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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1998
REGISTRATION NO. 333-65619
333-65619-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONSUMERS ENERGY COMPANY
(EXACT NAME OF REGISTRANT 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
517-788-0550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ALAN M. WRIGHT
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CONSUMERS ENERGY COMPANY
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)
------------------------
WITH COPIES TO:
MICHAEL D. VAN HEMERT, ESQ.
ASSISTANT GENERAL COUNSEL
CMS ENERGY CORPORATION
FAIRLANE PLAZA SOUTH, SUITE 1100
330 TOWN CENTER DRIVE
DEARBORN, MICHIGAN 48126
(313) 436-9605
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this 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, 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. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS RATINGS:
STANDARD & POOR'S: "AAA"
MOODY'S: "AAA"
$150,000,000
LOGO
% Senior Secured Insured Quarterly Notes
Due October 1, 2028
(IQ Notes(SM)*)
------------------------
The notes bear interest at the rate of % per year. Interest on the notes is
payable quarterly on January 1, April 1, July 1 and October 1 of each year,
beginning January 1, 1999. The notes will mature on October 1, 2028. We can
redeem the notes on or after October 1, 2003. We will also redeem the notes,
subject to certain conditions, at the option of the representative of any
deceased noteholder.
We will issue first mortgage bonds to secure the notes. On the date that we have
retired all the first mortgage bonds, the notes will become unsecured and rank
equally with all of our other unsecured senior indebtedness.
AMBAC Logo
The payment of principal and interest on the notes will be insured by a
financial guaranty insurance policy issued by Ambac Assurance Corporation. The
notes will be available for purchase in denominations of $1,000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Edward D. Jones & Co., L.P. has agreed to purchase the notes at % of their
principal amount ($ aggregate proceeds to Consumers Energy Company,
before deducting our expenses, which we estimate to be $ ), subject to
the terms of our purchase agreement. Edward D. Jones & Co., L.P. plans to sell
the notes from time to time, in negotiated transactions or otherwise, at prices
based on either the prevailing market or negotiated prices.
We expect that the notes will be ready for delivery in book-entry form only
through The Depository Trust Company ("DTC"), on or about October [ ], 1998.
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*IQ Notes is a service mark of Edward D. Jones & Co., L.P.
EDWARD D. JONES & CO., L.P.
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The date of this Prospectus is October [ ], 1998
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WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Our SEC filings are also available over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; Seven World Trade Center, 13th Floor,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60601. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. You may also
inspect our SEC reports and other information at the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC covering the
notes. For further information on Consumers and the notes, you should refer to
our registration statement and its exhibits. This prospectus summarizes material
provisions of contracts and other documents that we refer you to. Since the
prospectus may not contain all the information that you may find important, you
should review the full text of these documents. We have included copies of these
documents as exhibits to our registration statement.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about Consumers, including, among other things:
- - our anticipated growth strategies;
- - our intention to develop new services, energy sources and facilities;
- - anticipated trends in our energy-related businesses;
- - future expenditures for capital projects; and
- - our ability to continue to control costs and maintain quality.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
You should rely only on the information contained or incorporated by reference
in this prospectus. We have not, and the underwriters have not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and the underwriters are not, making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus, as well as information we
previously filed with the SEC and incorporated by reference, is accurate as of
the date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that date.
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PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to you.
You should read the entire prospectus, including the financial data and related
notes, before making an investment decision. The terms "Consumers", "our" and
"we" as used in this prospectus refer to "Consumers Energy Company" and its
subsidiaries and predecessors as a combined entity, except where it is made
clear that such term means only the parent company.
CONSUMERS ENERGY COMPANY
We are a public utility that provides gas or electricity to almost six million
of the nine and a half million residents in Michigan's Lower Peninsula. Our
service areas include automotive, metal, chemical, food and wood products and a
diversified group of other industries. At December 31, 1997, we provided service
to 1.6 million electric customers and 1.5 million gas customers. Our
consolidated operating revenues in 1997 were $3,769 million. 67% of our
operating revenue was generated from our electric utility business, 32% from our
gas utility business and 1% from our non-utility business.
We generate, purchase, transmit and distribute electricity in 61 of the 68
counties in the Lower Peninsula. We generate electricity through 5 fossil-fueled
plants, 1 nuclear plant, 1 pumped storage hydroelectric facility, 7 gas
combustion turbine plants and 13 hydroelectric plants. Together, as of December
31, 1997, these facilities gave us the capacity to generate 6,255 megawatts
("MW") of electricity. In 1997, we also purchased 1,648 MW of net capacity from
independent power producers. Our peak power demand during 1997 was 7,315 MW in
July.
We purchase, transport, store and distribute gas in 54 of the 68 counties in the
Lower Peninsula. We distribute and transmit gas through 22,825 miles of
distribution mains and 1,057 miles of transmission lines. We own and operate six
compressor stations that have a total of 133,560 installed horsepower.
We are subject to regulation by various federal, state and local agencies
including the Michigan Public Service Commission, the Federal Energy Regulatory
Commission and the Nuclear Regulatory Commission. These agencies regulate
various aspects of our business including the retail utility rates we charge,
certain tariffs that affect our pricing, our accounting practices and our
ability to acquire, construct, operate or dispose of certain gas and electric
assets and facilities, including nuclear power plants.
RECENT DEVELOPMENTS
On October 2, 1998, we began to solicit bids to acquire our rights to 1240 MW of
contract capacity and associated energy under our Power Purchase Agreement with
Midland Cogeneration Venture Limited Partnership. We have reserved the right at
any time, in our sole discretion, to terminate the auction process or to reject
any or all bids. We will not consummate the transaction unless we believe
important customer benefits will flow from the transaction.
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THE OFFERING
<TABLE>
<S> <C>
Notes Offered............................. Senior Secured Insured Quarterly Notes due
October 1, 2028
Aggregate Principal Amount................ $150,000,000
Interest Rate............................. [ ]%
Date of Maturity.......................... October 1, 2028.
Interest Payment Date..................... January 1, April 1, July 1 and October 1 of
each year, beginning January 1, 1999.
Record Date for Interest Payments......... The 15th calendar day of the month preceding
the month in which an Interest Payment Date
occurs.
Ranking................................... The notes will be secured by first mortgage
bonds. On the date that we have retired all
the first mortgage bonds, the notes will
become unsecured and rank equally with all
of our other unsecured senior indebtedness.
Redemption of the Notes:
Option of the Company..................... We will have the option to redeem the notes
(in whole or in part), from time to time on
or after October 1, 2003. If we redeem the
notes, we will pay 100% of the principal
amount plus the accrued interest through the
redemption date.
Redemption of the Notes:
Option of a Deceased Noteholder's
Representative.......................... We will also redeem the notes at the option
of the representative of any deceased
noteholder. We will pay 100% of the
principal amount, plus accrued interest,
subject to the following condition: the
maximum principal amount we will redeem is
$25,000 per deceased owner and $3,000,000 in
the aggregate for all deceased owners during
the initial period from the date of this
prospectus until October 1, 1999 and during
each twelve-month period thereafter.
Insurance................................. The payment of the principal and interest on
the notes will be insured by a financial
guaranty insurance policy issued by Ambac
Assurance Corporation that will be issued at
the same time the notes are delivered.
Form of Note.............................. One global security, held in the name of
DTC.
Settlement and Payment.................... Same-day immediately available funds.
</TABLE>
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<TABLE>
<S> <C>
Rating.................................... The notes will be rated "AAA" by Standard &
Poor's Ratings Group and "AAA" by Moody's
Investors Services, Inc.
Ratio of Earnings to Fixed Charges........ Our ratio of earnings to fixed charges for
the twelve months ended June 30, 1998 is
3.26. For each of the years ended December
31, 1993 through 1997 they are as follows:
2.46; 2.81; 2.82; 3.27; and 3.31.
Use of Proceeds........................... We estimate that the net proceeds of the
offering will be approximately $150 million
before deducting expenses. We intend to use
these proceeds from the offering of the
notes to repay certain indebtedness
outstanding under a credit facility, and for
general corporate purposes, including paying
down short-term debt.
</TABLE>
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CONSUMERS ENERGY COMPANY
Consumers, incorporated in Michigan in 1968, is the successor to a
corporation organized in Maine in 1910 that did business in Michigan from 1915
to 1968. Consumers was named Consumers Power Company from 1910 to the first
quarter of 1997, when Consumers changed its name to Consumers Energy Company.
