and the Common Securities,
respectively.
(f) The Property Trustee shall take any Legal Action
which arises out of or in connection with an Event of Default of which a
Responsible Officer of the Property Trustee has actual knowledge or the
Property Trustee's duties and obligations under this Declaration or the Trust
Indenture Act.
(g) The Property Trustee shall not resign as a Trustee
unless either:
(i) the Trust has been completely liquidated and
the proceeds of the liquidation distributed to the Holders of
Securities pursuant to the terms of the Securities; or
(ii) a Successor Property Trustee has been
appointed and has accepted that appointment in accordance with Section
5.6.
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(h) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Property Trustee occurs and is continuing, the Property Trustee
shall, for the benefit of Holders of the Securities, enforce its rights as
holder of the Debentures subject to the rights of the Holders pursuant to the
terms of such Securities.
(i) The Property Trustee may authorize one or more
Persons (each, a "Paying Agent") to pay Distributions, redemption payments or
liquidation payments on behalf of the Trust with respect to all Securities, and
any such Paying Agent shall comply with Section 317(b) of the Trust Indenture
Act. Any Paying Agent may be removed by the Property Trustee at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any time
by the Property Trustee.
(j) Subject to this Section 3.8, the Property Trustee
shall have none of the duties, liabilities, powers or the authority of the
Regular Trustees set forth in Section 3.6.
The Property Trustee must exercise the powers set forth in
this Section 3.8 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Property Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust
set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Property Trustee has actual knowledge, the Property
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Declaration shall be construed
to relieve the Property Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of
Default and after the curing or waiving of all such Events of Default
that may have occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the express
provisions of this Declaration and the Property Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration,
and no implied covenants or obligations shall be read into
this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the
part of the Property Trustee, the Property Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Property Trustee and
conforming to the requirements of this Declaration; but in the
case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Property Trustee, the Property Trustee shall be under a
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duty to examine the same to determine whether or not they
conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Property Trustee, unless it shall be proved that the Property
Trustee was grossly negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall
require the Property Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Declaration or indemnity reasonably satisfactory to the Property
Trustee against such risk or liability is not reasonably assured to
it;
(v) the Property Trustee's sole duty with respect
to the custody, safe keeping and physical preservation of the
Debentures and the Property Trustee Account shall be to deal with such
property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except as it may otherwise
agree with the Sponsor. Money held by the Property Trustee need not
be segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant
to Section 3.8(c)(i) and except to the extent otherwise required by
law; and
(viii) the Property Trustee shall not be
responsible for monitoring the compliance by the Regular Trustees or
the Sponsor with their respective duties under this Declaration, nor
shall the Property Trustee be liable for any default or misconduct of
the Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely
and shall be fully protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
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(ii) any direction or act of the Sponsor or the
Regular Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting
any action hereunder, the Property Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered by
the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no duty to
see to any recording, filing or registration of any instrument
(including any financing or continuation statement or any filing under
tax or securities laws) or any rerecording, refiling or registration
thereof;
(v) the Property Trustee may consult with counsel
of its choice or other experts and the advice or opinion of such
counsel and experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion, such counsel may be counsel to the Sponsor or any
of its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Property Trustee security and
indemnity, reasonably satisfactory to the Property Trustee, against
the costs, expenses (including attorneys' fees and expenses and the
expenses of the Property Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Property Trustee provided, that, nothing contained in
this Section 3.10(a)(vi) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Property Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, custodians, nominees or attorneys
and the Property Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(ix) any action taken by the Property Trustee or
its agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or its agents
alone shall be sufficient and effective to perform any such action and
no third party shall be required to inquire as to the authority of the
Property Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's taking
such action;
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(x) whenever in the administration of this
Declaration the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Property Trustee (i) may request
instructions from the Holders of the Securities which instructions may
only be given by the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to direct the Property
Trustee under the terms of the Securities in respect of such remedy,
right or action, (ii) may refrain from enforcing such remedy or right
or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in or
accordance with such instructions; and
(xi) except as otherwise expressly provided by
this Declaration, the Property Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the Property
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property Trustee described in
this Declaration. Except as set forth in Section 5.2, the Delaware Trustee
shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act, a majority of or, if
there are only two, both Regular Trustees or, if there is only one, such
Regular Trustee is authorized to execute on behalf of the Trust any documents
that the Regular Trustees have the power and authority to execute pursuant to
Section 3.6; provided that, the registration statement referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Regular Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
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SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall have existence for thirty-five (35) years from the
Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with
or into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any business trust or other business
entity (as defined in the Business Trust Act), except as described in Section
3.15(b) and (c).
(b) The Trust may, with the consent of the Regular
Trustees or, if there are more than two, a majority of the Regular Trustees and
without the consent of the Holders of the Securities, the Delaware Trustee or
the Property Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor
Entity") either:
(A) expressly assumes all of the
obligations of the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Preferred
Securities rank with respect to Distributions and payments
upon liquidation, redemption and otherwise;
(ii) the Debenture Issuer expressly acknowledges a
trustee of the Successor Entity that possesses the same powers and
duties as the Property Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with
any other organization on which the Preferred Securities are then
listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the material rights, preferences
and privileges of the Holders of the Securities (including any
Successor Securities) in any material respect (other than with respect
to any dilution of such Holders' interests in the Preferred Securities
as a result of such merger, consolidation, amalgamation or
replacement);
(vi) such Successor Entity has a purpose identical
to that of the Trust;
(vii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust experienced in
such matters to the effect that:
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(A) such merger, consolidation,
amalgamation or replacement does not adversely affect the
material rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of
the Holders' interest in the new entity); and
(B) following such merger,
consolidation, amalgamation or replacement, neither the Trust
nor the Successor Entity will be required to register as an
Investment Company; and
(C) following such merger,
consolidation, amalgamation or replacement, the Trust (or the
Successor Entity) will continue to be classified as a grantor
trust for United States federal income tax purposes; and
(viii) the Sponsor guarantees the obligations of
such Successor Entity under the Successor Securities at least to the
extent provided by the Preferred Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date the Sponsor will purchase all of the
Common Securities issued by the Trust, in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare for filing by the Trust with the
Commission a registration statement on Form S-3 in relation to, among other
securities, the Preferred Securities, including any amendments thereto;
(b) to determine the States in which to take appropriate
action to qualify or register for sale all or part of the Preferred Securities
and to do any and all such acts, other than actions which must be taken by the
Trust, and advise the Trust of actions it must take, and prepare for execution
and filing any documents to be executed and filed by the Trust, as the Sponsor
deems necessary or advisable in order to comply with the applicable laws of any
such States;
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(c) to prepare for filing by the Trust an application to
the New York Stock Exchange or any other national stock exchange or the Nasdaq
National Market for listing upon notice of issuance of any Preferred
Securities;
(d) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A relating to the registration of
the Preferred Securities under Section 12(b) of the Exchange Act, including any
amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement
and Pricing Agreement providing for the sale of the Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities,
the Sponsor may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the Holders of a majority in
liquidation amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities,
provided that, in any case, the number of Trustees shall at least be five (5)
unless the Trustee that acts as the Property Trustee also acts as Delaware
Trustee pursuant to Section 5.2, in which case the number of Trustees, shall be
at least three (3).
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law,
provided that, if the Property Trustee has a principal place of business in the
State of Delaware and otherwise meets the requirements of applicable law, then
the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall
have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall
act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
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(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
other Person permitted by the Commission to act as an institutional
trustee under the Trust Indenture Act, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus
of at least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation or other Person publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to
above, then for the purposes of this Section 5.3(a)(ii), the combined
capital and surplus of such corporation or other Person shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be
eligible to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture
Act) shall in all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act.
(d) The Preferred Securities Guarantee shall be deemed to
be specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
Alan M. Wright Thomas A. McNish
212 West Michigan Avenue 212 West Michigan Avenue
Jackson, Michigan 49201 Jackson, Michigan 49201
Doris F. Galvin
212 W. Michigan Avenue
Jackson, Michigan 49201
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
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The initial Property Trustee shall be:
The Bank of New York
101 Barclay
New York, New York 10286
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b), Trustees may be appointed
or removed without cause at any time:
(i) until the issuance of any Securities, by
written instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote
of the Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders of the Common
Securities.
(b)(i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a successor Trustee possessing
the qualifications to act as Property Trustee under Section 5.3 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as
Delaware Trustee shall not be removed in accordance with this Section 5.6(a)
until a successor Trustee possessing the qualifications to act as Delaware
Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument executed by
such Successor Delaware Trustee and delivered to the Regular Trustees and the
Sponsor.
(c) A Trustee appointed to office shall hold office until
his successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Trustee and
delivered to the Sponsor and the Trust, which resignation shall take effect
upon such delivery or upon such later date as is specified therein; provided,
however, that:
(i) No such resignation of the Trustee that acts
as the Property Trustee shall be effective:
(A) until a Successor Property Trustee
has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and
delivered to the Trust, the Sponsor and the resigning Property
Trustee; or
(B) until the assets of the Trust have
been completely liquidated and the proceeds thereof
distributed to the Holders of the Securities; and
(ii) no such resignation of the Trustee that acts
as the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and delivered
to the Trust, the Sponsor and the resigning Delaware Trustee.
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(d) The Holders of the Common Securities shall use their
best efforts to promptly appoint a Successor Delaware Trustee or Successor
Property Trustee as the case may be if the Property Trustee or the Delaware
Trustee delivers an instrument of resignation in accordance with this Section
5.6.
(e) If no Successor Property Trustee or Successor
Delaware Trustee shall have been appointed and shall have accepted such
appointment as provided in this Section 5.6 within 60 days after delivery to
the Sponsor and the Trust of an instrument of resignation, the resigning
Property Trustee or Delaware Trustee, as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Property Trustee or
Successor Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustee, if
there is one, or by each of the Regular Trustees, if there are two or, if there
are more than two, a majority of the Regular Trustees, shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the number
of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 5.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
granted to the Regular Trustees and shall discharge all the duties imposed upon
the Regular Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 48 hours before such meeting. Notice of any telephonic meetings of
the Regular Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before a meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Regular Trustees may be taken at a meeting by vote of a
majority of the Regular Trustees present (whether in person or by telephone)
and eligible to vote with respect to such matter, provided that a Quorum is
present, or without a meeting, by the unanimous written consent of the Regular
Trustees. In the event there is only one Regular Trustee,
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any and all action of such Regular Trustee shall be evidenced by a written
consent of such Regular Trustee.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.6, including any registration statement or amendment
thereto filed with the Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate
from time to time to such of their number or to officers of the Trust the doing
of such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
SECTION 5.11 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Property Trustee or
the Delaware Trustee, as the case may be, hereunder, provided such Person shall
be otherwise qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions in accordance with the
applicable terms of the relevant Holder's Securities. Distributions shall be
made on the Preferred Securities and the Common Securities in accordance with
the preferences set forth in their respective terms. If and to the extent that
the Debenture Issuer makes a payment of interest (including Compounded Interest
(as defined in the Indenture) and Additional Interest (as defined in the
Indenture)), premium and/or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "Payment Amount"), the Property
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall, on behalf of the Trust,
issue one class of preferred securities representing undivided beneficial
interests in the assets of the Trust having such terms as are set
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forth in Annex I (the "Preferred Securities") and one class of common
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities.")
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Preferred Securities and the Common Securities.
(b) The Certificates shall be signed on behalf of the
Trust by the Regular Trustee (or, if there are more than two Regular Trustees,
by any two of the Regular Trustees). Any such signature shall be the manual
signature of any present or any future Regular Trustee. In case any Regular
Trustee of the Trust who shall have signed any of the Securities shall cease to
be such Regular Trustee before the Certificates so signed shall be delivered by
the Trust, such Certificates nevertheless may be delivered as though the person
who signed such Certificates had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons who, at the
actual date of execution of such Certificate, shall be the Regular Trustees of
the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such a Regular Trustee. Certificates shall
be printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation of any stock exchange on which the Securities may
be listed, or to conform to usage.
(c) The consideration received by the Trust for the
issuance of the Securities shall constitute a contribution to the capital of
the Trust and shall not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable subject to Section 10.1(b) with respect to the
Common Securities.
(e) Every Person, by virtue of having become a Holder or
a Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration, the Preferred Securities Guarantee
and the Indenture.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Holder of the
Common Securities or the Sponsor;
(ii) upon the filing of a certificate of
dissolution or its equivalent with respect to the Holder of the Common
Securities or the Sponsor or the revocation of the charter of the
Holder of the Common Securities, or the Sponsor's charter and the
expiration of 90 days after the date of revocation without a
reinstatement thereof;
(iii) upon the entry of a decree of judicial
dissolution of the Holder of the Common Securities, the Sponsor or the
Trust;
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(iv) when all of the Securities shall have been
called for redemption and the amounts necessary for redemption thereof
shall have been paid to the Holders in accordance with the terms of
the Securities;
(v) upon the occurrence and continuation of a
Special Event pursuant to which the Trust shall have been dissolved in
accordance with the terms of the Securities and all of the Debentures
endorsed thereon shall have been distributed to the Holders of
Securities in exchange for all of the Securities;
(vi) before the issuance of any Securities, with
the consent of all of the Regular Trustees and the Sponsor; or
(vii) upon the expiration of the term of the Trust
as set forth in Section 3.14.
(b) After the occurrence of an event referred to in
Section 8.1(a) and upon the completion of winding-up of the Trust and its
termination, the Trustees shall file a certificate of cancellation with the
Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article X shall
survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration, and the terms of the
Securities shall be null and void.
(b) Subject to this Article IX, Preferred Securities
shall be freely transferable.
(c) Subject to this Article IX, the Sponsor and any
Related Party may only transfer Common Securities to the Sponsor or a Related
Party of the Sponsor; provided that, any such transfer is subject to the
condition precedent that the transferor obtain the written opinion of
nationally recognized independent counsel experienced in such matters that such
transfer would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or
the transferee would become an Investment Company.
SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the
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Regular Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Certificate, the Regular Trustees shall cause one or more
new Certificates to be issued in the name of the designated transferee or
transferees. Every Certificate surrendered for registration of transfer shall
be accompanied by a written instrument of transfer in form satisfactory to the
Regular Trustees duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Certificate surrendered for registration of
transfer shall be canceled by the Regular Trustees. A transferee of a
Certificate shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Certificate. By
acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Declaration. In the event that the Preferred Securities do
not remain in book-entry only form, the Property Trustee will act as paying
agent and may designate an additional or substitute paying agent at any time.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any
Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Securities represented by such
Certificate for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trust shall
have actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
Unless otherwise specified in the terms of the Preferred
Securities, the Preferred Securities Certificates, on original issuance, will
be issued in the form of one or more, fully registered, global Preferred
Security Certificates (each a "Global Certificate"), to be delivered to DTC,
the initial Clearing Agency, by, or on behalf of, the Trust. Such Global
Certificate(s) shall initially be registered on the books and records of the
Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security
Beneficial Owner will receive a definitive Preferred Security Certificate
representing such Preferred Security Beneficial Owner's interests in such
Global Certificate(s), except as provided in Section 9.7. Unless and until
definitive, fully registered Preferred Security Certificates (the "Definitive
Preferred Security Certificates") have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in full
force and effect;
(b) the Trust and the Trustees shall be entitled to deal
with the Clearing Agency for all purposes of this Declaration
(including the payment of Distributions on the Global Certificate(s)
and receiving approvals, votes or consents hereunder) as the Holder of
the Preferred Securities and the sole holder of the Global
Certificate(s) and shall have no notice obligation to the Preferred
Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions
of this Section 9.4 shall control; and
(d) the rights of the Preferred Security Beneficial
Owners shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such
Preferred Security Beneficial Owners and the Clearing Agency and/or
the Clearing Agency Participants. DTC will make book entry transfers
among the Clearing Agency
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Participants and receive and transmit payments of Distributions on the
Global Certificates to such Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred
Security Holders is required under this Declaration, unless and until
Definitive Preferred Security Certificates shall have been issued to the
Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular
Trustees shall give all such notices and communications specified herein to be
given to the Preferred Security Holders to the Clearing Agency, and shall have
no notice obligations to the Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Preferred Securities.