Consumers is the principal subsidiary of CMS Energy Corporation, a Michigan
corporation ("CMS Energy"). CMS Energy, through other subsidiaries, is also
engaged in several domestic and international energy-related businesses
including: oil and gas exploration and production; acquisition, development and
operation of independent power production facilities; storage, transmission and
processing of natural gas; energy marketing, services and trading; and
international energy distribution.
Consumers is a public utility serving gas or electricity to almost six
million of Michigan's nine and a half million residents in all 68 counties in
Michigan's Lower Peninsula. Consumers' service areas include automotive, metal,
chemical, food and wood products and a diversified group of other industries.
Consumers' electric operations include the generation, purchase, transmission
and distribution of electricity in 61 of the 68 counties in the Lower Peninsula
of Michigan. Consumers' gas operations include the purchase, transportation,
storage and distribution of gas serving 54 of the 68 counties in the Lower
Peninsula of Michigan. At December 31, 1997, Consumers provided service to 1.6
million electric customers and 1.5 million gas customers.
Consumers' 1997 consolidated operating revenue of $3,769 million was
derived 67% ($2,515 million) from its electric utility business, 32% ($1,204
million) from its gas utility business and 1% ($50 million) from its non-utility
business.
Consumers' electric generating system consists of five fossil-fueled
plants, one nuclear plant, one pumped storage hydroelectric facility, seven gas
combustion turbine plants and thirteen hydroelectric plants. Consumers-owned
system generating capacity (including the pumped storage hydroelectric facility,
of which Consumers has a 51% ownership) was 6,255 MW as of December 31, 1997. In
1997, Consumers purchased 1,648 MW of net capacity from independent power
producers. Consumers' peak power demand for 1997 was 7,315 MW in July 1997.
Consumers' gas distribution and transmission system consists of 22,825
miles of distribution mains and 1,057 miles of transmission lines throughout the
Lower Peninsula of Michigan. Consumers owns and operates six compressor stations
with a total of 133,560 installed horsepower.
Consumers is subject to regulation by various federal, state and local
agencies including the Michigan Public Service Commission ("MPSC"), the Federal
Energy Regulatory Commission ("FERC") and the Nuclear Regulatory Commission
("NRC"). The MPSC regulates public utilities in Michigan with respect to retail
utility rates, accounting, services, certain facilities and various other
matters. The FERC has jurisdiction over certain aspects of Consumers' gas
business relating, among other things, to the acquisition, operation and
disposal of assets and facilities and to service provided and rates charged by
Michigan Gas Storage Company, a subsidiary of Consumers. Under certain
circumstances, the FERC also has the power to modify gas tariffs of interstate
pipeline companies. Certain aspects of Consumers' gas business also are subject
to regulation by the FERC including a blanket transportation tariff pursuant to
which Consumers can transport gas in interstate commerce. Certain aspects of
Consumers' electric operations also are subject to regulation by the FERC,
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including compliance with the FERC's accounting rules and other regulations
applicable to "public utilities" and "licensees," the transmission of electric
energy in interstate commerce and the rates and charges for the sale of electric
energy at wholesale, the consummation of certain mergers, the sale of certain
facilities, the construction, operation and maintenance of hydroelectric
projects and the issuance of securities, as provided by the Federal Power Act.
Consumers is subject to NRC jurisdiction with respect to the design,
construction, operation and decommissioning of its nuclear power plants.
The foregoing information concerning Consumers does not purport to be
comprehensive. For additional information concerning Consumers' business and
affairs, including its capital requirements and external financing plans,
pending legal and regulatory proceedings and descriptions of certain laws and
regulations to which it is subject, prospective purchasers should refer to the
Incorporated Documents. See Incorporation by Reference: Information we file with
the SEC.
RECENT DEVELOPMENTS
On October 2, 1998, Consumers initiated a process for the solicitation of
bids to acquire Consumers' rights to 1240 MW of contract capacity and associated
energy ("PPA Rights") under its Power Purchase Agreement ("PPA") with Midland
Cogeneration Venture Limited Partnership ("MCV"). The term of the PPA is for 35
years, which commenced on the date of commercial operation of the MCV's
generating facilities in March 1990. The PPA Rights are being offered in one
1240 MW block or in two 620 MW pieces, for the period from the effective date in
1999 through either September 2007 or March 2025.
Consumers has reserved the right at any time, in its sole discretion, to
terminate the auction process or to reject any or all bids. Consumers will not
consummate a transaction unless important customer benefits flow from that
transaction. Any such transaction would be subject to the approval of Consumers'
Board of Directors and obtaining satisfactory ratemaking and accounting
treatment from the MPSC and the FERC with respect to the definitive agreements,
including any necessary approval of the transfer of PPA Rights by FERC.
In an order issued October 12, 1998, the MPSC delayed consideration of the
auction until the definitive agreements with the winning bidder(s) are presented
to the MPSC but stated that Consumers' approach offers legitimate way to utilize
independent market forces to determine the above-market or stranded portion of
Consumers' obligations under the PPA with the MCV.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of certain financial information of Consumers
and its consolidated subsidiaries and is qualified in its entirety by, and
should be read in conjunction with, the detailed information and Consumers
consolidated financial statements and notes thereto included in the Incorporated
Documents. See "Incorporation by Reference: Information We File with the SEC."
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED/AT YEAR ENDED/AT DECEMBER 31,
JUNE 30, ----------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ------ ------ ------ ------ ------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenue........... $3,696 $3,769 $3,770 $3,511 $3,356 $3,243
Net income.................. 342 321 296 255 226 198
Net income available to
common stockholder........ 305 284 260 227 202 187
Total assets................ 7,076 6,949 7,025 6,954 6,809 6,551
Long-term debt, excluding
current maturities........ 2,159 1,369 1,900 1,922 1,953 1,839
Non-current portion of
capital leases............ 77 74 100 104 108 106
Total preferred stock....... 238 238 356 356 356 163
Total trust preferred
securities................ 220 220 100 -- -- --
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the twelve months ended June
30, 1998 and for each of the years ended December 31, 1993 through 1997 are as
follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------
1998 1997 1996 1995 1994 1993
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.................... 3.26 3.31 3.27 2.82 2.81 2.46
</TABLE>
For the purpose of computing such ratio, earnings represent net income
before income taxes, net interest charges and estimated interest portion of
lease rentals.
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CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Consumers Energy Company ("Consumers" or the "Company") at June 30, 1998 and as
adjusted to reflect the sale of the % Senior Secured Insured Quarterly Notes
due October 1, 2028 (the "Notes") 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 described under "Incorporation by
Reference: Information We File with the SEC" (the "Incorporated Documents").
<TABLE>
<CAPTION>
AT JUNE 30, 1998
------------------
AS
ACTUAL ADJUSTED
------ --------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Common stockholder's equity................................. $1,748 $1,748
Preferred stock............................................. 238 238
Consumers-obligated mandatorily redeemable Trust Preferred
Securities of:
Consumers Power Company Financing I(a).................... 100 100
Consumers Energy Company Financing II(a).................. 120 120
Long-term debt (excluding current maturities)(b)............ 2,159 2,259
Non-current portion of capital leases....................... 77 77
------ ------
Total capitalization........................................ 4,442 4,542
Current portion of long-term debt and capital leases(b)..... 94 94
------ ------
Total capitalization and current portion of long-term debt
and capital leases........................................ $4,536 $4,636
====== ======
</TABLE>
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(a) The primary asset of Consumers Power Company Financing I is $103
million principal amount of 8.36% subordinated deferrable interest
notes due 2015 from the Consumers. The primary asset of Consumers
Energy Company Financing II is $124 million principal amount of 8.20%
subordinated deferrable interest notes due 2027 from Consumers.
(b) Adjusted amount reflects issuance of $150 million of the Notes and the
proceeds being used for general corporate purposes and for payment of
long-term debt as described in "Use of Proceeds."
USE OF PROCEEDS
Fifty million dollars of the net proceeds from the sale of the Notes
offered hereby will be used by Consumers to repay a portion of the indebtedness
outstanding under the $225 million Term Loan Agreement, dated as of May 7, 1998,
by and among Consumers, the banks named therein, the other lenders from time to
time who may become parties thereto, and Barclays Bank PLC, as Administrative
Agent (the "Credit Facility"). The term of the Credit Facility
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is until May 7, 2003. The weighted average interest rate under the Credit
Facility is 6.10%. The amounts borrowed under the Credit Facility were used to
repay indebtedness outstanding under a $400 million term loan agreement which
Consumers had entered into on November 1, 1994. The remaining approximately $100
million of net proceeds from the sale of the Notes will be used by Consumers for
general corporate purposes, including paying down short-term debt.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes are to be issued pursuant to an Indenture, dated as of February
1, 1998, as supplemented (collectively, the "Indenture"), between Consumers and
The Chase Manhattan Bank, as trustee (the "Trustee"). At October 1, 1998, four
series of Senior Notes (as defined below) in an aggregate principal amount of
$925 million were outstanding under the Indenture. The following summaries of
certain provisions of the Indenture do not purport to be complete, make use of
defined terms (some but not all of which are defined herein) and are subject to,
and qualified in their entirety by, all of the provisions of the Indenture,
which is incorporated herein by this reference and which is available upon
request to the Trustee. Unless otherwise indicated, references to Section
numbers under this caption are references to the Section numbers of the
Indenture. In addition, capitalized terms used in this section and not otherwise
defined herein shall have the meaning given to them in the Indenture.
Until the Release Date (as defined below), all of the senior notes
outstanding under the Indenture (the "Senior Notes") will be secured by one or
more series of Consumers' First Mortgage Bonds (as defined below) issued and
delivered by Consumers to the Trustee. See "-- Security; Release Date" below. ON
THE RELEASE DATE, THE SENIOR NOTES (INCLUDING THE NOTES) WILL CEASE TO BE
SECURED BY FIRST MORTGAGE BONDS, WILL BECOME UNSECURED GENERAL OBLIGATIONS OF
CONSUMERS AND WILL RANK ON A PARITY WITH OTHER UNSECURED INDEBTEDNESS OF
CONSUMERS. The Indenture provides that, in addition to the Notes offered hereby,
additional Senior Notes may be issued thereunder, without limitation as to
aggregate principal amount, provided that, prior to the Release Date, the
principal amount of Senior Notes that may be issued and outstanding cannot
exceed the principal amount of Senior Note Mortgage Bonds (as defined herein)
then held by the Trustee. See "Description of First Mortgage Bonds -- Issuance
of Additional First Mortgage Bonds."
There is no requirement under the Indenture that future issues of debt
securities of Consumers be issued exclusively under the Indenture, and Consumers
will be free to employ other indentures (including, prior to the Release Date,
the Mortgage (as defined below)) or documentation, containing provisions
different from those included in the Indenture or applicable to one or more
issues of Senior Notes (including the Notes), in connection with future issues
of such other debt securities.
INTEREST
Each Note shall bear interest at % (the "Securities Rate") from the date
of original issuance, payable quarterly in arrears on January 1, April 1, July 1
and October 1 of each year and on the date of maturity to the person in whose
name such Note is registered at the close of business on the fifteenth calendar
day of the month preceding the month in which the respective Interest Payment
Date occurs. The initial Interest Payment Date is January 1, 1999. The amount of
interest payable will 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 the
Notes is not a Business Day (as defined below), 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).
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SPECIAL INSURANCE PROVISIONS OF THE INDENTURE
Notwithstanding any other provision of the Indenture, so long as Ambac
Assurance Corporation (the "Insurer") is not in default under the financial
guaranty insurance policy that insures the payment of the principal of and
interest on the Notes when due (the "Policy"), the Insurer shall be entitled to
control and direct the enforcement of all rights and remedies with respect to
the Notes upon the occurrence and continuation of an Event of Default (as
defined herein). The Trustee shall within one business day notify the Insurer of
any Nonpayment (as defined in the Policy) and such notice shall specify the
amount of the Nonpayment. The Trustee shall make a claim for Nonpayment under
the Policy prior to exercising any other rights under the Indenture; provided,
however, if the Insurer defaults under the Policy, the Trustee may assert any
and all rights it has under the Indenture.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Notes, in whole or in part,
at par without premium, from time to time, on or after October 1, 2003, 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 to
the Redemption Date (the "Redemption Price").
If notice of redemption is given as aforesaid, the Notes so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
together with any accrued interest thereon, and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Notes shall cease to bear interest. If any Note called for
redemption shall not be paid upon surrender thereof for redemption, the
principal shall, until paid, bear interest from the Redemption Date at the
Securities Rate.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding Notes by
tender, in the open market or by private agreement.
LIMITED RIGHT OF REDEMPTION UPON DEATH OF BENEFICIAL OWNER
Unless the Notes have been declared due and payable prior to their maturity
by reason of an Event of Default, a person authorized to represent the estate of
the deceased Beneficial Owner (as defined herein) or from a surviving joint
tenant(s) or tenants(s) by the entirety (each a "Representative") of a deceased
Beneficial Owner has the right to request redemption at par of all or part of
such interest, expressed in integral multiples of $1,000 principal amount, in
the Notes for payment prior to maturity, and the Company will redeem the same
subject to the limitations that the Company will not be obligated to redeem
during the period from the original issuance of the Notes through and including
October 1, 1999 (the "Initial Period"), and during any twelve-month period which
ends on and includes each October 1 thereafter (each such twelve-month period
being hereinafter referred to as a "Subsequent Period") (i) on behalf of a
deceased Beneficial Owner any interest in the Notes which exceeds an aggregate
principal amount of $25,000 or (ii) interests in the Notes in an aggregate
principal amount exceeding $3,000,000. A "Beneficial Owner" is a person who has
the right to sell, transfer or otherwise dispose of an interest in a Note and
the right to receive the proceeds therefrom, as well as the principal and
interest payable to the holder thereof. A
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request for redemption may be initiated by the Representative of a deceased
Beneficial Owner at any time and in any principal amount in integral multiples
of $1,000. Representatives of deceased Beneficial Owners must make arrangements
with the Participant through whom such interest is owned in order that timely
presentation of redemption requests can be made by the Participant to the
Trustee. If the Company, although not obligated to do so, chooses to redeem
interests of a deceased Beneficial Owner in the Notes in the Initial Period or
in any Subsequent Period in excess of the $25,000 limitation, such redemption,
to the extent that it exceeds the $25,000 limitation for any deceased Beneficial
Owner, shall not be included in the computation of the $3,000,000 aggregate
limitation for such Initial Period or such Subsequent Period, as the case may
be, or for any succeeding Subsequent Period. Any Note (or portion thereof)
tendered pursuant to a redemption request may be withdrawn by a written request
by the Representative received by the Trustee at least 10 days prior to its
repayment.
Subject to the $25,000 and the $3,000,000 limitations, the Company will,
after the death of any Beneficial Owner, redeem the interest of the Beneficial
Owner in the Notes on the next Interest Payment Date following receipt by the
Trustee of a redemption request received at least 20 days in advance of the next
Interest Payment Date. If, during the Initial Period or any Subsequent Period,
redemption requests exceed the aggregate principal amount of interests in Notes
required to be redeemed, then such excess redemption requests will be applied to
successive Subsequent Periods, regardless of the number of Subsequent Periods
required to redeem such interests. All redemption requests will be redeemed in
the order in which the Trustee receives the redemption request. To obtain
repayment pursuant to a redemption request, the Representative must provide to
the Participant (i) a written request for repayment signed by the
Representative, and such signature must be guaranteed by a member firm of a
registered national securities exchange or of the NASD or a commercial bank or
trust company having an office or correspondent in the United States, (ii)
appropriate evidence satisfactory to the Company and the Trustee that (A) the
Representative has authority to act on behalf of the deceased Beneficial Owner,
(B) the death of such Beneficial Owner has occurred and (C) the deceased was the
owner of a beneficial interest in such Note at the time of death, (iii) if
applicable, a properly executed assignment or endorsement, and (iv) if the
beneficial interest in such Notes is held by a nominee of the deceased
Beneficial Owner, a certificate satisfactory to the Trustee from such nominee
attesting to the deceased's ownership of a beneficial interest in such Note. The
Participant will provide these documents to the Trustee. All questions as to the
eligibility or validity of any exercise of redemption on behalf of a deceased
Beneficial Owner will be determined by the Company, in its sole discretion,
which determinations will be final and binding on all parties.
Interests in the Notes held in tenancy by the entirety, joint tenancy or by
tenants in common will be deemed to be held by a single Beneficial Owner, and
the death of a tenant in common, tenant by the entirety or joint tenant will be
deemed the death of a Beneficial Owner. The death of a person who, during such
person's lifetime, was entitled to substantially all of the rights of a
Beneficial Owner of an interest in the Notes will be deemed the death of the
Beneficial Owner, regardless of the recordation of such interest on the records
of the Participant, if such rights can be established to the satisfaction of the
Participant and the Company.