SECTION 9.7 Definitive Preferred Security Certificates.
If:
(a) a Clearing Agency elects to discontinue its services
as securities depositary with respect to the Preferred Securities and a
successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with
the Sponsor to terminate the book entry system through the Clearing Agency with
respect to the Preferred Securities,
then:
(i) Definitive Preferred Security Certificates
shall be prepared by the Regular Trustees on behalf of the Trust with
respect to such Preferred Securities; and
(ii) upon surrender of the Global Certificate(s)
by the Clearing Agency, accompanied by registration instructions, the
Regular Trustees shall cause Definitive Preferred Security
Certificates to be delivered to Preferred Security Beneficial Owners
in accordance with the instructions of the Clearing Agency. Neither
the Trustees nor the Trust shall be liable for any delay in delivery
of such instructions and each of them may conclusively rely on and
shall be protected in relying on, said instructions of the Clearing
Agency. The Definitive Preferred Security Certificates shall be
printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters,
numbers or other marks of identification or designation and such
legends or endorsements as the Regular Trustees may deem appropriate,
or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which Preferred Securities may be listed, or to
conform to usage.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
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(a) any mutilated Certificates should be surrendered to
the Regular Trustees, or if the Regular Trustees shall receive evidence to
their satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees such
security or indemnity as may be required by them to keep each of them harmless,
then, in the absence of notice that such Certificate shall have been acquired
by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 9.8,
the Regular Trustees may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section 9.8 shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration,
the Preferred Securities Guarantee, the Common Securities Guarantee and the
terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any
portion of the capital contributions (or any return thereon) of the
Holders of the Securities which shall be made solely from assets of
the Trust; and
(ii) required to pay to the Trust or to any Holder
of Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable
for all of the debts and obligations of the Trust (other than with respect to
the Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust
Act, the Holders of the Preferred Securities shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the
State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.
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(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be
paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Property Trustee
under the Trust Indenture Act), are agreed by the parties hereto to replace
such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or
arises between any Covered Persons; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein provides that an Indemnified
Person shall act in a manner that is, or provides terms that are, fair
and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of
similar authority, the Indemnified Person shall be entitled to
consider such interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Trust or any
other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express standard
and shall not be subject to any other or different standard imposed by
this Declaration or by applicable law.
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SECTION 10.4 Indemnification.
(a)(i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the
full extent permitted by law, any Company Indemnified Person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that he is or
was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged
to be liable to the Trust unless and only to the extent that the Court
of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which such Court of Chancery or such other court shall
deem proper.
(iii) To the extent that a Company Indemnified
Person shall be successful on the merits or otherwise (including
dismissal of an action without prejudice or the settlement of an
action without admission of liability) in defense of any action, suit
or proceeding referred to in paragraphs (i) and (ii) of this Section
10.4(a), or in defense of any claim, issue or matter therein, he shall
be indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(iv) Any indemnification under paragraphs (i) and
(ii) of this Section 10.4(a) (unless ordered by a court) shall be made
by the Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified Person
is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority
vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written
opinion, or (3) by the Common Security Holder of the Trust.
(v) To the fullest extent permitted by applicable
law, expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal,
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administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by
the Debenture Issuer in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this Section
10.4(a). Notwithstanding the foregoing, no advance shall be made by
the Debenture Issuer if a determination is reasonably and promptly
made (i) by the Regular Trustees by a majority vote of a quorum of
disinterested Regular Trustees, (ii) if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested
Regular Trustees so directs, by independent legal counsel in a written
opinion or (iii) the Common Security Holder of the Trust, that, based
upon the facts known to the Regular Trustees, counsel or the Common
Security Holder at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
Trust, or, with respect to any criminal proceeding, that such Company
Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in
instances where the Regular Trustees, independent legal counsel or
Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Preferred
Security Holders.
(vi) The indemnification and advancement of
expenses provided by, or granted pursuant to, the other paragraphs of
this Section 10.4(a) shall not be deemed exclusive of any other rights
to which those seeking indemnification and advancement of expenses may
be entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or Preferred Security Holders of the
Trust or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office. All rights
to indemnification under this Section 10.4(a) shall be deemed to be
provided by a contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while this
Section 10.4(a) is in effect. Any repeal or modification of this
Section 10.4(a) shall not affect any rights or obligations then
existing.
(vii) The Debenture Issuer or the Trust may
purchase and maintain insurance on behalf of any person who is or was
a Company Indemnified Person against any liability asserted against
him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Debenture Issuer would have the
power to indemnify him against such liability under the provisions of
this Section 10.4(a).
(viii) For purposes of this Section 10.4(a),
references to "the Trust" shall include, in addition to the resulting
or surviving entity, any constituent entity (including any constituent
of a constituent) absorbed in a consolidation or merger, so that any
person who is or was a director, trustee, officer or employee of such
constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent
of another entity, shall stand in the same position under the
provisions of this Section 10.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent
entity if its separate existence had continued.
(ix) The indemnification and advancement of
expenses provided by, or granted pursuant to, this Section 10.4(a)
shall, unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a Company Indemnified Person and
shall inure to the benefit of the heirs, executors and administrators
of such a person.
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(b) The Debenture Issuer agrees to indemnify the (i)
Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Property Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee and the Delaware Trustee (each of
the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any loss, liability or expense incurred without gross negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to
present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Property Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person, the Delaware
Trustee and the Property Trustee may engage or be interested in any financial
or other transaction with the Sponsor or any Affiliate of the Sponsor, or may
act as depositary for, trustee or agent for, or act on any committee or body of
holders of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail,
each transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The books of account
and the records of the Trust shall be examined by and reported upon as of the
end of each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Regular Trustees.
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(b) The Regular Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss.
(c) The Regular Trustees shall cause to be duly prepared
and delivered to each of the Holders of Securities, any annual United States
federal income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the
Code to deliver any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly prepared
and filed with the appropriate taxing authority, an annual United States
federal income tax return, on a Form 1041 or such other form required by United
States federal income tax law, and any other annual income tax returns required
to be filed by the Regular Trustees on behalf of the Trust with any state or
local taxing authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust shall
be deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the Regular Trustees; provided, however, that
the Property Trustee shall designate the signatories for the Property Trustee
Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be limited
to an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or
by any applicable terms of the Securities, this Declaration may only be amended
by a written instrument approved and executed by:
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(i) the Regular Trustees (or, if there are more
than two Regular Trustees a majority of the Regular Trustees);
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee, the
Property Trustee; and
(iii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee, the
Delaware Trustee.
(b) No amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed
amendment, the Property Trustee shall have first received an Officers'
Certificate from each of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or immunities of
the Property Trustee or the Delaware Trustee, the Property Trustee or
the Delaware Trustee as the case may be, shall have first received:
(A) an Officers' Certificate from each
of the Trust and the Sponsor that such amendment is permitted
by, and conforms to, the terms of this Declaration (including
the terms of the Securities); and
(B) an opinion of counsel (who may be
counsel to the Sponsor or the Trust) that such amendment is
permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities); and
(iii) to the extent the result of such amendment
would be to:
(A) cause the Trust to fail to continue
to be classified for purposes of United States federal income
taxation as a grantor trust;
(B) reduce or otherwise adversely affect
the powers of the Property Trustee in contravention of the
Trust Indenture Act; or
(C) cause the Trust to be deemed to be
an Investment Company required to be registered under the
Investment Company Act;
(c) At such time after the Trust has issued any
Securities that remain outstanding, any amendment that would adversely affect
the rights, privileges or preferences of any Holder of Securities may be
effected only with such additional requirements as may be set forth in the
terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be
amended without the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent
of the Holders of a Majority in liquidation amount of the Common Securities;
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(f) The rights of the holders of the Common Securities
under Article V to increase or decrease the number of, and appoint and remove,
Trustees shall not be amended without the consent of the Holders of a Majority
in liquidation amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may
be amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor; or
(iv) to conform to any change in Rule
3a-5 or written change in interpretation or application of Rule
3a-5 by any legislative body, court, government agency or regulatory
authority which amendment does not have a material adverse effect on
the rights, preferences or privileges of the Holders of the Preferred
Securities.
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities
may be called at any time by the Regular Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration,
the terms of the Securities or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading. The Regular Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in liquidation amount of such class of Securities.
Such direction shall be given by delivering to the Regular Trustees one or more
calls in writing stating that the signing Holders of Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of Securities calling a meeting shall specify in
writing the Certificates held by the Holders of Securities exercising the right
to call a meeting and only those Securities specified shall be counted for
purposes of determining whether the required percentage set forth in the second
sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms
of the Securities, the following provisions shall apply to meetings of Holders
of Securities:
(i) notice of any such meeting shall be given to
all the Holders of Securities having a right to vote thereat at least
7 days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration or the rules of any stock
exchange on which the Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be given at a meeting of
the Holders of Securities. Any action that may be taken at a meeting
of the Holders of Securities may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by the
Holders of Securities owning not less than the minimum amount of
Securities in liquidation amount that would be necessary to authorize
or take such action at a meeting at which all Holders of Securities
having a right to vote thereon were present and voting. Prompt notice
of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in
writing. The Regular Trustees may specify that any written ballot
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submitted to the Security Holder for the purpose of taking any action
without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any
Person to act for it by proxy on all matters in which a Holder of
Securities is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. No proxy shall be
valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Holder of Securities executing it. Except as
otherwise provided herein, all matters relating to the giving, voting
or validity of proxies shall be governed by the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders of the Securities
shall be conducted by the Regular Trustees or by such other Person
that the Regular Trustees may designate; and
(iv) unless the Business Trust Act, this
Declaration, the terms of the Securities, the Trust Indenture Act or
the listing rules of any stock exchange on which the Preferred
Securities are then listed or trading, otherwise provides, the Regular
Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders of Securities, including
notice of the time, place or purpose of any meeting at which any
matter is to be voted on by any Holders of Securities, waiver of any
such notice, action by consent without a meeting, the establishment of
a record date, quorum requirements, voting in person or by proxy or
any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Property Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a New York banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the United States, with trust power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration;
(b) the execution, delivery and performance by the
Property Trustee of the Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. The Declaration has been
duly executed and delivered by the Property Trustee, and it constitutes a
legal, valid and binding obligation of the Property Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law);
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(c) the execution, delivery and performance of the
Declaration by the Property Trustee does not conflict with or constitute a
breach of the Articles of Organization or By-laws of the Property Trustee; and
(d) no consent, approval or authorization of, or
registration with or notice to, any State or Federal banking authority is
required for the execution, delivery or performance by the Property Trustee, of
the Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) the Delaware Trustee is a Delaware banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the State of Delaware, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, the Declaration.
(b) the Delaware Trustee has been authorized to perform
its obligations under the Certificate of Trust and the Declaration. The
Declaration under Delaware law constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(c) no consent, approval or authorization of, or
registration with or notice to, any State or Federal banking authority is
required for the execution, delivery or performance by the Delaware Trustee, of
the Declaration.
(d) the Delaware Trustee is a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular
Trustees at the Trust's mailing address set forth below (or such other address
as the Trust may give notice of to the Holders of the Securities):
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Consumers Energy Company Financing II
c/o Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Attention: Alan M. Wright, Senior Vice President and
Chief Financial Officer
(b) if given to the Delaware Trustee, at the mailing
address set forth below (or such other address as Delaware Trustee may
give notice of to the Holders of the Securities):
The Bank of New York (Delaware)
White Clay Center
Route 473
Newark, Delaware 19711
(c) if given to the Property Trustee, at its Corporate
Trust Office to the attention of the Administrator (or such other
address as the Property Trustee may give notice of to the Holders of
the Securities):
The Bank of New York
101 Barclay
New York, New York 10286
(d) if given to the Holder of the Common Securities, at
the mailing address of the Sponsor set forth below (or such other
address as the Holder of the Common Securities may give notice to the
Trust):
Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Attention: Thomas A. McNish, Vice President and
Secretary
(e) if given to any other Holder, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
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SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each party hereto to one of such counterpart signature pages. All
of such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.
SECTION 14.8 Recitals.
The recitals contained herein and in the Securities shall be
taken as the statements of the Sponsor and Trust, and the Trustees assume no
responsibility for their correctness. The Trustees make no representations as
to the validity or sufficiency of this Declaration or of the Securities.
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<PAGE> 47
IN WITNESS WHEREOF, the undersigned have caused these presents
to be executed as of the day and year first above written.
__________________________________
Alan M. Wright, as Regular Trustee
__________________________________
Thomas A. McNish, as Regular Trustee
__________________________________
Doris F. Galvin, as Regular Trustee
The Bank of New York (Delaware),
as Delaware Trustee
By: ________________________________
Name:
Title:
The Bank of New York, as Property Trustee
By: ________________________________
Name:
Title:
Consumers Energy Company, as Sponsor
By: ________________________________
Name:
Title:
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ANNEX I
TERMS OF
___% TRUST ORIGINATED PREFERRED SECURITIES
___% TRUST ORIGINATED COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of ______________, 1997 (as amended from time to
time, the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or, if not defined in such
Declaration, as defined in the Prospectus referred to below):
1. Designation and Number.
(a) Preferred Securities. ________________ Preferred
Securities of the Trust with an aggregate liquidation amount with respect to
the assets of the Trust of _______________________ dollars
($__________________) and a liquidation amount with respect to the assets of
the Trust of $25 per preferred security, are hereby designated, for the
purposes of identification only, as "_____% Trust Originated Preferred
SecuritiesSM ('TOPrS'SM)" (the "Preferred Securities"). The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice
or to conform to the rules of any stock exchange on which the Preferred
Securities are listed.
(b) Common Securities. ____________ Common Securities of
the Trust with an aggregate liquidation amount with respect to the assets of
the Trust of _________________________________ ($________________) and a
liquidation amount with respect to the assets of the Trust of $25 per common
security, are hereby designated, for the purposes of identification only, as
"______% Trust Originated Common Securities" (the "Common Securities"). The
Common Security Certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed
at a rate per annum of ______% (the "Coupon Rate") of the stated liquidation
amount of $25 per Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 90-day quarter.