In the case of a redemption request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Notes, the interests in the
Notes which are the subject of such redemption request
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shall not be eligible for redemption pursuant to the Company's option to redeem
but shall remain subject to redemption pursuant to such redemption request.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that its interest in the Notes will be
paid prior to maturity.
REGISTRATION, TRANSFER AND EXCHANGE
The Notes will initially be issued in the form of one or more Global Notes,
in registered form, without coupons, in denominations of $1,000 or an integral
multiple thereof as described under "Book-Entry Only Issuance -- The Depository
Trust Company." The Global Notes will be registered in the name of a nominee of
DTC. Except as set forth herein under "Book-Entry Only Issuance -- The
Depository Trust Company," owners of beneficial interests in a Global Note will
not be entitled to have Notes registered in their names, will not receive or be
entitled to receive physical delivery of any such Note and will not be
considered the registered holder thereof under the Indenture.
Senior Notes of any series will be exchangeable for other Senior Notes of
the same series of any authorized denominations and of a like aggregate
principal amount and tenor. (Section 2.06)
Senior Notes may be presented for exchange or registration of transfer
(duly endorsed or accompanied by a duly executed written instrument of
transfer), at the office of the Trustee maintained in the Borough of Manhattan,
The City of New York, for such purpose with respect to any series of Senior
Notes, without service charge but upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon Consumers and the Trustee being satisfied with the
documents of title and indemnity of the person making the request. (Sections
2.06, 2.07 and 6.02)
In the event of any redemption of Senior Notes of any series, the Trustee
will not be required to exchange or register a transfer of any Senior Notes of
such series selected, called or being called for redemption except, in the case
of any Senior Note to be redeemed in part, the portion thereof not to be so
redeemed. (Section 2.06)
PAYMENT AND PAYING AGENTS
Payments of principal of, and interest and/or premium, if any, on Notes
issued in the form of Global Notes shall be made by wire transfer of immediately
available funds to the account specified by the registered holder of such Global
Note, which shall initially be a nominee of DTC. Interest on Notes (other than
interest at maturity) that are in the form of certificated notes ("Certificated
Notes") will be paid by check mailed to the person entitled thereto at such
person's address as it appears in the register for the Notes maintained by the
Trustee; however, a holder of Senior Notes of one or more series under the
Indenture in the aggregate principal amount of $10 million or more having the
same interest payment dates will be entitled to receive payments of interest on
such series by wire transfer of immediately available funds to a bank within the
continental United States if appropriate wire transfer instructions have been
received by the Trustee on or prior to the applicable Regular Record Date. The
principal of, and interest at maturity and premium, if any, on Notes in the form
of Certificated Notes will be payable in immediately available funds at the
office of the Trustee or at the authorized office of any paying agent. (Section
2.12)
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If and to the extent that Consumers fails to make timely payment of
interest on any Note, that interest shall cease to be payable to the persons who
were the holders of such Notes at the applicable Regular Record Date, and shall
instead become payable to the holder of such Note at the close of business on a
special record date established by the Trustee, which special record date shall
be not more than 15 or fewer than 10 days prior to the date of the proposed
payment. (Section 2.11)
All monies paid by Consumers to the Trustee for the payment of principal
of, interest and/or premium, if any, on any Note which remain unclaimed at the
end of two years after such principal, interest or premium shall have become due
and payable will be repaid to Consumers, subject to applicable abandoned
property laws, and the holder of such Note will thereafter look only to
Consumers for payment thereof. (Section 5.04)
In any case where the date of maturity of the principal of or any premium
or interest on any Note or the date fixed for redemption of any Note is not a
Business Day, then payment of such principal or any premium or interest need not
be made on such date but may be made on the next succeeding Business Day with
the same force and effect as if made on the date of maturity or the date fixed
for redemption, and, in the case of timely payment thereof, no interest shall
accrue for the period from and after such interest payment date or the date on
which the principal or premium of the Note is stated to be payable to such next
succeeding Business Day. (Section 15.06) "Business Day" means each Monday,
Tuesday, Wednesday, Thursday and Friday that is not a day on which banks or
trust companies in the Borough of Manhattan, The City of New York, or in any
other city where the corporate trust office of the Trustee may be located, are
obligated or authorized by law or executive order to close.
SECURITY; RELEASE DATE
Until the Release Date, the Senior Notes (including the Notes) will be
secured by one or more series of Consumers' First Mortgage Bonds ("Senior Note
Mortgage Bonds") issued and delivered by Consumers to the Trustee (see
"Description of First Mortgage Bonds"). Upon the issuance of a series of Senior
Notes (including the Notes) prior to the Release Date, Consumers will
simultaneously issue and deliver to the Trustee, as security for all Senior
Notes, a series of Senior Note Mortgage Bonds that will have the same stated
maturity date and corresponding redemption provisions, and will be in the same
aggregate principal amount as the series of the Senior Notes (including the
Notes) being issued. Any series of Senior Note Mortgage Bonds may, but need not,
bear interest. The series of Senior Note Mortgage Bonds to be issued to the
Trustee concurrently with the issuance of the Notes will bear interest at the
same rate as is borne by the Notes. Any payment by Consumers to the Trustee of
principal of, interest and/or premium, if any, on a series of Senior Note
Mortgage Bonds will be applied by the Trustee to satisfy Consumers' obligations
with respect to principal of, interest and/or premium, if any, on the Senior
Notes. (Sections 2.12(c), 4.10 and 4.11)
THE RELEASE DATE WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS ("FIRST
MORTGAGE BONDS") OF CONSUMERS ISSUED AND OUTSTANDING UNDER THE MORTGAGE, OTHER
THAN SENIOR NOTE MORTGAGE BONDS, HAVE BEEN RETIRED (AT, BEFORE OR AFTER THE
MATURITY THEREOF) THROUGH PAYMENT, REDEMPTION OR OTHERWISE. ON THE RELEASE DATE,
THE TRUSTEE WILL DELIVER TO CONSUMERS FOR CANCELLATION ALL SENIOR NOTE MORTGAGE
BONDS AND NOT LATER THAN 30 DAYS THEREAFTER, WILL PROVIDE NOTICE TO ALL HOLDERS
OF SENIOR NOTES (INCLUDING THE NOTES) OF THE OCCURRENCE OF THE RELEASE DATE. AS
A RESULT, ON THE RELEASE DATE, THE SENIOR NOTE MORTGAGE BONDS SHALL CEASE TO
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SECURE THE SENIOR NOTES (INCLUDING THE NOTES), AND THE SENIOR NOTES (INCLUDING
THE NOTES) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF CONSUMERS. (Section
4.11.) Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of Consumers, all of which are secured by a lien on certain
property owned by Consumers. See "Description of First Mortgage
Bonds -- Priority and Security." Upon the payment or cancellation of any
outstanding Senior Notes, the Trustee shall surrender to the Company for
cancellation an equal principal amount of the related series of Senior Note
Mortgage Bonds. Consumers shall not permit, at any time prior to the Release
Date, the aggregate principal amount of Senior Note Mortgage Bonds held by the
Trustee to be less than the aggregate principal amount of Senior Notes
outstanding. (Section 4.08.) Following the Release Date, Consumers will cause
the Mortgage to be discharged and will not issue any additional First Mortgage
Bonds under the Mortgage. (Section 4.11.) While Consumers will be precluded
after the Release Date from issuing additional First Mortgage Bonds, it will not
be precluded under the Indenture or Notes from issuing or assuming other secured
debt, or incurring liens on its property, except to the extent indicated below
under "-- Certain Covenants of Consumers -- Limitation on Liens."
EVENTS OF DEFAULT
The following constitute events of default under the Indenture: (a) default
in the payment of principal of and premium, if any, on any Senior Note when due
and payable; (b) default in the payment of interest on any Senior Note when due
which continues for 60 days; (c) default in the performance or breach of any
other covenant or agreement of Consumers in the Senior Notes or in the Indenture
and the continuation thereof for 90 days after written notice thereof to
Consumers by the Trustee or the holders of at least 33% in aggregate principal
amount of the outstanding Senior Notes; (d) prior to the Release Date, the
occurrence of a default as defined in the Mortgage; provided, however, that the
waiver or cure of such default and the rescission and annulment of the
consequences thereof under the Mortgage shall constitute a waiver of the
corresponding event of default under the Indenture and a rescission and
annulment of the consequences thereof under the Indenture; and (e) certain
events of bankruptcy, insolvency, reorganization, assignment or receivership of
Consumers. (Section 8.01)
If an event of default occurs and is continuing, either the Trustee or the
holders of a majority in aggregate principal amount of the outstanding Senior
Notes may declare the principal amount of all Senior Notes to be due and payable
immediately. Upon such acceleration of the Senior Notes, the Senior Note
Mortgage Bonds shall be immediately redeemed upon demand of the Trustee (and
surrender thereof to the Mortgage Trustee) at a redemption price of 100% of the
principal amount thereof, together with interest to the redemption date. See
"Description of First Mortgage Bonds -- Redemption Provisions." At any time
after an acceleration of the Senior Notes has been declared but before a
judgment or decree for the payment of the principal amount of the Senior Notes
has been obtained (and provided the acceleration of all First Mortgage Bonds has
not occurred), if Consumers pays or deposits with the Trustee a sum sufficient
to pay all matured installments of interest and the principal and any premium
which has become due otherwise than by acceleration and all defaults shall have
been cured or waived, then such payment or deposit will cause an automatic
rescission and annulment of the acceleration of the Senior Notes. (Section 8.01)
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The Indenture provides that the Trustee generally will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of Senior Notes unless such holders
have offered to the Trustee reasonable security or indemnity. (Section 9.02.)
Subject to such provisions for indemnity and certain other limitations contained
in the Indenture, the holders of a majority in principal amount of the
outstanding Senior Notes generally will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or of exercising any trust or power conferred on the Trustee. The
holders of a majority in principal amount of the outstanding Senior Notes
generally will have the right to waive any past default or event of default
(other than a payment default) on behalf of all holders of Senior Notes.
(Section 8.07.) The Indenture provides that no holder of Senior Notes may
institute any action against Consumers under the Indenture unless such holder
previously shall have given to the Trustee written notice of default and
continuance thereof and unless the holders of not less than a majority in
aggregate principal amount of Senior Notes then outstanding affected by such
event of default shall have requested the Trustee to institute such action and
shall have offered the Trustee reasonable indemnity, and the Trustee shall not
have instituted such action within 60 days of such request. Furthermore, no
holder of Senior Notes will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
holders of Senior Notes. Notwithstanding that the right of a holder of Senior
Notes to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, each holder of a Senior Note has the right, which
is absolute and unconditional, to receive payment of the principal of, and
interest and/or premium, if any, on such Senior Note when due and to institute
suit for the enforcement of any such payment, and such rights may not be
impaired without the consent of such holder of Senior Notes. (Section 8.04.) The
Indenture provides that the Trustee, within 90 days after the occurrence of a
default with respect to the Senior Notes, is required to give the holders of the
Senior Notes notice of any such default known to the Trustee, unless cured or
waived, but, except in the case of default in the payment of principal of, and
interest and/or premium, if any, on any Senior Notes, the Trustee may withhold
such notice if it determines in good faith that it is in the interest of such
holders to do so. (Section 8.08.) Consumers is required to deliver to the
Trustee each year a certificate as to whether or not, to the knowledge of the
officers signing such certificate, Consumers is in compliance with the
conditions and covenants under the Indenture. (Section 6.06)
MODIFICATION
Modification and amendment of the Indenture may be effected by Consumers
and the Trustee with the consent of the holders of a majority in principal
amount of the outstanding Senior Notes affected thereby, provided that no such
modification or amendment may, without the consent of the holder of each
outstanding Senior Note affected thereby, (a) change the maturity date of any
Senior Note; (b) reduce the rate (or change the method of calculation thereof)
or extend the time of payment of interest on any Senior Note; (c) reduce the
principal amount of, or premium payable on, any Senior Note; (d) change the coin
or currency of any payment of principal of, and interest and/or premium on any
Senior Note; (e) change the date on which any Senior Note may be redeemed or
repaid at the option of the holder thereof or adversely affect the rights of a
holder to institute suit for the enforcement of any payment on or with respect
to any Senior Note; (f) impair the interest of the Trustee in the Senior Note
Mortgage Bonds held by it or, prior to the Release Date,
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reduce the principal amount of any series of Senior Note Mortgage Bonds securing
the Senior Notes to an amount less than the principal amount of the related
series of Senior Notes or alter the payment provisions of such Senior Note
Mortgage Bonds in a manner adverse to the holders of the Senior Notes; or (g)
modify the foregoing requirements or reduce the percentage of outstanding Senior
Notes necessary to modify or amend the Indenture or to waive any past default to
less than a majority. (Section 13.02.) Modification and amendment of the
Indenture may be effected by Consumers and the Trustee without the consent of
the holders in certain cases, including (a) to add to the covenants of Consumers
for the benefit of the holders or to surrender a right conferred on Consumers in
the Indenture; (b) to add further security for the Senior Notes; (c) to add
provisions enabling Consumers to be released with respect to one or more series
of outstanding Senior Notes from its obligations under the covenants described
under "-- Certain Covenants of Consumers -- Limitation on Liens" and
"-- Limitation on Sale and Lease-Back Transactions" and "-- Consolidation,
Merger and Sale or Disposition of Assets" below, upon satisfaction of conditions
with respect to such series of Senior Notes which are the same as those
described below under "-- Defeasance and Discharge" (except that the opinion of
tax counsel referred to therein need not be based upon an External Tax
Pronouncement (as defined in the Indenture)); (d) to supply omissions, cure
ambiguities or correct defects which actions, in each case, are not prejudicial
to the interests of the holders in any material respect; or (e) to make any
other change that is not prejudicial to the holders of Senior Notes in any
material respect. (Section 13.01)
A supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture (or any supplemental indenture) which has expressly
been included solely for the benefit of one or more series of Senior Notes, or
which modifies the rights of the holders of Senior Notes of such series with
respect to such covenant or provision, will be deemed not to affect the rights
under the Indenture of the holders of Senior Notes of any other series. (Section
13.02)
DEFEASANCE AND DISCHARGE
The Indenture provides that Consumers will be discharged from any and all
obligations in respect to the Senior Notes and the Indenture (except for certain
obligations such as obligations to register the transfer or exchange of Senior
Notes, replace stolen, lost or mutilated Senior Notes and maintain paying
agencies) if, among other things, Consumers irrevocably deposits with the
Trustee, in trust for the benefit of holders of Senior Notes, money or certain
United States government obligations, or any combination thereof, which through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient, without reinvestment, to make
all payments of principal of, and any premium and interest on, the Senior Notes
on the dates such payments are due in accordance with the terms of the Indenture
and the Senior Notes; provided that, unless all of the Senior Notes are to be
due within 90 days of such deposit by redemption or otherwise, Consumers shall
also have delivered to the Trustee an opinion of counsel to the effect that the
holders of the Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or discharge of the
Indenture. Thereafter, the holders of Senior Notes must look only to such
deposit for payment of the principal of, and interest and any premium on, the
Senior Notes. (Section 5.01)
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CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
Consumers will not consolidate with or merge into any other corporation or
sell or otherwise dispose of its properties as or substantially as an entirety