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(b) Distributions on the Securities will be cumulative,
will accrue from _________________, 199__, and will be payable quarterly in
arrears, on March 31, June 30, September 30 and December 31 of each year,
commencing on _________________, except as otherwise described below. The
Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period from time to time on the
Debentures for a period not exceeding 20 consecutive quarters (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall last beyond
the date of maturity of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period; provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters. Payments of accrued
Distributions will be payable to Holders as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Securities will be payable to
the Holders thereof as they appear on the books and records of the Trust on the
relevant record dates. While the Preferred Securities remain in book-entry
only form, the relevant record dates shall be one Business Day prior to the
relevant payment dates which payment dates correspond to the interest payment
dates on the Debentures. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment in respect of the
Preferred Securities will be made as described under the heading "Description
of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" in the Prospectus dated _______________, 199__ (the "Prospectus"), of
the Trust included in the Registration Statement on Form S-3 of the Sponsor and
the Trust. The relevant record dates for the Common Securities shall be the
same record date as for the Preferred Securities. If the Preferred Securities
shall not continue to remain in book-entries only form, the relevant record
dates for the Preferred Securities shall conform to the rules of any securities
exchange on which the securities are listed and, if none, shall be selected by
the Regular Trustees, which dates shall be at least one Business Day but less
than 60 Business Days before the relevant payment dates, which payment dates
correspond to the interest payment dates on the Debentures. Distributions
payable on any Securities that are not punctually paid on any Distribution
payment date, as a result of the Debenture Issuer having failed to make a
payment under the Debentures, will cease to be payable to the Person in whose
name such Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day, then payment
of the Distribution payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(d) In the event that there is any money or other
property held by or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein) among the Holders of
the Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution,
winding-up or termination of the Trust, the Holders of the Securities on the
date of the dissolution, winding-up or termination, as the case
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<PAGE> 50
may be, will be entitled to receive out of the assets of the Trust available
for distribution to Holders of Securities after satisfaction of liabilities to
creditors an amount equal to the aggregate of the stated liquidation amount of
$25 per Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such dissolution, winding-up or termination, after satisfaction
of liabilities to creditors of the Trust, Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of such Securities,
with an interest rate equal to the Coupon Rate of, and bearing accrued and
unpaid interest in an amount equal to the accrued and unpaid Distributions on,
such Securities, shall be distributed on a Pro Rata basis to the Holders of the
Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(a) Upon the repayment of the Debentures in whole or in
part, whether at maturity or upon redemption (either at the option of the
Debenture Issuer or pursuant to a Special Event as described below), the
proceeds from such repayment or payment shall be simultaneously applied to
redeem Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed at a redemption price
of $25 per Security plus an amount equal to accrued and unpaid Distributions
thereon at the date of the redemption, payable in cash (the "Redemption
Price"). Holders will be given not less than 30 nor more than 60 days notice
of such redemption, except in the case of payments upon maturity.
(b) If fewer than all the outstanding Securities are to
be so redeemed, the Common Securities and the Preferred Securities will be
redeemed Pro Rata and the Preferred Securities to be redeemed will be as
described in Section 4(f)(ii) below.
(c) If a Tax Event or an Investment Company Event (each
as defined below, and each a "Special Event") shall occur and be continuing the
Regular Trustees shall, except in the case of a redemption described in this
Section 4(c), dissolve the Trust and, after satisfaction of creditors, cause
Debentures held by the Property Trustee, having an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the Coupon Rate of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on, and having the same record date for
payment as the Securities, to be distributed to the Holders of the Securities
in liquidation of such Holders' interests in the Trust on a Pro Rata basis,
within 90 days following the occurrence of such Special Event (the "90 Day
Period"); provided, however, that in the case of the occurrence of a Tax Event,
as a condition of such dissolution and distribution, the Regular Trustees shall
have received an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal Revenue Service, to the
effect that the Holders of the Securities will not recognize any gain or loss
for United States federal income tax purposes as a result of the dissolution of
the Trust and the distribution of Debentures, and provided, further, that, if
at the time there is available to the Trust the opportunity to eliminate,
within the 90 Day Period, the Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, the Debenture
Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"),
the Trust will pursue such Ministerial Action in lieu of dissolution.
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If (a) a Tax Event has occurred and is continuing, and (i) the
Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of a
nationally recognized independent tax counsel experienced in such matters that,
as a result of a Tax Event, there is more than an insubstantial risk that the
Debenture Issuer would be precluded from deducting the interest on the
Debentures for United States federal income tax purposes even if the Debentures
were distributed to the Holders of Securities in liquidation of such Holders'
interests in the Trust as described in this Section 4(c), or (ii) the Regular
Trustees shall have been informed by such tax counsel that a No Recognition
Opinion cannot be delivered to the Trust, or (b) if an Investment Company Event
has occurred and is continuing, then the Debenture Issuer shall have the right
at any time, upon not less than 30 nor more than 60 days notice, to redeem the
Debentures in whole or in part for cash within 90 days following the occurrence
of such Tax Event, or Investment Company Event, as the case may be and,
following such redemption, Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Debentures so redeemed shall be
redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided,
however, that, if at the time there is available to the Trust the opportunity
to eliminate, within such 90 day period, such Special Event by taking some
Ministerial Action, the Trust or the Debenture Issuer will pursue such
Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Tax Event Opinion") to the effect that on or
after the date of the Prospectus, as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority therefor or therein, or (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is
taken, in each case on or after the date of the Prospectus, there is more than
an insubstantial risk that (i) the Trust is or will be within 90 days of the
date thereof, subject to United States federal income tax with respect to
interest accrued or received on the Debentures, (ii) the Trust is, or will be
within 90 days of the date thereof, subject to more than a de minimis amount of
taxes, duties or other governmental charges, or (iii) interest payable by the
Debenture Issuer to the Trust on the Debentures is not, or within 90 days of
the date thereof will not be, deductible, in whole or in part, by the Debenture
Issuer for United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
experienced in practice under the Investment Company Act (an "Investment
Company Event Opinion") that, as a result of the occurrence of a change in law
or regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is a more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of the Prospectus.
On and from the date fixed by the Regular Trustees for any
distribution of Debentures and dissolution of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) The Depository Trust Company
(the "Depository") or its nominee (or any successor Clearing Agency or its
nominee), as the record Holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Debentures to be
delivered upon such distribution and (iii) any certificates representing
Securities, except for certificates representing Preferred Securities held by
the Depository or its nominee (or any successor Clearing Agency or its
nominee), will be deemed to represent beneficial interests in the Debentures
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with
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<PAGE> 52
an interest rate identical to the Coupon Rate of, and accrued and unpaid
interest equal to accrued and unpaid Distributions on such Securities until
such certificates are presented to the Debenture Issuer or its agent for
transfer or reissue.
(d) The Trust may not redeem fewer than all the
outstanding Securities unless all accrued and unpaid Distributions have been
paid on all Securities for all quarterly Distribution periods terminating on or
before the date of redemption.
(e) If the Debentures are distributed to holders of the
Securities, pursuant to the terms of the Indenture, the Debenture Issuer will
use its best efforts to have the Debentures listed on the New York Stock
Exchange or on such other exchange as the Preferred Securities were listed
immediately prior to the distribution of the Debentures.
(f) "Redemption or Distribution Procedures."
(i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for the Securities (a
"Redemption/Distribution Notice") will be given by the Trust by mail
to each Holder of Securities to be redeemed or exchanged not fewer
than 30 nor more than 60 days before the date fixed for redemption or
exchange thereof which, in the case of a redemption, will be the date
fixed for redemption of the Debentures. For purposes of the
calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this Section 4(f)(i), a
Redemption/ Distribution Notice shall be deemed to be given on the day
such notice is first mailed by first-class mail, postage prepaid, to
Holders of Securities. Each Redemption/Distribution Notice shall be
addressed to the Holders of Securities at the address of each such
Holder appearing in the books and records of the Trust. No defect in
the Redemption/Distribution Notice or in the mailing of either thereof
with respect to any Holder shall affect the validity of the redemption
or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be
redeemed Pro Rata from each Holder of Preferred Securities, it being
understood that, in respect of Preferred Securities registered in the
name of and held of record by the Depository or its nominee (or any
successor Clearing Agency or its nominee) or any nominee, the
distribution of the proceeds of such redemption will be made to each
Clearing Agency Participant (or Person on whose behalf such nominee
holds such securities) in accordance with the procedures applied by
such agency or nominee.
(iii) If Securities are to be redeemed and the Trust gives
a Redemption/Distribution Notice, which notice may only be issued if
the Debentures are redeemed as set out in this Section 4 (which notice
will be irrevocable), then (A) while the Preferred Securities are in
book-entry only form, with respect to the Preferred Securities, by
12:00 noon, New York City time, on the redemption date, provided that
the Debenture Issuer has paid the Property Trustee a sufficient amount
of cash in connection with the related redemption or maturity of the
Debentures, the Property Trustee will deposit irrevocably with the
Depository or its nominee (or successor Clearing Agency or its
nominee) funds sufficient to pay the applicable Redemption Price with
respect to the Preferred Securities and will give the Depository
irrevocable instructions and authority to pay the Redemption Price to
the Holders of the Preferred Securities, and (B) with respect to
Preferred Securities issued in definitive form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Property Trustee will pay the relevant
Redemption Price to the Holders of such Securities by check mailed to
the address of the relevant
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<PAGE> 53
Holder appearing on the books and records of the Trust on the
redemption date. If a Redemption/Distribution Notice shall have been
given and funds deposited as required, if applicable, then immediately
prior to the close of business on the date of such deposit, or on the
redemption date, as applicable, distributions will cease to accrue on
the Securities so called for redemption and all rights of Holders of
such Securities so called for redemption will cease, except the right
of the Holders of such Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the Regular
Trustees nor the Trust shall be required to register or cause to be
registered the transfer of any Securities that have been so called for
redemption. If any date fixed for redemption of Securities is not a
Business Day, then payment of the Redemption Price payable on such
date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in
respect of any Securities is improperly withheld or refused and not
paid either by the Property Trustee or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accrue from the original redemption date
to the actual date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in respect of the
Preferred Securities, the Depository or its nominee (or any successor
Clearing Agency or its nominee) if the Global Certificate(s) have been
issued or, if Definitive Preferred Security Certificates have been
issued, to the Holder thereof, and (B) in respect of the Common
Securities to the Holder thereof.
(v) Subject to the foregoing and applicable law
(including, without limitation, United States federal securities
laws), provided the acquiror is not the Holder of the Common
Securities or the obligor under the Indenture, the Sponsor or any of
its subsidiaries may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by
private agreement.
5. Voting Rights - Preferred Securities.
(a) Except as provided under Sections 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.
(b) Subject to the requirements set forth in this
paragraph, the Holders of a Majority in liquidation amount of the Preferred
Securities, voting separately as a class may direct the time, method, and place
of conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under the
Declaration, including (i) directing the time, method, place of conducting any
proceeding for any remedy available to the Debenture Trustee, or exercising any
trust or power conferred on the Debenture Trustee with respect to the
Debentures, (ii) waive any past default and its consequences that is waivable
under Section 5.10 of the Indenture, or (iii) exercise any right to rescind or
annul a declaration that the principal of all the Debentures shall be due and
payable. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any remedy available to the Property Trustee or the Debenture Trustee as set
forth above, the Property Trustee shall not take any action in accordance with
the directions of the Holders of the Preferred Securities under this paragraph
unless the Property Trustee has obtained an opinion of tax counsel, at the
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<PAGE> 54
reasonable expense of the Trust, to the effect that for the purposes of United
States federal income tax the Trust will not be classified as other than a
grantor trust on account of such action. In addition, a Holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such Holder directly of the principal of or interest on Subordinated Notes
having a principal amount equal to the aggregate liquidation preference amount
of the Preferred Securities of such Holder on or after the respective due dates
specified in the Subordinated Notes. With respect to the Property Trustee's
rights other than its rights to receive payment on the Debentures as holder of
the Debentures, if the Property Trustee fails to enforce its rights under the
Declaration, to the fullest extent permitted by law, any Holder of Preferred
Securities may, institute a legal proceeding directly against any Person to
enforce the Property Trustee's rights under the Declaration without first
instituting a legal proceeding against the Property Trustee or any other
Person.
Any approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Securities in the Trust
or pursuant to written consent. The Regular Trustees will cause a notice of
any meeting at which Holders of Preferred Securities are entitled to vote, or
of any matter upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Preferred Securities
will be required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Sponsor or any Affiliate of
the Sponsor shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
6. Voting Rights - Common Securities.
(a) Except as provided under Sections 6(b), (c) and 7 and
as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to appoint, remove or
replace any Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only
after the Event of Default with respect to the Preferred Securities has been
cured, waived, or otherwise eliminated and subject to the requirements of the
second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under the Declaration, including (i) directing the
time, method, place of conducting any proceeding for any remedy available to
the Debenture Trustee, or exercising any trust or power conferred on the
Debenture Trustee with respect to the Debentures, (ii) waive any past default
and its consequences that is waivable under Section 5.10 of the Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal
of all the Debentures shall be due and payable, provided that, where a consent
or action under the Indenture would require the consent or act of
7
<PAGE> 55
the Holders of greater than a majority in principal amount of Debentures
affected thereby (a "Super Majority"), the Property Trustee may only give such
consent or take such action at the written direction of the Holders of at least
the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Pursuant to this Section 6(c), the Property Trustee
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to the Property
Trustee or the Debenture Trustee as set forth above, the Property Trustee shall
not take any action in accordance with the directions of the Holders of the
Common Securities under this paragraph unless the Property Trustee has obtained
an opinion of tax counsel, at the reasonable expense of the Trust, to the
effect that for the purposes of United States federal income tax the Trust will
not be classified as other than a grantor trust on account of such action. In
addition, a Holder of Common Securities may directly institute a proceeding for
enforcement of payment to such Holder directly of the principal of or interest
on Subordinated Notes having a principal amount equal to the aggregate
liquidation preference amount of the Common Securities of such Holder on or
after the respective due dates specified in the Subordinated Notes. With
respect to the Property Trustee's rights other than its rights to receive
payment on the Debentures as holder of the Debentures, if the Property Trustee
fails to enforce its rights under the Declaration, to the fullest extent
permitted by applicable law, any Holder of Common Securities may, institute a
legal proceeding directly against any Person to enforce the Property Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Property Trustee or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
7. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.1 of
the Declaration, if any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than as described in
Section 8.1 of the Declaration, then the Holders of outstanding Securities as a
class, will be entitled to vote on such amendment or proposal (but not on any
other amendment or proposal) and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a Majority in
liquidation amount of the Securities, voting together as a single class;
provided, however, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities; and provided further, that no such amendment or proposal which
would reduce the principal amount or the
8
<PAGE> 56
distribution rate or change the payment dates or maturity of the Preferred
Securities shall be permitted without the consent of each holder of Preferred
Securities.