unless (i) the successor or transferee corporation shall be a corporation
organized and existing under the laws of the United States of America, any State
thereof, or the District of Columbia, (ii) the successor or transferee
corporation assumes by supplemental indenture the due and punctual payment of
the principal of and premium and interest on all the Senior Notes and the
performance of every covenant of the Indenture to be performed or observed by
Consumers and (iii) if prior to the Release Date, the successor or transferee
corporation assumes Consumers' obligations under the Mortgage (as defined below)
with respect to the Senior Note Mortgage Bonds. (Section 12.01.) Upon any such
consolidation, merger, sale, transfer or other disposition of the properties of
Consumers substantially as an entirety, the successor corporation formed by such
consolidation or into which Consumers is merged or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, Consumers under the Indenture with the same effect as if such
successor corporation had been named as Consumers therein and Consumers will be
released from all obligations under the Indenture. (Section 12.02.) For purposes
of the Indenture, the conveyance or other transfer by Consumers of (a) all or
any portion of its facilities for the generation of electric energy, (b) all of
its facilities for the transmission of electric energy or (c) all of its
facilities for the distribution of natural gas, in each case considered alone or
in any combination with properties described in any other clause, shall in no
event be deemed to constitute a conveyance or other transfer of all the
properties of Consumers, as or substantially as an entirety. (Section 12.01)
CERTAIN COVENANTS OF CONSUMERS
Limitation on Liens
The Indenture provides that, so long as any such Senior Notes are
outstanding, Consumers may not issue, assume, guarantee or permit to exist after
the Release Date any Debt (as defined below) that is secured by any mortgage,
security interest, pledge or lien ("Lien") of or upon any Operating Property of
Consumers, whether owned at the date of the Indenture or thereafter acquired,
without in any such case effectively securing the Senior Notes (together with,
if Consumers shall so determine, any other indebtedness of Consumers ranking
equally with the Senior Notes) equally and ratably with such Debt (but only so
long as such Debt is so secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of a corporation existing at the time such
corporation is merged into or consolidated with, or such corporation disposes of
its properties (or those of a division) as or substantially as an entirety to,
Consumers; (3) Liens on Operating Property to secure the cost of acquisition,
construction, development or substantial repair, alteration or improvement of
property or to secure indebtedness incurred to provide funds for any such
purpose or for reimbursement of funds previously expended for any such purpose,
provided such Liens are created or assumed contemporaneously with, or within 18
months after, such acquisition or the completion of substantial repair or
alteration, construction, development or substantial improvement; (4) Liens in
favor of any State or any department, agency or instrumentality or political
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subdivision of any State, or for the benefit of holders of securities issued by
any such entity (or providers of credit enhancement with respect to such
securities), to secure any Debt (including, without limitation, obligations of
Consumers with respect to industrial development, pollution control or similar
revenue bonds) incurred for the purpose of financing all or any part of the
purchase price or the cost of substantially repairing or altering, constructing,
developing or substantially improving Operating Property of Consumers; or (5)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in clauses (1)
through (4), provided, however, that the principal amount of Debt secured
thereby and not otherwise authorized by said clauses (1) to (4), inclusive,
shall not exceed the principal amount of Debt, plus any premium or fee payable
in connection with any such extension, renewal or replacement, so secured at the
time of such extension, renewal or replacement. However, the foregoing
restriction will not apply to the issuance, assumption or guarantee by Consumers
of Debt secured by a Lien which would otherwise be subject to the foregoing
restriction up to an aggregate amount which, together with all other secured
Debt of Consumers (not including secured Debt permitted under any of the
foregoing exceptions) and the Value (as defined below) of Sale and Lease-Back
Transactions (as defined below) existing at such time (other than Sale and
Lease-Back Transactions the proceeds of which have been applied to the
retirement of certain indebtedness, Sale and Lease-Back Transactions in which
the property involved would have been permitted to be subjected to a Lien under
any of the foregoing exceptions in clauses (1) to (5) and Sale and Lease-Back
Transactions that are permitted by the first sentence of "Limitation on Sale and
Lease-Back Transactions" below), does not exceed the greater of 15% of Net
Tangible Assets or 15% of Capitalization. (Section 6.07).
Limitation on Sale and Lease-Back Transactions
The Indenture provides that so long as such Senior Notes are outstanding,
Consumers may not enter into or permit to exist after the Release Date any Sale
and Lease-Back Transaction with respect to any Operating Property (except for
transactions involving leases for a term, including renewals, of not more than
48 months), if the purchaser's commitment is obtained more than 18 months after
the later of the completion of the acquisition, construction or development of
such Operating Property or the placing in operation of such Operating Property
or of such Operating Property as constructed or developed or substantially
repaired, altered or improved. This restriction will not apply if (a) Consumers
would be entitled pursuant to any of the provisions described in clauses (1) to
(5) of the first sentence of the second paragraph under "Limitation on Liens"
above to issue, assume, guarantee or permit to exist Debt secured by a Lien on
such Operating Property without equally and ratably securing the Senior Notes,
(b) after giving effect to such Sale and Lease-Back Transaction, Consumers could
incur pursuant to the provisions described in the second sentence of the second
paragraph under "Limitation on Liens," at least $1.00 of additional Debt secured
by Liens (other than Liens permitted by clause (a)), or (c) Consumers applies
within 180 days an amount equal to, in the case of a sale or transfer for cash,
the net proceeds (not exceeding the net book value), and, otherwise, an amount
equal to the fair value (as determined by its Board of Directors) of the
Operating Property so leased to the retirement of Senior Notes or other Debt of
Consumers ranking equally with, the Senior Notes, subject to reduction for
Senior Notes and such Debt retired during such 180-day period otherwise than
pursuant to mandatory sinking fund or prepayment provisions and payments at
stated maturity. (Section 6.08).
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Certain Definitions
"Capitalization" means the total of all the following items appearing on,
or included in, the consolidated balance sheet of Consumers: (i) liabilities for
indebtedness maturing more than twelve (12) months from the date of
determination; and (ii) common stock, preferred stock, Hybrid Preferred
Securities (as defined in the Indenture), premium on capital stock, capital
surplus, capital in excess of par value, and retained earnings (however the
foregoing may be designated), less, to the extent not otherwise deducted, the
cost of shares of capital stock of Consumers held in its treasury.
"Debt" means any outstanding debt for money borrowed evidenced by notes,
debentures, bonds or other securities, or guarantees of any thereof.
"Net Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of Consumers, less the following: (i) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense and (ii)
appropriate adjustments, if any, on account of minority interests. Net Tangible
Assets shall be determined in accordance with generally accepted accounting
principles ("GAAP") and practices applicable to the type of business in which
Consumers is engaged and that are approved by the independent accountants
regularly retained by Consumers, and may be determined as of a date not more
than sixty (60) days prior to the happening of the event for which such
determination is being made.
"Operating Property" means (i) any interest in real property owned by
Consumers and (ii) any asset owned by Consumers that is depreciable in
accordance with GAAP, excluding, in either case, any interest of Consumers as
lessee under any lease (except for a lease that results from a Sale and
Lease-Back Transaction) which has been or would be capitalized on the books of
the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to Consumers of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by Consumers
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Indenture.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of any
particular time, the amount equal to the greater of (i) the net proceeds to
Consumers from the sale or transfer of the property leased pursuant to such Sale
and Lease-Back Transaction or (ii) the net book value of such property, as
determined in accordance with GAAP by Consumers at the time of entering into
such Sale and Lease-Back Transaction, in either case multiplied by a fraction,
the numerator of which shall be equal to the number of full years of the term of
the lease that is part of such Sale and Lease-Back Transaction remaining at the
time of determination and the denominator of which shall be equal to the number
of full years of such term, without regard, in any case, to any renewal or
extension options contained in such lease.
VOTING OF SENIOR NOTE MORTGAGE BONDS HELD BY TRUSTEE
The Trustee, as the holder of Senior Note Mortgage Bonds, will attend any
meeting of bondholders under the Mortgage, or, at its option, will deliver its
proxy in connection therewith as it relates to matters with respect to which it
is entitled to vote or consent. So long
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as no Event of Default as defined in the Indenture has occurred and is
continuing, the Trustee will vote or consent:
(a) in favor of amendments or modifications of the Mortgage of
substantially the same tenor and effect as follows:
(i) to eliminate the maintenance and replacement fund and to recover
amounts of net property additions previously applied in satisfaction
thereof so that the same would become available as a basis for the
issuance of First Mortgage Bonds;
(ii) to eliminate sinking funds or improvement funds ("S&I Funds") and
to recover amounts of net property additions previously applied in
satisfaction thereof so that the same would become available as a basis
for the issuance of First Mortgage Bonds;
(iii) to eliminate the restriction on the payment of dividends on common
stock and to eliminate the requirements in connection with the periodic
examination of the mortgaged and pledged property by an independent
engineer;
(iv) to permit First Mortgage Bonds to be issued under the Mortgage in a
principal amount equal to 70% of unfunded net property additions instead
of 60%, to permit S&I Fund requirements (to the extent not otherwise
eliminated) under the Mortgage to be satisfied by the application of net
property additions in an amount equal to 70% of such additions instead
of 60%, and to permit the acquisition of property subject to certain
liens prior to the lien of the Mortgage if the principal amount of
indebtedness secured by such liens does not exceed 70% of the cost of
such property instead of 60%;
(v) to eliminate requirements that Consumers deliver a net earnings
certificate for any purpose under the Mortgage;
(vi) to raise the minimum dollar amount of insurance proceeds on account
of loss or damage that must be payable to the Trustee from $50,000 to an
amount equal to the greater of (A) $5,000,000 and (B) three per centum
(3%) of the aggregate principal amount of First Mortgage Bonds
outstanding;
(vii) to increase the amount of the fair value of property which may be
sold or disposed of free from the lien of the Mortgage, without any
release or consent by the Trustee, from not more than $25,000 in any
calendar year to not more than an amount equal to the greater of (A)
$5,000,000 and (B) three per centum (3%) of the aggregate principal
amount of First Mortgage Bonds then outstanding;
(viii) to permit certain mortgaged and pledged property to be released
from the lien of the Mortgage if, in addition to certain other
conditions, the Trustee receives purchase money obligations of not more
than 70% of the fair value of such property instead of 60% and to
eliminate the further requirement for the release of such property that
the aggregate principal amount of purchase money obligations held by the
Trustee not exceed 20% of the principal amount of First Mortgage Bonds
outstanding;
(ix) to eliminate the restriction prohibiting the Mortgage Trustee from
applying cash held by it pursuant to the Mortgage to the purchase of
bonds not otherwise
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redeemable at a price exceeding 110% of the principal of such bonds,
plus accrued interest; and
(b) with respect to any other amendments or modifications of the Mortgage,
as follows: the Trustee shall vote all Senior Note Mortgage Bonds then held
by it, or consent with respect thereto, proportionately with the vote or
consent of the holders of all other first mortgage bonds outstanding under
the Mortgage, the holders of which are eligible to vote or consent;
provided, however, that the Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were
an amendment or modification of the Indenture, would require the consent of
Holders of Senior Notes as described under "Modification," without the
prior consent of Holders of Senior Notes which would be required for such
an amendment or modification of the Indenture. (Section 4.03)
RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time upon written notice to Consumers
specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Trustee and such specified day. (Section 9.10)
The Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Trustee and signed by the holders, or
their attorneys-in-fact, of at least a majority in principal amount of the then
outstanding Senior Notes. In addition, so long as no Event of Default or event
which, with the giving of notice or lapse of time or both, would become an Event
of Default has occurred and is continuing, Consumers may remove the Trustee upon
notice to the holder of each Senior Note outstanding and the Trustee, and
appointment of a successor Trustee. (Section 9.10)
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is both the Trustee under the Indenture and the
Mortgage Trustee under the Mortgage. Consumers and its affiliates maintain
depository and other normal banking relationships with The Chase Manhattan Bank.
The Chase Manhattan Bank is also a lender to Consumers and its affiliates. The
Indenture provides that Consumers' obligations to compensate the Trustee and
reimburse the Trustee for expenses, disbursements and advances will constitute
indebtedness which will be secured by a lien generally prior to that of the
Senior Notes upon all property and funds held or collected by the Trustee as
such.
GOVERNING LAW
The Indenture and each Senior Note will be governed by Michigan Law.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as the initial securities depositary for the Notes. The Notes
will be issued only as fully registered securities registered in the name of
Cede & Co., DTC's nominee. One or more fully registered global Notes
certificates will be issued, representing in the aggregate the total principal
amount of Notes, and will be deposited with DTC (collectively, the "Global
Notes").
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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 1934 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 Participant's 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,
Inc., 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 SEC.
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of Notes (such purchaser, or the
person to whom such purchaser conveys his or her ownership interest, a
"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 Notes. Transfers of ownership interests in
the Notes 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 Notes, except in the
event that use of the book-entry system for the Notes is discontinued, the
Company determines that Beneficial Owners may exchange their ownership interests
for such certificates or there shall have occurred an Event of Default.
DTC has no knowledge of the actual Beneficial Owners of the Notes. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Notes are credited, which may or may not be the Beneficial 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 DTC. If less than all of the Notes are
being redeemed, DTC will reduce the amount of the interest of each Direct
Participant in the Notes in accordance with its procedures.
Although voting with respect to the Notes is limited, in those cases where
a vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC would mail an Omnibus Proxy to
the Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to
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<PAGE> 26
those Direct Participants to whose accounts the Notes are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Payments on the Notes will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the Interest 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 Interest 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 registered in "street name," and will be the
responsibility of such Participant and not of DTC or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to DTC is the responsibility of the Company, 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 herein, a Beneficial Owner of an interest in a Global
Note will not be entitled to receive physical delivery of Notes. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the Notes. 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 Note.
DTC may discontinue providing its services as security depositary with
respect to the Notes at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Notes certificates will be printed and delivered to the holders of
record. Additionally, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to the
Notes. In that event, certificates for the Notes will be printed and delivered
to the holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
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DESCRIPTION OF FIRST MORTGAGE BONDS
GENERAL
The Senior Note Mortgage Bonds are to be issued under an Indenture dated as
of September 1, 1945, between Consumers and The Chase Manhattan Bank, as trustee
(the "Mortgage Trustee"), as amended and supplemented by various supplemental
indentures and as supplemented by a Supplemental Indenture dated as of October
, 1998 providing for the series of Senior Note Mortgage Bonds relating to the
Notes (the "Mortgage"). In connection with the change of the state of
incorporation from Maine to Michigan in 1968, Consumers succeeded to and was
substituted for the Maine corporation under the Mortgage. At September 30, 1998,
four series of First Mortgage Bonds in an aggregate principal amount of
approximately $674 million were outstanding under the Mortgage, excluding four
series of First Mortgage Bonds in an aggregate principal amount of $925 million
to secure outstanding Senior Notes and one series of First Mortgage Bonds in an
aggregate principal amount of $30 million to secure outstanding pollution
control revenue bonds. The statements herein concerning the Senior Note Mortgage
Bonds and the Mortgage are an outline and do not purport to be complete and are
subject to, and qualified in their entirety by, all of the provisions of the
Mortgage, which is incorporated herein by this reference. They make use of
defined terms and are qualified in their entirety by express reference to the
cited sections and articles of the Mortgage a copy of which will be available
upon request to the Trustee.
The Senior Note Mortgage Bonds relating to the Notes ("Senior IQ Mortgage
Bonds") will be issued as security for Consumers' obligations under the
Indenture and will be immediately delivered to and registered in the name of the
Trustee. The Senior Note Mortgage Bonds will be issued as security for the Notes
and will secure the Notes until the Release Date. For purposes of the Indenture,
the Senior IQ Note Mortgage Bonds shall be deemed to be the "related series" of
Senior Note Mortgage Bonds in respect of the Notes. The Indenture provides that
the Trustee shall not transfer any Senior Note Mortgage Bonds except to a
successor trustee, to Consumers (as provided in the Indenture) or in compliance
with a court order in connection with a bankruptcy or reorganization proceeding
of Consumers. The Trustee shall generally vote the Senior Note Mortgage Bonds
proportionately with what it believes to be the vote of all other First Mortgage
Bonds then outstanding except in connection with certain amendments or
modifications of the Mortgage, as described under "Description of the Notes --
Voting of Senior Note Mortgage Bonds Held by Trustee."
The Senior IQ Mortgage Bonds will correspond to the Notes in respect of
principal amount, interest rate, maturity date and redemption provisions. Upon
payment of the principal or premium, if any, or interest on the Notes, Senior IQ
Mortgage Bonds in a principal amount equal to the principal amount of such Notes
will, to the extent of such payment of principal, premium or interest, be deemed
fully paid and the obligation of Consumers to make such payment shall be
discharged. The Mortgage Trustee may conclusively assume that the obligation to
make payments on the Senior IQ Mortgage Bonds has been discharged unless it has
received a written notice from the Trustee stating that timely payment on the
Notes has not been made.
REDEMPTION PROVISIONS
The Senior IQ Mortgage Bonds will be redeemed on the respective dates and
in the respective principal amounts which correspond to the redemption dates
for, and the principal
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amounts to be redeemed of, the Notes. The Senior IQ Mortgage Bonds are not
redeemable by operation of the improvement fund or the maintenance or
replacement provisions of the Mortgage, or with the proceeds of released
property.
In the event of an Event of Default under the Indenture and acceleration of
the Notes, the Senior IQ Mortgage Bonds will be immediately redeemable in whole,
upon demand of the Trustee, at a redemption price of 100% of the principal
amount thereof, together with accrued interest to the redemption date. See
"Description of the Notes -- Events of Default."