(b) In the event the consent of the Property Trustee as
the holder of the Debentures is required under the Indenture with respect to
any amendment, modification or termination on the Indenture or the Debentures,
the Property Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a Majority in liquidation amount of the Preferred Securities, and
if no Event of Default has occurred and is continuing, a majority in
liquidation amount of the Common Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of the holders of greater than a majority in aggregate principal amount
of the Debentures (a "Super Majority"), the Property Trustee may only give such
consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding;
provided, further, that the Property Trustee shall not take any action in
accordance with the directions of the Holders of the Securities under this
Section 7(b) unless the Property Trustee has obtained an opinion of tax counsel
to the effect that for the purposes of United States federal income tax the
Trust will not be classified as other than a grantor trust on account of such
action.
8. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each
Holder of Securities according to the aggregate liquidation amount of the
Securities held by the relevant Holder in relation to the aggregate liquidation
amount of all Securities outstanding unless, in relation to a payment, an Event
of Default under the Declaration has occurred and is continuing, in which case
any funds available to make such payment shall be paid first to each Holder of
the Preferred Securities pro rata according to the aggregate liquidation amount
of Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate
liquidation amount of Common Securities held by the relevant Holder relative to
the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event
of Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Preferred Securities.
10. Listing.
The Regular Trustees shall use their best efforts to cause the
Preferred Securities to be listed for quotation on the New York Stock Exchange.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee,
9
<PAGE> 57
respectively, including the subordination provisions therein and to the
provisions of the Indenture, including the subordination provisions therein.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request
to the Sponsor at its principal place of business.
10
<PAGE> 58
EXHIBIT A-1
FORM OF PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE
INSERT - This Preferred Security is a Global Certificate within the meaning of
the Declaration hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the Depositary.
This Preferred Security is exchangeable for Preferred Securities registered in
the name of a person other than the Depositary or its nominee only in the
limited circumstances described in the Declaration and no transfer of this
Preferred Security (other than a transfer of this Preferred Security as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Trust or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.]
Certificate Number Number of Preferred Securities
CUSIP NO. [ ]
Certificate Evidencing Preferred Securities
of
Consumers Energy Company Financing II
____% Trust Originated Preferred SecuritiesSM ("TOPrS"SM)
(liquidation amount $25 per Preferred Security)
Consumers Energy Company Financing II, a statutory business
trust formed under the laws of the State of Delaware (the "Trust"), hereby
certifies that ______________ (the "Holder") is the registered owner of
preferred securities of the Trust representing undivided beneficial interests
in the assets of the Trust designated the _____% Trust Originated Preferred
SecuritiesSM (liquidation amount $25 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities represented hereby are issued and
shall in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of _______, 199__, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The
A1-1
<PAGE> 59
Holder is entitled to the benefits of the Preferred Securities Guarantee to the
extent provided therein. The Sponsor will provide a copy of the Declaration,
the Preferred Securities Guarantee and the Indenture to a Holder without charge
upon written request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate
this ___ day of _______, 199__.
___________________________________
[Name of Regular Trustee]
___________________________________
[Name of Regular Trustee]
___________________________________
[Name of Regular Trustee]
A1-2
<PAGE> 60
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to: _____________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Insert assignee's social security or tax identification number)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
______________________________________________________________________________
______________________________________________________________________________
_______agent to transfer this Preferred Security Certificate on the books of
the Trust. The agent may substitute another to act for him or her.
Date: _______________________
Signature: ___________________________________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
A1-3
<PAGE> 61
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
Consumers Energy Company Financing II
______% Trust Originated Common Securities
(liquidation amount $25 per Common Security)
Consumers Energy Company Financing II, a statutory business
trust formed under the laws of the State of Delaware (the "Trust"), hereby
certifies that _________________ (the "Holder") is the registered owner of
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust designated the ______% Trust Originated Common
Securities (liquidation amount $25 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of
this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of _______, 199__, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Common Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The Holder is entitled to the benefits of the Common
Securities Guarantee to the extent provided therein. The Sponsor will provide
a copy of the Declaration, the Common Securities Guarantee and the Indenture to
a Holder without charge upon written request to the Sponsor at its principal
place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
A2-1
<PAGE> 62
IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of _______, 199__.
___________________________________
[Name of Regular Trustee]
___________________________________
[Name of Regular Trustee]
___________________________________
[Name of Regular Trustee]
A2-2
<PAGE> 63
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints _______________________________________________________
________________________________________________________________________________
agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _______________________
Signature: ___________________________________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
A2-3
<PAGE> 64
EXHIBIT B
SPECIMEN OF DEBENTURE
B-1
<PAGE> 65
EXHIBIT C
UNDERWRITING AGREEMENT
C-1
<PAGE> 1
EXHIBIT 4.4
====================================
SECOND SUPPLEMENTAL INDENTURE
between
CONSUMERS ENERGY COMPANY
and
THE BANK OF NEW YORK
Dated as of ______________, 1997
====================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definition of Terms . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
GENERAL TERMS AND CONDITIONS OF THE NOTES
SECTION 2.1. Designation and Principal Amount . . . . . . . . . . . . . 3
SECTION 2.2. Maturity . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3. Form and Payment . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4. Global Note . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III.
REDEMPTION OF THE NOTES
SECTION 3.1. Special Event Redemption . . . . . . . . . . . . . . . . . 5
SECTION 3.2. Optional Redemption by Issuer . . . . . . . . . . . . . . 5
SECTION 3.3. No Sinking Fund . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period . . . . . . . . . . . 6
SECTION 4.2. Notice of Extension . . . . . . . . . . . . . . . . . . . 6
ARTICLE V.
EXPENSES
SECTION 5.1. Payment of Expenses . . . . . . . . . . . . . . . . . . . 7
SECTION 5.2. Payment Upon Resignation or Removal . . . . . . . . . . . 7
ARTICLE VI.
SUBORDINATION
SECTION 6.1. Agreement to Subordinate . . . . . . . . . . . . . . . . . 8
ARTICLE VII.
COVENANT TO LIST ON EXCHANGE
SECTION 7.1. Listing on an Exchange . . . . . . . . . . . . . . . . . . 8
i
<PAGE> 3
ARTICLE VIII.
FORM OF NOTES
SECTION 8.1. Form of Note . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX.
ORIGINAL ISSUE OF NOTES
SECTION 9.1. Original Issue of Notes . . . . . . . . . . . . . . . . . 13
ARTICLE X.
MISCELLANEOUS
SECTION 10.1. Provisions of Indenture for the Sole Benefit of
Parties and Holders of Notes . . . . . . . . . . . . . . . 13
SECTION 10.2. Ratification of Indenture . . . . . . . . . . . . . . . . 13
SECTION 10.3. Trustee Not Responsible for Recitals . . . . . . . . . . . 13
SECTION 10.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.5. Separability . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10.6. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 14
ii
<PAGE> 4
SECOND SUPPLEMENTAL INDENTURE, dated as of______________, 1997, (the
"Second Supplemental Indenture"), between Consumers Energy Company, a Michigan
Corporation (the "Issuer"), and The Bank of New York, as trustee (the
"Trustee") under the Indenture dated as of January 1, 1996 between the Issuer
and the Trustee (the "Indenture").
WHEREAS, the Issuer executed and delivered the Indenture to the Trustee
to provide for the future issuance of the Issuer's Securities to be issued from
time to time in one or more series as might be determined by the Issuer under
the Indenture, in an unlimited aggregate principal amount which may be
authenticated and delivered as provided in the Indenture;
WHEREAS, Section 2.3 of the Indenture permits the terms of any series of
Securities to be established in an indenture supplemental to the Indenture;
WHEREAS, Section 8.1(e) of the Indenture provides that a supplemental
indenture may be entered into by the Issuer and the Trustee without the consent
of any Holders of the Securities to establish the form and terms of the
Securities of any series.
WHEREAS, pursuant to the terms of the Indenture, the Issuer desires to
provide for the establishment of a new series of its Securities to be known as
its ______% Subordinated Deferrable Interest Notes due 20____ (the "Notes"),
the form and substance of such Notes and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this Second
Supplemental Indenture;
WHEREAS, Consumers Energy Company Financing II, a Delaware statutory
business trust (the "Trust"), has offered to the public $_____ million
aggregate liquidation amount of its_____% Trust Originated Preferred Securities
(the "Preferred Securities"), representing undivided beneficial interests in
the assets of the Trust and proposes to invest the proceeds from such offering,
together with the proceeds of the issuance and sale by the Trust to the Issuer
of $_______________ aggregate liquidation amount of its % Trust
Originated Common Securities, in $__________________ aggregate principal amount
of the Notes; and
WHEREAS, the Issuer has requested that the Trustee execute and deliver
this Second Supplemental Indenture and all requirements necessary to make this
Second Supplemental Indenture a valid instrument in accordance with its terms,
and to make the Notes, when executed by the Issuer and authenticated and
delivered by the Trustee, the valid obligations of the Issuer, have been
performed, and the execution and delivery of this Second Supplemental Indenture
has been duly authorized in all respects.
NOW THEREFORE, in consideration of the purchase and acceptance of the
Notes by the Holders thereof, and for the purpose of setting forth, as provided
in the Indenture, the form and substance of the Notes and the terms, provisions
and conditions thereof, the Issuer covenants and agrees with the Trustee as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in
this Second Supplemental Indenture;
(b) a term defined anywhere in this Second Supplemental Indenture has
the same meaning throughout;
<PAGE> 5
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of
this Second Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Redemption Tax
Opinion; (iv) No Recognition Opinion; (v) Preferred Security Certificate; (vi)
Property Trustee; (vii) Regular Trustees; (viii) Special Event; (ix) Tax Event;
(x) Underwriting Agreement; (xi) Investment Company Event; and (xii)
Distribution;
(g) the following terms have the meanings given to them in this Section
1.1(g):
"Additional Interest" shall have the meaning set forth in Section 2.5.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Declaration" means the Amended and Restated Declaration of Trust of
Consumers Energy Company Financing II, a Delaware statutory business trust,
dated as of _________________, 1997.
"Deferred Interest" shall have the meaning set forth in Section 4.1.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Declaration, and the Notes held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 4.1.
"Global Note" shall have the meaning set forth in Section 2.4.
"Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.4.
"Optional Redemption Price" shall have the meaning set forth in Section
3.2.
ARTICLE II.
GENERAL TERMS AND CONDITIONS OF THE NOTES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized and established a series of unsecured
Securities designated the " % Subordinated Deferrable Interest Notes
due 20__", limited in aggregate principal amount to $___________, (except as
contemplated in Section 2(f)(2) of the Indenture).
2
<PAGE> 6
SECTION 2.2. Maturity.
The Maturity Date of the notes is ______________________.
SECTION 2.3. Form and Payment.
The Notes shall be issued in fully registered form without interest
coupons. Principal and interest on the Notes issued in certificated form will
be payable, the transfer of such Notes will be registrable and such Notes will
be exchangeable for Notes bearing identical terms and provisions, at the office
or agency of the Trustee in the Borough of Manhattan, the City of New York;
provided, however, that payment of interest may be made at the option of the
Issuer by check mailed to the Holder at such address as shall appear in the
Security Register or by wire transfer to an account maintained by the Holder.
Notwithstanding the foregoing, so long as the Holder of any Notes is the
Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Interest, if any) on such Notes held by the
Property Trustee will be made at such place and to such account as may be
designated by the Property Trustee.
SECTION 2.4. Global Note.
(a) In connection with a Dissolution Event,
(i) the Notes may be presented to the Trustee by the Property
Trustee in exchange for a global Note in an aggregate principal amount
equal to the aggregate principal amount of all outstanding Notes (a
"Global Note"), to be registered in the name of the Clearing Agency, or
its nominee, and delivered by the Trustee to the Clearing Agency for
crediting to the accounts of its participants pursuant to the instructions
of the Regular Trustees and the Clearing Agency will act as Depository for
the Notes. The Issuer upon any such presentation, shall execute a Global
Note in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with the Indenture
and this Second Supplemental Indenture. Payments on the Notes issued as a
Global Note will be made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Notes may be presented to the Trustee by the
Property Trustee and any Preferred Security Certificate which represents
Preferred Securities other than Preferred Securities held by the Clearing
Agency or its nominee ("Non Book-Entry Preferred Securities") will be
deemed to represent beneficial interests in Notes presented to the Trustee
by the Property Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non Book-Entry Preferred Securities
until such Preferred Security Certificates are presented to the Security
Registrar for transfer or reissuance at which time such Preferred Security
Certificates will be cancelled and a Note, registered in the name of the
holder of the Preferred Security Certificate or the transferee of the
holder of such Preferred Security Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of
the Preferred Security Certificate cancelled, will be executed by the
Issuer and delivered to the Trustee for authentication and delivery in
accordance with the Indenture and this Second Supplemental Indenture.
(b) Except as provided in (c) below, a Global Note may be transferred,
in whole but not in part, only to another nominee of the Depositary, or to a
successor Depositary selected or approved by the Issuer or to a nominee of such
successor Depositary.
(c) If at any time the Depositary notifies the Issuer that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
for such series shall no longer be registered or in good standing under the
Securities Exchange Act of 1934, as amended, or other applicable statute or
regulation, and a successor Depositary for such series is not appointed by the
Issuer within 90 days after the Issuer receives such notice or becomes aware of
such condition, as the case may be, the Issuer will execute, and, subject to
Section 2.8 of the Indenture, the
3
<PAGE> 7
Trustee, upon written notice from the Issuer, will authenticate and deliver the
Notes in definitive registered form, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Note in
exchange for such Global Note. In addition, the Issuer may at any time
determine that the Notes shall no longer be represented by a Global Note. In
such event the Issuer will execute, and subject to Section 2.8 of the
Indenture, the Trustee, upon receipt of an Officers' Certificate evidencing
such determination by the Issuer, will authenticate and deliver the Notes in
definitive registered form, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global Note in exchange
for such Global Note. Upon the exchange of the Global Note for such Notes in
definitive registered form, in authorized denominations, the Global Note shall
be cancelled by the Trustee. Such Notes in definitive registered form issued
in exchange for the Global Note shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Notes to the Depositary for delivery to the Persons
in whose names such Notes are so registered.
SECTION 2.5. Interest.
(a) Each Note will bear interest at the rate of % per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest, at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date," commencing on __________________, ), to the Person in
whose name such Note or any predecessor Note is registered, at the close of
business on the regular record date for such interest installment, which, in
respect of any Notes of which the Property Trustee is the Holder or a Global
Note, shall be the close of business on the Business Day next preceding that
Interest Payment Date. Notwithstanding the foregoing sentence, if the
Preferred Securities are no longer in book-entry only form or, except if the
Notes are held by the Property Trustee, the Notes are not represented by a
Global Note, the regular record date for such interest installment shall be the
fifteenth day of the month in which the applicable Interest Payment Date
occurs.
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than
a full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed in such a 90-day period. In the
event that any date on which interest is payable on the Notes is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
(c) If, at any time while the Property Trustee is the Holder of any
Notes, the Trust or the Property Trustee is required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any case, the Issuer will pay as additional interest ("Additional Interest") on
the Notes held by the Property Trustee, such additional amounts as shall be
required so that the net amounts received and retained by the Trust and the
Property Trustee after paying such taxes, duties, assessments or other
governmental charges will be equal to the amounts the Trust and the Property
Trustee would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
ARTICLE III.
REDEMPTION OF THE NOTES
SECTION 3.1. Special Event Redemption.
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<PAGE> 8
If (a) a Tax Event has occurred and is continuing and (i) the Issuer has
received a Redemption Tax Opinion, or (ii) The Regular Trustees shall have been
informed by tax counsel that a No Recognition Opinion cannot be delivered to
the Trust, or (b) an Investment Company Event has occurred and is continuing,
then, notwithstanding Section 3.2(a) but subject to Section 3.2(b) and Article
Eleven of the Indenture, the Issuer shall have the right upon not less than 30
days' nor more than 60 days' notice to the Holders of the Notes to redeem the
Notes, in whole or in part, for cash within 90 days' following the occurrence
of such Special Event (the "90 Day Period") at a redemption price equal to 100%
of the principal amount to be redeemed plus any accrued and unpaid interest
thereon to the date of such redemption (the "Redemption Price"), provided that
if at the time there is available to the Issuer or the Trust the opportunity to
eliminate, within the 90 Day Period, the Special Event by taking some
ministerial action ("Ministerial Action"), such as filing a form or making an
election, or pursuing some other similar reasonable measure which has no
adverse effect on the Issuer, the Trust or the Holders of the Trust Securities
issued by the Trust, the Issuer shall pursue such Ministerial Action in lieu of
redemption, and, provided, further, that the Issuer shall have no right to
redeem the Notes while the Trust is pursuing any Ministerial Action pursuant to
its obligations under the Declaration. The Redemption Price shall be paid
prior to 12:00 noon, New York time, on the date of such redemption or such
earlier time as the Issuer determines, and the Issuer shall deposit with the
Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New
York time, on the date such Redemption Price is to be paid.
SECTION 3.2. Optional Redemption by Issuer.
(a) Subject to the provisions of Section 3.2(b) and to the provisions of
Article Eleven of the Indenture, the Issuer shall have the right to redeem the
Notes, in whole or in part, from time to time, on or after____________________,
at a redemption price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest thereon to the date of such redemption
(the "Optional Redemption Price"). Any redemption pursuant to this paragraph
will be made upon not less than 30 days' nor more than 60 days' notice to the
Holder of the Notes, at the Optional Redemption Price. If the Notes are only
partially redeemed pursuant to this Section 3.2, the Notes will be redeemed on
a pro rata basis provided that if at the time of redemption the Notes are
registered as a Global Note, the Depository shall determine, in accordance with
its procedures, the principal amount of such Notes held by each Holder of Notes
to be redeemed. The Optional Redemption Price shall be paid prior to 12:00
noon, New York time, on the date of such redemption or at such earlier time as
the Issuer determines and the Issuer shall deposit with the Trustee an amount
sufficient to pay the Optional Redemption Price by 10:00 a.m., New York time,
on the date such Optional Redemption Price is to be paid.
(b) If a partial redemption of the Notes would result in the delisting
of the Preferred Securities from any national securities exchange or other
organization on which the Preferred Securities are then listed, the Issuer
shall not be permitted to effect such partial redemption and may only redeem
the Notes in whole.
SECTION 3.3. No Sinking Fund.
The Notes are not entitled to the benefit of any sinking fund.
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
The Issuer shall have the right, at any time and from time to time during
the term of the Notes, to defer payments of interest by extending the interest
payment period of such Notes for a period not exceeding 20 consecutive quarters
(the "Extended Interest Payment Period"), during which Extended Interest
Payment Period no interest shall be due and payable; provided that no Extended
Interest Payment Period may extend beyond the Maturity Date. To
5
<PAGE> 9
the extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
this Section 4.1, will bear interest thereon at the Coupon Rate compounded
quarterly for each quarter of the Extended Interest Payment Period ("Compounded
Interest"). At the end of the Extended Interest Payment Period, the Issuer
shall pay all interest accrued and unpaid on the Notes, including any
Additional Interest and Compounded Interest (together, "Deferred Interest")
that shall be payable to the Holders of the Notes in whose names the Notes are
registered in the Security Register on the First record date after the end of
the Extended Interest Payment Period. Prior to the termination of any Extended
Interest Payment Period, the Issuer may further extend such period, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters. Upon the termination of any Extended Interest
Payment Period and upon the payment of all Deferred Interest then due, the
Issuer may commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable during an
Extended Interest Payment Period, except at the end thereof, but the Issuer may
prepay at any time all or any portion of the interest accrued during an
Extended Interest Payment Period.
The limitations set forth in Section 3.5 of the Indenture shall apply
during any Extended Interest Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Property Trustee is the only registered Holder of the Notes
at the time the Issuer elects an Extended Interest Payment Period, the Issuer
shall give written notice to the Regular Trustees, the Property Trustee and the
Trustee of its election of such Extended Interest Payment Period one Business
Day before the earlier of (i) the next succeeding date on which Distributions
on the Trust Securities issued by the Trust are payable, or (ii) the date the
Trust is required to give notice of the record date, or the date such
Distributions are payable, to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Preferred Securities, but in
any event at least one Business Day before such record date.
(b) If the Property Trustee is not the only Holder of the Notes at the
time the Issuer elects an Extended Interest Payment Period, the Issuer shall
give the Holders of the Notes and the Trustee written notice of its election of
such Extended Interest Payment Period ten Business Days before the earlier of
(i) the next succeeding Interest Payment Date, or (ii) the date the Issuer is
required to give notice of the record or payment date of such interest payment
to the New York Stock Exchange or other applicable self-regulatory organization
or to Holders of the Notes, but in any event at least 2 Business Days before
such record date.
(c) The quarter in which any notice is given pursuant to paragraphs (a)
or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted
in the maximum Extended Interest Payment Period permitted under Section 4.1.
ARTICLE V.
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Notes to the
Property Trustee and in connection with the sale of the Trust Securities by the
Trust, the Issuer, in its capacity as borrower with respect to the Notes,
shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Notes, including commissions to the underwriters payable
pursuant to the Underwriting Agreement and the Pricing Agreements, and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.6 of the Indenture;
6
<PAGE> 10
(b) pay all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust, the offering,
sale and issuance of the Trust Securities (including commissions to the
underwriters in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets);
(c) be primarily liable for any indemnification obligations arising with
respect to the Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
SECTION 5.2. Payment Upon Resignation or Removal.
Upon termination of this Second Supplemental Indenture or the Indenture
or the removal or resignation of the Trustee pursuant to Section 6.10 of the
Indenture, the Issuer shall pay to the Trustee all amounts accrued to the date
of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Property Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Issuer shall pay to the Delaware Trustee or the Property
Trustee, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.
ARTICLE VI.
SUBORDINATION
SECTION 6.1. Agreement to Subordinate.
The Issuer covenants and agrees, and each Holder of Notes issued
hereunder, by such Holder's acceptance thereof likewise covenants and agrees,
that pursuant to Section 2.3(f)(9) of the Indenture all Notes shall be issued
as Subordinated Securities subject to the provisions of Article Twelve of the
Indenture and this Article VI; and each Holder of a Note by its acceptance
thereof accepts and agrees to be bound by such provisions.
ARTICLE VII.
COVENANT TO LIST ON EXCHANGE
SECTION 7.1. Listing on an Exchange.
In connection with the distribution of the Notes to the holders of the
Preferred Securities upon a Dissolution Event, the Issuer will use its best
efforts to list such Notes on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.
7
<PAGE> 11
ARTICLE VIII.
FORM OF NOTES
SECTION 8.1. Form of Note.
The Notes and the Trustee's Certificate of Authentication to be endorsed
thereon are to be substantially in the following forms and the Notes shall have
such additional terms as may be set forth in such form:
(FORM OF FACE OF NOTE)
[IF THE NOTE IS TO BE A GLOBAL NOTES, INSERT - This Note is a Global Note
within the meaning of the Indenture hereinafter referred to and is registered
in the name of a Depositary or a nominee of a Depositary. This Note is
exchangeable for Notes registered in the name of a person other than the
Depositary or its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Note (other than a transfer of this Note as
a whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.
Unless this Note is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.]
No.
$
CUSIP NO.
CONSUMERS ENERGY COMPANY
___% SUBORDINATED DEFERRABLE INTEREST NOTES
DUE____________
Consumers Energy Company, a Michigan corporation (the "Issuer", which
term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________ Dollars ($___________)
on _________, ____, and to pay interest on said principal sum from _____, 19__,
or from the most recent interest payment date (each such date, an "Interest
Payment Date") to which interest has been paid or duly provided for, quarterly
(subject to deferral as set forth herein) in arrears on March 31, June 30,
September 30 and December 31 of each year commencing ___________ at the rate of
___% per annum until the principal hereof shall have become due and payable,
and on any overdue principal and premium, if any, and (without duplication and
to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on which interest is payable on this Note is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. The interest installment so payable, and
8
<PAGE> 12
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the person in whose name this Note (or
one or more Predecessor Securities, as defined in said Indenture) is registered
at the close of business on the regular record date for such interest
installment, which shall be the close of business on the business day next
preceding such Interest Payment Date. [IF PURSUANT TO THE PROVISIONS OF THE
INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A GLOBAL NOTE -- which shall
be the close of business on the 15th day of the month in which such Interest
Payment Date occurs.] If and to the extent the Company shall default in the
payment of the interest due on such Interest Payment Date, interest shall be
paid to the person in whose name this Note is registered at the close of
business on a subsequent record date (which shall not be less than five
Business Days prior to the date of payment of such defaulted interest)
established by notice given by mail by or on behalf of the Company to the
Holders of this Note not less than 15 days preceding such subsequent Record
Date. The principal of (and premium, if any) and the interest on this Note
shall be payable at the office or agency of the Trustee in the Borough of
Manhattan, the City of New York maintained for that purpose in any coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Issuer by check mailed to the
registered Holder at such address as shall appear in the Security Register or
by wire transfer to an account maintained by the Holder. Notwithstanding the
foregoing, so long as the Holder of this Note is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this Note
will be made at such place and to such account as may be designated by the
Property Trustee.
The indebtedness evidenced by this Note is, to the extent provided in the
Indenture, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate the subordination
so provided and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes. Each Holder hereof, by his or her acceptance hereof,
hereby waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.
This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on behalf
of the Trustee.
The provisions of this Note are continued on the reverse side hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be executed.
Dated
Consumers Energy Company
By:
Name:
Title
Attest:
By:
Name:
Title:
9
<PAGE> 13
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series of Securities described in
the within-mentioned Indenture.
[ ]
________________________________
as Trustee
By
Authorized Officer
(FORM OF REVERSE OF NOTE)
This Note is one of a duly authorized series of Securities of the Issuer
(herein sometimes referred to as the "Notes"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to an Indenture
dated as of January 1, 1996, duly executed and delivered between the Issuer and
The Bank of New York, as Trustee (the "Trustee"), as supplemented by certain
supplemental indentures, including the Second Supplemented Indenture dated as
of _______, 1997, between the Issuer and the Trustee (the Indenture as so
supplemented, the "Indenture"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Issuer and the Holders of the Notes. By the terms of the
Indenture, the Notes are issuable in series that may vary as to amount, date of
maturity, rate of interest and in other respects as provided in the Indenture.
This series of Notes is limited in aggregate principal amount as specified in
said Second Supplemental Indenture.
The Issuer shall have the right to redeem this Note at the option of the
Issuer, without premium or penalty, in whole or in part at any time on or after
_________ __, or at any time in certain circumstances upon the occurrence of
a Special Event, at a redemption price equal to 100% of the principal amount
plus any accrued but unpaid interest, to the date of such redemption. Any
redemption pursuant to this paragraph will be made upon not less than 30 days
nor more than 60 days' notice. If the Notes are only partially redeemed by the
Issuer pursuant to an Optional Redemption, the Notes will be redeemed pro rata.
In the event of redemption of this Note in part only, a new Note or Notes
of this series for the unredeemed portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with
the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes and other Indenture securities of each series
affected at the time Outstanding and affected (voting as one class), as defined
in the Indenture, to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions
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<PAGE> 14
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Notes; provided, however, that the Company and
the Trustee may not, without the consent of the Holder of each Note then
Outstanding and affected thereby: (a) change the time of payment of the
principal (or any installment) of any Note, or reduce the principal amount
thereof, or reduce the rate or change the time of payment of interest thereon,
or impair the right to institute suit for the enforcement of any payment on any
Note when due or (b) reduce the percentage in principal amount of the Notes,
the consent of whose Holders is required for any such modification or for any
waiver provided for in the Indenture. The Indenture also contains provisions
providing that prior to the acceleration of the maturity of any Note or other
securities outstanding under the Indenture, the Holders of a majority in
aggregate principal amount of Notes of and other Securities Outstanding under
the Indenture with respect to which a default or/an Event of Default shall have
occurred and be continuing (voting as one class) may on behalf of the Holders
of all such affected Securities (including the Notes) waive any past default
and its consequences, except a default or an Event of Default in respect of a
covenant or provision of the Indenture or of any Note or other Security which
cannot be modified or amended without the consent of the Holder of each Note or
other Security affected. Any such consent or waiver by the registered Holder
of this Note (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such Holder and upon all future Holders and owners of this
Note and of any Note issued in exchange herefor or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Note at the time and place and at the rate and in the money
herein prescribed.
The Issuer shall have the right at any time during the term of the Notes
and from time to time to extend the interest payment period of such Notes for
up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the
end of which period the Issuer shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Notes to the
extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Issuer
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters. At the termination of any
such Extended Interest Payment Period and upon the payment of all accrued and
unpaid interest and any additional amounts then due, the Issuer may commence a
new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Note is transferable by the registered Holder hereof on the
Security Register of the Issuer, upon surrender of this Note for registration
of transfer at the office or agency of the Trustee in the City and State of New
York accompanied by a written instrument or instruments of transfer in form
satisfactory to the Issuer or the Trustee duly executed by the registered
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of authorized denominations and for the same aggregate principal
amount and series will be issued to the designated transferee or transferees.
No service charge will be made for any such transfer, but the Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Issuer, the Trustee, any paying agent and the Security Registrar may deem and
treat the registered holder hereof as the absolute owner hereof (whether or not
this Note shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and
neither the Issuer nor the Trustee nor any paying agent nor any Security
Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, past, present or future, as such, of the
Issuer or of any predecessor or successor
11
<PAGE> 15
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issuance hereof, expressly waived and released.
Notes of this series so issued are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and therein
set forth, Notes of this series so issued are exchangeable for a like aggregate
principal amount of Notes of this series in authorized denominations, as
requested by the Holder surrendering the same.
All terms used in this Note that are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
[END OF FORM OF NOTE]
ARTICLE IX.
ORIGINAL ISSUE OF NOTES
SECTION 9.1. Original Issue of Notes.
Notes in the aggregate principal amount of $ ________________ may, upon
execution of this Second Supplemental Indenture, be executed by the Issuer and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Issuer,
in accordance with Section 2.4 of the Indenture.
ARTICLE X.
MISCELLANEOUS
SECTION 10.1 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Notes.
Notwithstanding Section 13.2 of the Indenture, for so long as any Notes
remain outstanding, the Issuer's obligations under the Indenture and this
Second Supplemental Indenture will also be for the benefit of the holders of
the Notes, and the Issuer acknowledges and agrees that such holders will be
entitled to enforce certain payment obligations under the Notes directly
against the Issuer to the extent provided in the Declaration.
SECTION 10.2 Ratification of Indenture.
The Indenture, as supplemented by this Second Supplemental Indenture, is
in all respects ratified and confirmed, and this Second Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein
and therein provided.
SECTION 10.3. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Issuer and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
Second Supplemental Indenture.
12
<PAGE> 16
SECTION 10.4. Governing Law.
This Second Supplemental Indenture and each Note shall be deemed to be a
contract made under the internal laws of the State of Michigan, and for all
purposes shall be construed in accordance with the laws of said State,
provided, however, that the rights, duties and obligations of the Trustee are
governed and construed in accordance with the laws of the State of New York.
SECTION 10.5. Separability.
In case any one or more of the provisions contained in this Second
Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Second
Supplemental Indenture or of the Notes, but this Second Supplemental Indenture
and the Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.
SECTION 10.6. Counterparts.
This Second Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
13
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, on the date or dates indicated in
the acknowledgements and as of the day and year first above written.
Consumers Energy Company
By:
------------------------------
Name:
Title:
[Seal]
Attest:
By:
--------------------------
The Bank of New York as Trustee
By:
------------------------------
Name:
Title:
Attest:
By:
--------------------------
14
<PAGE> 18
STATE OF MICHIGAN )
)ss.
COUNTY OF WAYNE )
On the _____ day of __________, 199__, before me personally
came_________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ______________________; that he is __________________ of
Consumers Energy Company, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate; that it was so
affixed by authority of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
[Notarial Seal]
______________________________________
Notary Public, ______________ County, ____________
My Commission Expires:
15
<PAGE> 1
EXHIBIT 4.7
================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
CONSUMERS ENERGY COMPANY FINANCING II
Dated as of August __, 1997
================================================
<PAGE> 2
Page
ARTICLE I.
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation......................... 2
ARTICLE II.
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application....................... 4
SECTION 2.2 Lists of Holders of Securities......................... 4
SECTION 2.3 Reports by the Preferred Guarantee Trustee............. 5
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee........ 5
SECTION 2.5 Evidence of Compliance with Conditions Precedent....... 5
SECTION 2.6 Events of Default; Waiver.............................. 5
SECTION 2.7 Event of Default; Notice............................... 5
SECTION 2.8 Conflicting Interests.................................. 6
ARTICLE III.
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee... 6
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.......... 7
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.. 9
ARTICLE IV.
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility............... 9
SECTION 4.2 Appointment, Removal and Resignation of Preferred
Guarantee Trustees..................................... 10
ARTICLE V.
GUARANTEE
ECTION 5.1 Guarantee............................................... 10
ECTION 5.2 Waiver of Notice and Demand............................. 11
ECTION 5.3 Obligations Not Affected................................ 11
ECTION 5.4 Rights of Holders....................................... 12
ECTION 5.5 Guarantee of Payment.................................... 12
ECTION 5.6 Subrogation............................................. 12
ECTION 5.7 Independent Obligations................................. 12
<PAGE> 3
Page
ARTICLE VI.
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions............................. 12
SECTION 6.2 Ranking................................................ 13
ARTICLE VII.
TERMINATION
SECTION 7.1 Termination............................................ 13
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Exculpation............................................ 13
SECTION 8.2 Indemnification........................................ 14
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Successors and Assigns................................. 14
SECTION 9.2 Amendments............................................. 14
SECTION 9.3 Notices................................................ 14
SECTION 9.4 Benefit................................................ 15
SECTION 9.5 Governing Law.......................................... 15
ii
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PREFERRED SECURITIES GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"),
dated as of _____________, 1997, is executed and delivered by Consumers Energy
Company, a Michigan corporation (the "Guarantor"), and The Bank of New York, as
trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of Consumers Energy Company Financing II, a Delaware statutory business
trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of July __, 1997, among the trustees of the
Issuer named therein, the Guarantor, as sponsor, and the holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
is issuing on the date hereof ___________ preferred securities, having an
aggregate liquidation amount of $____________ designated the ____% Trust
Originated Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth
herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Preferred Securities Guarantee for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event
of Default (as defined in the Indenture), has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments under this Preferred
Securities Guarantee;
NOW, THEREFORE, in consideration of the purchase by each Holder
of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Preferred
Securities Guarantee for the benefit of the Holders.
<PAGE> 5
ARTICLE I.
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) Capitalized terms used in this Preferred Securities
Guarantee but not defined in the preamble above have the
respective meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(c) all references to "the Preferred Securities Guarantee"
or "this Preferred Securities Guarantee" are to this
Preferred Securities Guarantee as modified, supplemented or
amended from time to time;
(d) all references in this Preferred Securities Guarantee
to Articles and Sections are to Articles and Sections
of this Preferred Securities Guarantee, unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Preferred Securities
Guarantee, unless otherwise defined in this Preferred
Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and
vice versa.
"Affiliate" has the same meaning as given to that term in Rule
405 of the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Business Day" means any day other than a day on which banking
institutions in the City of New York, New York are authorized or required by
any applicable law to close.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Agreement is located at 101
Barclay Street, New York, New York 10286.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debentures" means the series of junior subordinated debt
securities of the Guarantor designated the ____% Subordinated Deferrable
Interest Notes due 20___ held by the Property Trustee (as defined in the
Declaration) of the Issuer.
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"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities,
to the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Preferred Securities to the extent the Issuer shall have funds available
therefor, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price") to the extent
the Issuer has funds available therefor, with respect to any Preferred
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders in exchange for
Preferred Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid Distributions on
the Preferred Securities to the date of payment, to the extent the Issuer shall
have funds available therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
(in either case, the "Liquidation Distribution"). If an event of default under
the Indenture has occurred and is continuing, the rights of holders of the
Common Securities to receive payments under the Common Securities Guarantee
Agreement are subordinated to the rights of Holders of Preferred Securities to
receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of January 1, 1996,
between the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee, and any indenture supplemental thereto pursuant to which certain
subordinated debt securities of the Debenture Issuer are to be issued to the
Property Trustee of the Issuer.
"Majority in liquidation amount of the Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
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<PAGE> 7
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of
each such officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Guarantee Trustee" means The Bank of New York, until
a Successor Preferred Guarantee Trustee has been appointed and has accepted
such appointment pursuant to the terms of this Preferred Securities Guarantee
and thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Guarantee Trustee, including any vice-president, any assistant
vice-president, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Preferred Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II.
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions; and
(b) if and to the extent that any provision of this
Preferred Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Preferred Guarantee
Trustee with a list, in such form as the Preferred Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") as of such date, (i) within 14 days after
January 1 and June 30 of each year, and (ii) at any other time within 30 days
of receipt by the Guarantor of a written request for a List of
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<PAGE> 8
Holders as of a date no more than 14 days before such List of Holders is
given to the Preferred Guarantee Trustee provided, that the Guarantor shall not
be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Preferred
Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture
Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee
Within 60 days after May 15 of each year, the Preferred
Guarantee Trustee shall provide to the Holders of the Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee
The Guarantor shall provide to the Preferred Guarantee Trustee
such documents, reports and information as required by Section 314 (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Preferred Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Preferred Securities Guarantee that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice
(a) The Preferred Guarantee Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Preferred Securities, notices of all
Events of Default actually known to a Responsible Officer of the Preferred
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, the Preferred Guarantee Trustee shall be protected
in withholding such notice, to the extent permitted by the Trust Indenture Act,
if and so long as a Responsible Officer of the Preferred Guarantee Trustee in
good faith determines that the withholding of such notice is in the interests
of the Holders of the Preferred Securities.
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(b) The Preferred Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Preferred Guarantee Trustee
shall have received written notice, or a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in
this Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III.
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee
(a) This Preferred Securities Guarantee shall be held by
the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee
shall automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee
for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants
shall be read into this Preferred Securities Guarantee against the Preferred
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee
shall exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee
shall be construed to relieve the Preferred Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that
may have occurred:
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(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are
specifically set forth in this Preferred Securities
Guarantee, and no implied covenants or obligations shall be
read into this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and conforming
to the requirements of this Preferred Securities Guarantee;
but in the case of any such certificates or opinions that by
any provision hereof are specifically required to be
furnished to the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements
of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders of
not less than a Majority in liquidation amount of the Preferred
Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee
shall require the Preferred Guarantee Trustee to expend or risk
its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of
its rights or powers, if the Preferred Guarantee Trustee shall
have reasonable grounds for believing that the repayment of
such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against such risk or liability is not reasonably assured
to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or
refraining from acting upon, any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the
proper party or parties.
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(ii) Any direction or act of the Guarantor
contemplated by this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem
it desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the Preferred
Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request
and conclusively rely upon an Officers' Certificate which, upon
receipt of such request, shall be promptly delivered by the
Guarantor.
(iv) The Preferred Guarantee Trustee shall
have no duty to see to any recording, filing or registration of
any instrument (or any rerecording, refiling or registration
thereof).
(v) The Preferred Guarantee Trustee may consult
with counsel of its choice, and the written advice or opinion of
such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may include
any of its employees. The Preferred Guarantee Trustee shall have
the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any
court of competent jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have provided
to the Preferred Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Preferred Guarantee Trustee's
agents, nominees or custodians) and liabilities that might
be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Preferred Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by
this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any
of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder.
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(ix) Any action taken by the Preferred Guarantee
Trustee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred
Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be
required to inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action.
(x) Whenever in the administration of this
Preferred Securities Guarantee the Preferred Guarantee Trustee
shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until
such instructions are received, and (iii) shall be protected
in conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee
shall be deemed to impose any duty or obligation on the Preferred Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Preferred Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Preferred Guarantee Trustee shall be construed to
be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee
The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness. The Preferred Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Preferred Securities Guarantee.
ARTICLE IV.
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility
(a) There shall at all times be a Preferred Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Securities and Exchange
Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority
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referred to above, then, for the purposes of this Section
4.1(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee
Trustee shall immediately resign in the manner and with the effect set out in
Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee
Trustees
(a) Subject to Section 4.2(b), the Preferred Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee and delivered to the
Guarantor.
(c) The Preferred Guarantee Trustee appointed to office
shall hold office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and the resigning Preferred
Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee
or removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
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ARTICLE V.
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders. Notwithstanding anything to the
contrary herein, the Guarantor retains all of its rights under the Indenture to
extend the interest payment period on the Debentures and the Guarantor shall
not be obligated hereunder to pay during an Extension Period (as defined in the
Indenture) any monthly distributions on the Preferred Securities.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.3 Obligations Not Affected
Except as otherwise provided herein, the obligations,
covenants, agreements and duties of the Guarantor under this Preferred
Securities Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities (other
than an extension of time for payment of Distributions, Redemption Price,
Liquidation Distribution or other sum payable that results from the extension
of any interest payment period on the Debentures or any extension of the
maturity date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on
the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer or
any of the assets of the Issuer;
11
<PAGE> 15
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a
legal proceeding directly against the Guarantor to enforce its rights under
this Preferred Securities Guarantee, without first instituting a legal
proceeding against the Issuer, the Preferred Guarantee Trustee or any other
Person.
SECTION 5.5 Guarantee of Payment
This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Preferred Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
12
<PAGE> 16
ARTICLE VI.
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding, if
there shall have occurred an Event of Default or an event of default under the
Declaration, then (a) the Guarantor shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (b) the
Guarantor shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities (including guarantees)
issued by the Guarantor which rank pari passu with or junior to the Debentures
or (c) the Guarantor shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Preferred Securities Guarantee
Agreement); provided, however, the Guarantor may declare and pay a stock
dividend where the dividend stock is the same stock as that on which the
dividend is being paid.
SECTION 6.2 Ranking
This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor including the
Debentures, except those liabilities of the Guarantor made pari passu or
subordinate by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Guarantor and with any
guarantee now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock of any Affiliate of the Guarantor, and (iii)
senior to the Guarantor's common stock.
ARTICLE VII.
TERMINATION
SECTION 7.1 Termination
This Preferred Securities Guarantee shall terminate (i) upon
full payment of the Redemption Price of all Preferred Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Preferred
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing,
this Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by
13
<PAGE> 17
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in
relying in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Preferred Securities
might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss, liability or
expense incurred without gross negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses (including reasonable legal
fees and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligation to indemnify as set forth in this Section
8.2 shall survive the termination of this Preferred Securities Guarantee.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders of the Preferred Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely affect
the rights of Holders (in which case no consent of Holders will be required),
this Preferred Securities Guarantee may only be amended with the prior approval
of the Holders of at least a Majority in liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all the outstanding Preferred Securities. The provisions of
Section 12.2 of the Declaration with respect to meetings of Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Preferred Securities Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
14
<PAGE> 18
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred Guarantee Trustee may give notice of to the Holders of
the Preferred Securities):
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Administrator
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Preferred Securities):
Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Attention: Alan M. Wright,
Senior Vice President and
Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to Section 3.1(a), is
not separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MICHIGAN.
15
<PAGE> 19
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day
and year first above written.
Consumers Energy Company,
as Guarantor
By:____________________________________________
Name: Alan M. Wright
Title: Senior Vice President and
Chief Financial Officer
The Bank of New York, as Preferred Guarantee Trustee
By:____________________________________________
Name:
Title:
16
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
July 31, 1997
Consumers Energy Company Financing II
c/o Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Re: Consumers Energy Company Financing II
Ladies and Gentlemen:
We have acted as special Delaware counsel for Consumers Energy
Company, a Michigan corporation (the "Company"), and Consumers Energy Company
Financing II, a Delaware business trust (the "Trust"), in connection with the
matters set forth herein. At your request, this opinion is being furnished to
you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of July 30, 1997
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on July 30, 1997;
(b) The Declaration of Trust of the Trust, dated as of July 30, 1997,
among the Company, as Sponsor, and the trustees of the Trust named therein;
(c) The Registration Statement (the "Registration Statement") on Form
S-3, including a preliminary prospectus (the "Prospectus") relating to the __%
Trust Originated Preferred Securities of the Trust representing preferred
undivided beneficial interests in the assets of the Trust (each, a "Preferred
Security" and
<PAGE> 2
Consumers Energy Company Financing II
July 31, 1997
Page 2
collectively, the "Preferred Securities"), as proposed to be filed by the
Company and the Trust with the Securities and Exchange Commission on or about
August 1, 1997;
(d) A form of Amended and Restated Declaration of Trust of the
Trust, to be entered into among the Company, as Sponsor, the trustees of the
Trust named therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust (including Annex I and Exhibits A-1 and A-2
thereto) (the "Trust Agreement"), attached as an exhibit to the Registration
Statement; and
(e) A Certificate of Good Standing for the Trust, dated July 31,
1997, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular,
we have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) the due authorization,
<PAGE> 3
Consumers Energy Company Financing II
July 31, 1997
Page 3
execution and delivery by all parties thereto of all documents examined by us,
(vi) the receipt by each Person to whom a Preferred Security is to be issued by
the Trust (collectively, the "Preferred Security Holders") of a Preferred
Security Certificate for such Preferred Security and the payment for the
Preferred Security acquired by it, in accordance with the Trust Agreement and
the Registration Statement, and (vii) that the Preferred Securities are issued
and sold to the Preferred Security Holders in accordance with the Trust
Agreement and the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Preferred Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Matters" in
the Prospectus. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange
<PAGE> 4
Consumers Energy Company Financing II
July 31, 1997
Page 4
Commission thereunder. Except as stated above, without our prior written
consent, this opinion may not be furnished or quoted to, or relied upon by, any
other Person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
PMA/SHS/jj
<PAGE> 1
Exhibit (5)-2
August 4, 1997
Consumers Energy Company
Consumers Energy Company Financing II
212 West Michigan Avenue
Jackson, Michigan 49201
Re: Consumers Energy Company Financing II
Trust Originated Preferred Securities
Ladies and Gentlemen:
I refer to the Registration Statement on Form S-3 (the
"Registration Statement") being filed by Consumers Energy Company (the
"Company") and Consumers Energy Company Financing II (the "Trust") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the registration of
$120,000,000 of (i) Trust Originated Preferred Securities ($25 liquidation
amount) (the "Preferred Securities") of the Trust; (ii) Subordinated Debentures
of the Company ("Debentures"); and (iii) the guarantee of the Preferred
Securities by the Company ("Preferred Securities Guarantee"). (The foregoing
offered securities, collectively, the "Securities".) The guarantee of the
Preferred Securities is to be issued pursuant to the Preferred Securities
Guarantee Agreement (the "Preferred Securities Guarantee") to be entered into
between the Company and The Bank of New York, as trustee (the "Guarantee
Trustee"). The Debentures are to be issued under an Indenture between the
Company and The Bank of New York, as trustee (the "Indenture Trustee"), and a
supplemental indenture thereto (collectively, the "Indenture"). Capitalized
terms not otherwise defined herein have the respective meanings specified in
the Registration Statement.
In rendering this opinion, I have examined and relied upon a copy of
the Registration Statement. I have also examined, or have arranged for the
examination by an attorney or attorneys under my general supervision,
originals, or copies of originals certified to my satisfaction, of such
agreements, documents, certificates and other statements of governmental
officials and other instruments, and have examined such questions of law and
have satisfied myself as to such matters
<PAGE> 2
Page 2
of fact, as I have considered relevant and necessary as a basis for this
opinion. I have assumed the authenticity of all documents submitted to me as
originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to me for examination.
Based on the foregoing, it is my opinion that:
1. The Company is duly incorporated and validly existing under the
laws of the State of Michigan.
2. The Company has corporate power and authority (i) to execute
and deliver the Preferred Securities Guarantee and the
Indenture, and (ii) to authorize and sell the Debentures
pursuant to the Indenture.
3. The Preferred Securities Guarantee will be a legally issued and
binding obligation of the Company (except to the extent
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws affecting the enforcement of creditors'
rights generally and by the effect of general principles of
equity, regardless of whether enforceability is considered in a
proceeding in equity or at law) when (i) the Registration
Statement, as finally amended (including any necessary
post-effective amendments) shall have become effective under
the Securities Act; (ii) the Preferred Securities Guarantee
shall have been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and duly executed
and delivered by the Company and the Guarantee Trustee; (iii)
the Preferred Securities shall have been legally issued, as
contemplated by paragraph 4 below; and (iv) the Preferred
Securities Guarantees shall have been duly executed and
delivered as provided in the Preferred Securities Guarantee
Agreement.
4. The Debentures will be legally issued and binding obligations
of the Company (except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws affecting
the enforcement of creditors' rights generally and by the
effect of general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at
law) when (i) the Registration Statement, as finally amended
(including any necessary post-effective amendments) shall have
become effective under the Securities Act, and the Indenture
shall have been qualified under the Trust Indenture Act, and
duly executed and delivered by the Company and the Indenture
Trustee; (ii) the Company's Board of Directors or duly
authorized committee thereof shall have duly adopted final
resolutions authorizing the issuance and sale of the
Debentures, as contemplated by the Registration Statement and
the Indenture; and (iii) the Indenture under which such
Debentures are to be issued shall have been duly executed as
<PAGE> 3
Page 3
provided in such resolutions and the Debentures shall have been
duly executed and authenticated as provided in the Indenture,
and shall have been duly delivered to the purchasers thereof
against payment of the agreed consideration therefor.
For purposes of this opinion, I have assumed that there will be
no changes in the laws currently applicable to the Company and that such laws
will be the only laws applicable to the Company.
I do not find it necessary for the purposes of this opinion to
cover, and accordingly I express no opinion as to, the application of the
securities or blue sky laws of the various states to the execution and delivery
of the Preferred Securities Guarantee or the sale of the Securities.
I am a member of the bar of the State of Michigan and I express
no opinion as to the laws of any jurisdiction other than the State of Michigan
and the federal law of the United States of America. I note that the rights,
duties and obligations of the Indenture Trustee under the Indenture are stated
to be governed and construed in accordance with the laws of the State of New
York. However, for purposes of paragraph 4 above, I have assumed that the
Indenture, as to the rights, duties and obligations of the Indenture Trustee,
is stated to be governed by the laws of the State of Michigan.
I hereby consent to the filing of this opinion as an exhibit to
the Company's Registration Statement on Form S-3 relating to the Securities and
to all references to me included in or made a part of the Registration
Statement.
Very truly yours,
/s/Michael D. VanHemert
------------------------------
Michael D. Van Hemert
<PAGE> 1
EXHIBIT 8
[REID & PRIEST LLP LETTERHEAD]
New York, New York
August 4, 1997
Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Ladies and Gentlemen:
Reference is made to the prospectus, (the "Prospectus"), which constitutes
part of the registration statement on Form S-3 ("Registration Statement"), to
be filed by Consumers Energy Company and Consumers Energy Company Financing II
with the Securities and Exchange Commission on or about the date hereof
pursuant to the Securities Act of 1933, as amended, for the registration of,
among other things, Trust Originated Preferred Securities ("Preferred
Securities") of Consumers Energy Company Financing II.
We are of the opinion that the statements set forth under the caption
"Certain United States Federal Income Tax Consequences" in the Prospectus
constitute an accurate description, in general terms, of certain United States
federal income tax considerations that may be relevant to the prospective
purchasers of the Preferred Securities.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us in the Prospectus under the
caption "Certain United States Federal Income Tax Consequences.
Very truly yours,
/s/ REID & PRIEST LLP
<PAGE> 1
Exhibit (12)
CONSUMERS ENERGY COMPANY
Ratio of Earnings to Fixed Charges
(Millions of Dollars)
<TABLE>
<CAPTION>
Twelve Months
Ended
March 31, 1997 1996 1995 1994 1993 1992
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings as defined (a)
- -----------------------
Net Income (Loss) $ 290 $ 296 $ 255 $ 226 $ 198 $ (244)
Income taxes (benefits) 148 150 133 107 91 (127)
Exclude equity basis subsidiaries to (48) (42) (38) (16) (6) 12
Fixed charges as defined, adjusted to
exclude capitalized interest of $1,
$2, $2, $1, $1 and $1 million for the
twelve months ended March 31, 1997
and for the years ended December 31,
1996, 1995, 1994, 1993 and 1992,
respectively 176 175 189 174 192 186
-----------------------------------------------------------------
Earnings as defined $ 566 $ 579 $ 539 $ 491 $ 475 $ (173)
=================================================================
Fixed charges as defined (a)
- ----------------------------
Interest on long-term debt $ 138 $ 139 $ 141 $ 136 $ 152 $ 150
Estimated interest portion of lease rental 9 9 10 10 11 14
Other interest charges 30 29 40 29 30 23
-----------------------------------------------------------------
Fixed charges as defined $ 177 $ 177 $ 191 $ 175 $ 193 $ 187
=================================================================
Ratio of earnings to fixed charges 3.20 3.27 2.82 2.81 2.46 -
</TABLE>
NOTES:
(a) Earnings and Fixed charges as defined instructions for Item 503 of
Regulation S-K.
(b) For the year ended December 31, 1992, fixed charges exceeded earnings by
$360 million. Earnings as defined include a $520 million pre-tax loss on
the settlement of cost recovery issues relating to power purchases from
the MCV Partnership partially offset by $(15) million for potential
customer refunds and other reserves related to 1992 but recorded in 1991.
The ratio of earnings to fixed charges would have been 1.78 excluding
these amounts.
<PAGE> 2
EXHIBIT (12)
CONSUMERS ENERGY COMPANY
Ratio of Earnings to Fixed Charges and Preferred Dividends
(Millions of Dollars)
<TABLE>
<CAPTION>
Twelve Months
Ended
March 31, 1997 1996 1995 1994 1993 1992
-------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings as defined (a)
- -------------------------------------
Net Income (Loss) after
dividends on preferred stock $ 254 $ 260 $ 227 $ 202 $ 187 $ (255)
Income taxes (benefits) 148 150 123 107 91 (127)
Exclude equity basis subsidiaries (48) (42) (38) (16) (6) 12
Fixed charges as defined, adjusted to
exclude capitalized interest of $1,
$2, $2, $1, $1 and $1 million and $15,
$15, $15, $13, $6 and $6 for the twelve
months ended March 31, 1997 and for the
years ended December 31, 1996, 1995, 1994,
1993 and 1992, respectively 212 211 217 198 203 179
--------------------------------------------------------------------
Earnings as defined $ 566 $ 579 $ 539 $ 491 $ 475 $ (173)
====================================================================
Fixed charges as defined (a)
- ----------------------------
Interest on Long-term debt $ 138 $ 139 $ 141 $ 136 $ 152 $ 150
Estimated interest portion of lease rental 9 9 10 10 11 14
Other interest charges 30 29 40 29 30 23
Preferred stock dividend requirement 51 51 43 37 17 17
--------------------------------------------------------------------
Fixed charges as defined $ 228 $ 228 $ 234 $ 212 $ 210 $ 204
====================================================================
Ratio of earnings to fixed charges
and preferred dividends 2.48 2.54 2.30 2.32 2.26 -
</TABLE>
NOTES:
(a) Earnings and Fixed charges and preferred dividends as defined
instructions for Item 503 of Regulation S-K.
(b) For the year ended December 31, 1992, fixed charges and preferred
dividends exceeded earnings by $377 million. Earnings as defined include
a $520 million pre-tax loss on the settlement of cost recovery issues
relating to power purchases from the MCV Partnership partially offset by
$(15) million for potential customer refunds and other reserves related
to 1992 but recorded in 1991. The ratio of earnings to fixed charges and
preferred dividends would have been 1.63 excluding these amounts.
<PAGE> 1
Exhibit (15)
To CMS Energy Corporation:
We are aware that Consumers Energy Company has incorporated by
reference in this registration statement its Form 10-Q for the quarter ended
March 31, 1997, which includes our report dated May 9, 1997, covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933, this report is not considered a
part of the registration statement prepared or certified by our Firm or a
report prepared or certified by our Firm within the meaning of Sections 7 and
11 of the Act.
/s/ Arthur Andersen LLP
Detroit, Michigan,
July 31, 1997
<PAGE> 1
Exhibit (23)-4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
January 24, 1997 included or incorporated by reference in Consumers Energy
Company's Form 10-K for the year ended December 31, 1996, and to all references
to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Detroit, Michigan,
July 31, 1997.
<PAGE> 1
Exhibit (24)
July 25, 1997
Mr. Alan M. Wright and
Mr. Thomas A. McNish
Consumers Energy Company
212 West Michigan Avenue
Jackson, MI 49201
We hereby make, constitute and appoint each of you our true and lawful attorney
for each of us and in each of our names, places and steads to sign and cause to
be filed with the Securities and Exchange Commission registration statement(s)
and/or any amendment or amendments thereto, including post-effective amendment
or amendments, to be accompanied in each case by a prospectus or supplemental
prospectus and any necessary exhibits with respect to the proposed issue and
sale of one or more of the Preferred Securities of a statutory business trust
formed under the laws of the State of Delaware and the Subordinated Debt
Securities and Guarantee related thereto, Secured Debt Securities or Unsecured
Debt Securities.
Very truly yours,
/s/ William T. McCormick, Jr. /s/ Michael G. Morris
- --------------------------- ----------------------------
William T. McCormick, Jr. Michael G. Morris
/s/ William U. Parfet
- --------------------------- ----------------------------
John M. Deutch William U. Parfet
/s/ James J. Duderstadt /s/ Percy A. Pierre
- --------------------------- ----------------------------
James J. Duderstadt Percy A. Pierre
/s/ Kathleen R. Flaherty
- --------------------------- ----------------------------
Kathleen R. Flaherty Kenneth Whipple
/s/ Victor J. Fryling /s/ John B. Yasinsky
- --------------------------- ----------------------------
Victor J. Fryling John B. Yasinsky
/s/ Earl D. Holton
- ---------------------------
Earl D. Holton
<PAGE> 2
Extract from Minutes of a Meeting of the Board of Directors of Consumers Energy
Company (the "Company"), held July 25, 1997.
- - - - - - - - - -
Proposed Issue and Sale of Securities
At a meeting of the Board of Directors of the Company held on January
25, 1997, resolutions were adopted authorizing the Company to issue and sell,
from time to time, up to $500 million net aggregate principal amount of secured
or unsecured debt securities, including but not limited to debentures, notes,
first mortgage bonds or other evidence of indebtedness, or any combinations of
the foregoing (collectively, the "Long-Term Securities"), for the purpose of
having funds available to refinance or refund existing long-term securities. In
addition to the Long-Term Securities, it is recommended that the Company be
authorized to offer, from time to time, at private placement or public sale, for
the best price or terms, the following additional securities: (i) the preferred
securities ("Preferred Securities") of one or more Delaware statutory business
trusts (the "Trust"), (ii) the Company's guarantee of Preferred Securities of
the Trust, and (iii) subordinated debentures issued solely in connection with
the sale of the Preferred Securities (collectively, the "Additional
Securities"). One or more trusts would be formed as a Delaware statutory
business trust of which the Company would be the sponsor. The Trust may offer
Preferred Securities representing interests in the Trust. The resolutions
adopted by the Board on January 25, 1997 should be amended to reflect the
authority for such Additional Securities. The matter should be fully discussed.
Upon motion duly made and seconded, the following resolutions were
thereupon unanimously adopted:
RESOLVED: That the resolutions adopted by the Board of Directors
on January 25, 1997 with respect to the Long-Term Securities be amended to
reflect the Additional Securities and the formation of one or more Delaware
statutory business trusts of which the Company would be the sponsor. The
Trust may offer Preferred Securities representing interests in the Trust.
All other resolutions adopted by the Board at the January 25, 1997 meeting
with respect to the proposed issue and sale of debt securities remain in
full force and effect and apply equally in all respects to the Additional
Securities; and
RESOLVED FURTHER: That Messrs. Alan M. Wright, Thomas A. McNish
and Mrs. Doris F. Galvin (or successor(s) appointed, in writing, by the
Chairman of the Board, Vice Chairman of the Board or the President of the
Company, and filed in the Corporate Secretary's office) are appointed to
serve, at the Company's request, and are authorized and empowered, for and
on behalf of the Company, to act as the Company's trustees in accordance
with the declaration of trust, and any amendments thereto, of the trust;
and
RESOLVED FURTHER: That the above-designated Company trustees,
and each of them, are authorized and empowered, to execute and deliver all
documents, papers, applications, agreements and instruments, including but
not limited to, a declaration of trust, and any amendments thereto, and to
do all acts and things they deem necessary or appropriate and as counsel
may advise to carry out the intent and purpose of the foregoing
resolutions; and
RESOLVED FURTHER: That the officers of the Company, and each of
them, are authorized and empowered to execute and deliver on behalf of the
Company (i) an indenture or indentures, including one or more supplements
to any indenture, under the corporate seal to be thereto affixed and
attested by the Secretary, with the trustee or trustees appointed, and (ii)
Company guarantee or guarantees relating to Trust securities; each in the
form approved or authorized by the Special Committee, and such indenture or
indentures, supplement or supplements, and guarantee or guarantees to be in
such form and content and bear such date as may be approved by the officer
of the Company executing the same, such approval to be conclusively
evidenced by the execution of said indenture or indentures, supplement or
supplements, guarantee or guarantees; and
RESOLVED FURTHER: That the officers of the Company, and each of
them are authorized to execute, in addition to underwriting agreements,
purchase agreements, or any other type of agreements between the Company
and the underwriter or representatives of the underwriters (or any agents)
or any other purchaser appointed or named in such agreement or agreements,
as they may deem appropriate for the proposed sale of the Long-Term
Securities and Additional Securities.
- - - - - - - - - -
I, Thomas A. McNish, Vice President and Secretary of Consumers Energy Company,
CERTIFY that the foregoing is a true and correct copy of resolutions duly and
regularly adopted at a meeting of the Board of Directors of Consumers Energy
Company duly held on July 25, 1997, at which a quorum was in attendance and
voting throughout, and that said resolutions have not since been rescinded but
are still in full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Company this 25th day of July 1997.
/s/ Thomas A. McNish
------------------------------
( S E A L ) Thomas A. McNish
Vice President and Secretary
<PAGE> 4
Extract from Minutes of a Meeting of the Board of Directors of Consumers Power
Company (the "Company"), held January 25, 1997.
- - - - - - - - - -
Proposed Issue and Sale of Debt Securities
To have funds available for purposes of refinancing or refunding
existing long-term securities, management of the Company recommended that the
Company offer, from time to time, at private placement or public sale, up to
$500 million net aggregate principal amount of secured or unsecured debt
securities, including but not limited to debentures, notes, first mortgage bonds
or other evidence of indebtedness, or any combination of the foregoing. The
final maturity date for all such securities may not exceed 30 years from the
date of issue, and all such securities must be issued no later than November 30,
1998. Management further recommended the appointment of a Special Committee to
take any and all action to facilitate the proposed offering, and to assure that
the securities are sold for the best price and on the best terms obtainable in
the judgment of the Special Committee of the Board of Directors appointed for
such purposes. Authority to issue such securities was approved by the Federal
Energy Regulatory Commission on November 27, 1996 in Docket No. ES97-7-000. The
matter was fully discussed.
Upon motion duly made and seconded, the following resolutions were
thereupon unanimously adopted:
RESOLVED: That the Board of Directors approves the
issue and sale, from time to time, at private placement or public
sale, of up to $500 million net aggregate principal amount of
secured or unsecured debt securities, including but not limited to
debentures, notes, first mortgage bonds or other evidence of
indebtedness, or any combination of the foregoing, as discussed at
the meeting, each to be sold for the best price and on the best
terms obtainable in the judgment of a Special Committee of the
Board of Directors appointed for such purposes. The final maturity
date for all such securities may not exceed 30 years from the date
of issue, and all such securities must be issued no later than
November 30, 1998; and
RESOLVED FURTHER: That Mr. Victor J. Fryling with Mr.
Michael G. Morris, as alternate, is appointed to a Special
Committee of this Board of Directors, which shall have the full
authority to act on behalf of the Board for the purposes stated in
the foregoing resolution with respect to (a) determining the
offering price, any underwriting discounts and the proceeds to the
Company, and (b) authorizing the officers to take such further
actions as they may deem advisable to carry out the issue and sale
of such securities; and
RESOLVED FURTHER: That the officers of the Company,
and each of them, in their discretion on its behalf, are authorized
to execute and file a Registration Statement on Form S-3 with the
Securities and Exchange Commission under the Securities Act of
1933, as amended, with respect to the issue and sale of not more
than $500 million aggregate principal amount of debt securities, in
such form as may be approved by the officers executing the same,
and to do all other things necessary to make such registration
effective, including the execution and filing of any necessary or
appropriate amendments, including post-effective amendments; and
RESOLVED FURTHER: That, it may be desirable for the
securities to be qualified or registered for sale in various
jurisdictions; therefore, the officers of the Company, and each of
them, are authorized and directed to determine the jurisdictions in
which appropriate action shall be taken to qualify or register for
sale all or such part of the securities of the Company as they may
deem advisable; to perform on behalf of the Company any and all
such acts as they may deem necessary or advisable in order to
comply with the applicable laws of any such jurisdictions, and in
connection therewith, to execute and file all requisite papers and
documents, including but not limited to, applications, reports,
surety bonds, irrevocable consents and appointments of attorneys
for service of process; and the execution by such officers or any
of them of any such paper or document or the doing by them of any
act in connection with the foregoing matters shall conclusively
establish their authority therefor from the Company; and
RESOLVED FURTHER: That the officers of the Company,
and each of them, are authorized to cause the Company to make
application to the New York Stock Exchange, or on such other
exchange as the officers may decide, for the listing on such
Exchange, upon notice of issuance, of not more than $500 million
aggregate principal amount of securities of the Company; that
Messrs. Alan M. Wright and Thomas A. McNish are, and each of them
is, designated to represent the Company in connection with any
application or
<PAGE> 5
applications for listing and to appear on behalf of the Company
before such official or body of said Exchange as may be
appropriate, with authority to make such changes, upon the advice
of counsel, in said application(s) or in any agreements or other
papers relating thereto as may be necessary or appropriate to
conform with the requirements for listing; and
RESOLVED FURTHER: That the officers of the Company,
and each of them, in their discretion and on its behalf, are
authorized and empowered to execute one or more underwriting
agreements as they may deem appropriate for the proposed sale of
the aforementioned securities; and
RESOLVED FURTHER: That the officers of the Company,
and each of them, are authorized and empowered to execute and
deliver all other documents, papers, applications, agreements and
instruments by or on behalf of the Company and to do all acts and
things they deem necessary or appropriate and as counsel may
advise to carry out the intent and purpose of the foregoing
resolutions.
- - - - - - - - - -
I, Thomas A. McNish, Vice President and Secretary of Consumers Power Company,
CERTIFY that the foregoing is a true and correct copy of resolutions duly and
regularly adopted at a meeting of the Board of Directors of Consumers Power
Company duly held on January 25, 1997, at which a quorum was in attendance and
voting throughout, and that said resolutions have not since been rescinded but
are still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Company this 25th day of July 1997.
/s/ Thomas A. McNish
------------------------------
( S E A L ) Thomas A. McNish
Vice President and Secretary
<PAGE> 1
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [__]
-------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CONSUMERS ENERGY COMPANY FINANCING II
(Exact name of obligor as specified in its charter)
Delaware 38-6696294
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
212 West Michigan Avenue
Jackson, Michigan 49201
(Address of principal executive offices) (Zip code)
-----------------------
Preferred Securities
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of July, 1997.
THE BANK OF NEW YORK
By: /S/ WALTER N. GITLIN
------------------------
Name: Walter N. Gitlin
Title: Vice President
-4-
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ...................... $ 8,249,820
Interest-bearing balances ............... 1,031,026
Securities:
Held-to-maturity securities ............. 1,118,463
Available-for-sale securities ........... 3,005,838
Federal funds sold and Securities
purchased under agreements to resell..... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .......................32,895,077
LESS: Allowance for loan and
lease losses ....................633,877
LESS: Allocated transfer risk
reserve..............................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts .......... 1,715,214
Premises and fixed assets (including
capitalized leases) ..................... 684,704
Other real estate owned .................. 21,738
Investments in unconsolidated
subsidiaries and associated
companies ............................... 195,761
Customers' liability to this bank on
acceptances outstanding ................. 1,152,899
Intangible assets ........................ 683,503
Other assets ............................. 1,526,113
------------
Total assets ............................. $ 54,746,131
============
LIABILITIES
Deposits:
In domestic offices ..................... $ 25,614,961
Noninterest-bearing ...........10,564,652
Interest-bearing ..............15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 15,103,615
Noninterest-bearing ..............560,944
Interest-bearing ..............14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase...... 2,093,286
Demand notes issued to the U.S.
Treasury ................................ 239,354
Trading liabilities ...................... 1,399,064
Other borrowed money:
With remaining maturity of one year
or less ................................ 2,075,092
With remaining maturity of more than
one year ............................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding ................... 1,160,012
Subordinated notes and debentures ........ 1,014,400
Other liabilities ........................ 1,840,245
------------
Total liabilities ........................ 50,560,708
------------
EQUITY CAPITAL
Common stock ............................. 942,284
Surplus .................................. 731,319
Undivided profits and capital
reserves ................................ 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities .............................. ( 19,449)
Cumulative foreign currency transla-
tion adjustments ........................ ( 13,034)
------------
Total equity capital ..................... 4,185,423
------------
Total liabilities and equity
capital ................................. $ 54,746,131
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith }
J. Carter Bacot } Directors
Thomas A. Renyi }
<PAGE> 1
EXHIBIT 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [__]
------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------------------
CONSUMERS ENERGY COMPANY
(Exact name of obligor as specified in its charter)
Michigan 38-0442310
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
212 West Michigan Avenue
Jackson, Michigan 49201
(Address of principal executive offices) (Zip code)
----------------------------
Subordinated Deferrable Interest Notes
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 31st day of July, 1997.
THE BANK OF NEW YORK
By: /S/WALTER N. GITLIN
----------------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
-4-
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ...................... $ 8,249,820
Interest-bearing balances ............... 1,031,026
Securities:
Held-to-maturity securities ............. 1,118,463
Available-for-sale securities ........... 3,005,838
Federal funds sold and Securities
purchased under agreements to resell..... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .......................32,895,077
LESS: Allowance for loan and
lease losses ....................633,877
LESS: Allocated transfer risk
reserve..............................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts .......... 1,715,214
Premises and fixed assets (including
capitalized leases) ..................... 684,704
Other real estate owned .................. 21,738
Investments in unconsolidated
subsidiaries and associated
companies ............................... 195,761
Customers' liability to this bank on
acceptances outstanding ................. 1,152,899
Intangible assets ........................ 683,503
Other assets ............................. 1,526,113
------------
Total assets ............................. $ 54,746,131
============
LIABILITIES
Deposits:
In domestic offices ..................... $ 25,614,961
Noninterest-bearing ...........10,564,652
Interest-bearing ..............15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 15,103,615
Noninterest-bearing ..............560,944
Interest-bearing ..............14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase...... 2,093,286
Demand notes issued to the U.S.
Treasury ................................ 239,354
Trading liabilities ...................... 1,399,064
Other borrowed money:
With remaining maturity of one year
or less ................................ 2,075,092
With remaining maturity of more than
one year ............................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding ................... 1,160,012
Subordinated notes and debentures ........ 1,014,400
Other liabilities ........................ 1,840,245
------------
Total liabilities ........................ 50,560,708
------------
EQUITY CAPITAL
Common stock ............................. 942,284
Surplus .................................. 731,319
Undivided profits and capital
reserves ................................ 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities .............................. ( 19,449)
Cumulative foreign currency transla-
tion adjustments ........................ ( 13,034)
------------
Total equity capital ..................... 4,185,423
------------
Total liabilities and equity
capital ................................. $ 54,746,131
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith }
J. Carter Bacot } Directors
Thomas A. Renyi }
<PAGE> 1
EXHIBIT 25.3
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [__]
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CONSUMERS ENERGY COMPANY
(Exact name of obligor as specified in its charter)
Michigan 38-0442310
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
212 West Michigan Avenue
Jackson, Michigan 49201
(Address of principal executive offices) (Zip code)
--------------------------
Guarantee of Preferred Securities of
Consumers Energy Company Financing II
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
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<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
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<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 31st day of July, 1997.
THE BANK OF NEW YORK
By: /S/ WALTER N. GITLIN
-------------------------
Name: Walter N. Gitlin
Title: Vice President
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<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ...................... $ 8,249,820
Interest-bearing balances ............... 1,031,026
Securities:
Held-to-maturity securities ............. 1,118,463
Available-for-sale securities ........... 3,005,838
Federal funds sold and Securities
purchased under agreements to resell..... 3,100,281
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .......................32,895,077
LESS: Allowance for loan and
lease losses ....................633,877
LESS: Allocated transfer risk
reserve..............................429
Loans and leases, net of unearned
income, allowance, and reserve 32,260,771
Assets held in trading accounts .......... 1,715,214
Premises and fixed assets (including
capitalized leases) ..................... 684,704
Other real estate owned .................. 21,738
Investments in unconsolidated
subsidiaries and associated
companies ............................... 195,761
Customers' liability to this bank on
acceptances outstanding ................. 1,152,899
Intangible assets ........................ 683,503
Other assets ............................. 1,526,113
------------
Total assets ............................. $ 54,746,131
============
LIABILITIES
Deposits:
In domestic offices ..................... $ 25,614,961
Noninterest-bearing ...........10,564,652
Interest-bearing ..............15,050,309
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 15,103,615
Noninterest-bearing ..............560,944
Interest-bearing ..............14,542,671
Federal funds purchased and Securities
sold under agreements to repurchase...... 2,093,286
Demand notes issued to the U.S.
Treasury ................................ 239,354
Trading liabilities ...................... 1,399,064
Other borrowed money:
With remaining maturity of one year
or less ................................ 2,075,092
With remaining maturity of more than
one year ............................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding ................... 1,160,012
Subordinated notes and debentures ........ 1,014,400
Other liabilities ........................ 1,840,245
------------
Total liabilities ........................ 50,560,708
------------
EQUITY CAPITAL
Common stock ............................. 942,284
Surplus .................................. 731,319
Undivided profits and capital
reserves ................................ 2,544,303
Net unrealized holding gains
(losses) on available-for-sale
securities .............................. ( 19,449)
Cumulative foreign currency transla-
tion adjustments ........................ ( 13,034)
------------
Total equity capital ..................... 4,185,423
------------
Total liabilities and equity
capital ................................. $ 54,746,131
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Alan R. Griffith }
J. Carter Bacot } Directors
Thomas A. Renyi }