PRIORITY AND SECURITY
The Senior Mortgage Bonds will rank pari passu as to security with bonds of
other series now outstanding or hereafter issued under the Mortgage, which is a
direct first lien on substantially all of Consumers' property and franchises
(other than certain property expressly excluded from the lien thereof (such as
cash, bonds, stock and certain other securities, contracts, accounts and bills
receivables, judgments and other evidences of indebtedness, stock in trade,
materials or supplies manufactured or acquired for the purpose of sale and/or
resale in the usual course of business or consumable in the operation of any of
the properties of Consumers, natural gas, oil and minerals, motor vehicles and
certain real property listed in Schedule A to the Mortgage)), and subject to
excepted encumbrances (and certain other limitations) as defined and described
in the Mortgage and subject to the provisions of MCL 324.20138. MCL 324.20138
provides that under certain circumstances, the State of Michigan's lien against
property on which it has incurred costs related to any response activity that is
subordinate to prior recorded liens can become superior to such prior liens
pursuant to court order. The Mortgage permits, with certain limitations
specified in Section 7.05, the acquisition of property subject to prior liens
and, under certain conditions specified in Section 7.14, permits the issuance of
additional indebtedness under such prior liens to the extent of 60% of net
property additions made by Consumers to the property subject to such prior
liens. (Granting Clauses, Article I.)
IMPROVEMENT FUND REQUIREMENT
The supplemental indentures under which certain series of outstanding bonds
have been issued provide for annual improvement fund payments, in cash and/or
bonds, in the amount of an "improvement fund requirement" (which generally is 1%
of the principal amount of such bonds, less certain bonds retired), which may
also be satisfied with, and cash withdrawn to the extent of, 60% of unfunded net
property additions. The Senior IQ Mortgage Bonds will not have the benefit of
any sinking or improvement fund.
MAINTENANCE AND REPLACEMENT REQUIREMENT
The supplemental indentures under which all series of outstanding bonds
prior to the Sixty-seventh Supplemental Indenture have been issued have
incorporated certain covenants contained in Section 7.07 of the Mortgage. Such
covenants, in addition to a general covenant with respect to maintenance of the
mortgaged property, require Consumers as of the end of each calendar year to
have applied certain amounts for maintenance, renewals and replacements of the
mortgaged and pledged property. The supplemental indenture relating to the
Senior IQ Mortgage Bonds does not incorporate Section 7.07 of the Mortgage.
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ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
Additional bonds may be issued under the Mortgage to the extent of 60% of
unfunded net property additions or against the deposit of an equal amount of
cash, if, for any period of twelve consecutive months within the fifteen
preceding calendar months the net earnings of Consumers (before income or excess
profit taxes) shall have been at least twice the interest requirement for one
year on all bonds outstanding and to be issued and on indebtedness of prior or
equal rank. Additional bonds may also be issued to refund bonds theretofore
outstanding under the Mortgage. Deposited cash may be applied to the retirement
of bonds or be withdrawn in an amount equal to the principal amount of bonds
which may be issued on the basis of unfunded net property additions. (Articles
I, IV, V and VI.) As of June 30, 1998, unfunded net property additions were $2.8
billion, and Consumers could issue $1.7 billion of additional bonds on the basis
of such property additions. In addition, at June 30, 1998, Consumers could issue
$731 million of additional bonds on the basis of bonds previously retired.
The Senior IQ Mortgage Bonds are to be issued upon the basis of retired
bonds.
RELEASE AND SUBSTITUTION OF PROPERTY
The Mortgage provides that, subject to various limitations, property may be
released from the lien thereof when sold or exchanged, or contracted to be sold
or exchanged, upon the basis of cash deposited with the Mortgage Trustee, bonds
or purchase money obligations delivered to the Mortgage Trustee, prior lien
bonds delivered to the Mortgage Trustee or reduced or assumed by the purchaser,
property additions acquired in exchange for the property released, or upon a
showing that unfunded net property additions exist. The Mortgage also permits
the withdrawal of cash upon a showing that unfunded net property additions exist
or against the deposit of bonds or the application thereof to the retirement of
bonds. (Articles VI, VII and X.)
LIMITATIONS ON DIVIDENDS
The supplemental indenture relating to the Senior IQ Mortgage Bonds does
not restrict Consumers' ability to pay dividends on its Common Stock. However,
supplemental indentures relating to certain series of outstanding bonds prohibit
the payment of common dividends except out of retained earnings which have
accumulated since September 30, 1945 less the amount, if any, that actual
charges to income or retained earnings since December 31, 1945 for repairs,
maintenance and depreciation of certain of the property subject to the Indenture
are less than the maintenance and replacement requirements applicable pursuant
to Section 7.07 of the Indenture for the equivalent period.
MODIFICATION OF MORTGAGE
The Mortgage, the rights and obligations of Consumers and the rights of the
bondholders may be modified by Consumers with the consent of the holders of 75%
in principal amount of the bonds and of not less than 60% of the principal
amount of each series affected. In general, however, no modification of the
terms of payment of principal or interest and no modification affecting the lien
or reducing the percentage required for modification is effective against any
bondholder without the bondholder's consent. (Article XVII.) Consumers has
reserved the right without any consent or other action by the holders of bonds
of any series created after September 15, 1993 (including the Senior IQ Mortgage
Bonds) or by the holder of any
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Senior Note or Exchange Note, to amend the Mortgage in order to substitute a
majority in principal amount of bonds outstanding under the Mortgage for the 75%
requirement set forth above (and then only in respect of such series of
outstanding bonds as shall be affected by the proposed action) and to eliminate
the requirement for a series-by-series consent requirement.
CONCERNING THE MORTGAGE TRUSTEE
As of July 16, 1984, Citibank, N.A. resigned as Trustee under the Mortgage
and was replaced by Manufacturers Hanover Trust Company. As of June 19, 1992
Chemical Bank became successor Mortgage Trustee, and as of July 15, 1996 The
Chase Manhattan Bank became successor Mortgage Trustee.
The Chase Manhattan Bank is also the Trustee under the Indenture. Consumers
and its affiliates maintain depository and other normal banking relationships
with The Chase Manhattan Bank. The Chase Manhattan Bank is also a lender to
Consumers and its affiliates. The Mortgage provides that Consumers' obligations
to compensate the Mortgage Trustee and reimburse the Trustee for expenses,
disbursements and advances will constitute indebtedness which will be secured by
a lien generally prior to that of the Senior Note Mortgage Bonds upon all
property and funds held or collected by the Mortgage Trustee as such.
The Mortgage Trustee or the holders of 20% in aggregate principal amount of
the bonds may declare the principal due on default, but the holders of a
majority in aggregate principal amount may annul such declaration and waive the
default if the default has been cured. (Section 11.05.) Subject to certain
limitations, the holders of a majority in aggregate principal amount may
generally direct the time, method and place of conducting any proceeding for the
enforcement of the Mortgage. (Sections 11.01 and 11.12.) No bondholder has the
right to institute any proceedings for the enforcement of the Mortgage unless
such holder shall have given the Mortgage Trustee written notice of a default,
the holders of 20% of outstanding bonds shall have tendered to the Mortgage
Trustee reasonable security or indemnity against costs, expenses and liabilities
and requested the Mortgage Trustee to take action, the Mortgage Trustee shall
have declined to take action or failed to do so within sixty days and no
inconsistent directions shall have been given by the holders of a majority in
aggregate principal amount of the bonds. (Section 11.14.) The Mortgage Trustee
is not required to advance or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties if there is
reasonable ground for believing that repayment is not reasonably assured to it.
(Section 16.03.)
DEFAULTS
By Section 11.01 of the Mortgage, the following are defined as "defaults":
failure to pay principal when due; failure to pay interest for sixty days;
failure to pay any installment of any sinking or other purchase fund for ninety
days; certain events in bankruptcy, insolvency or reorganization; failure to
perform any other covenant for ninety days following written demand by the
Mortgage Trustee for Consumers to cure such failure. Consumers has covenanted to
pay interest on any overdue principal and (to the extent permitted by law) on
overdue installments of interest, if any, on the bonds under the Mortgage at the
rate of 6% per annum. The Mortgage does not contain a provision requiring any
periodic evidence to be furnished as to the absence of default or as to
compliance with the terms thereof. However, Consumers is required by law to
furnish annually to the Trustee a certificate as to compliance with all
conditions and covenants under the Mortgage.
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AMBAC ASSURANCE CORPORATION
The information set forth in this section has been provided by Ambac
Assurance Corporation (the "Insurer"). No representation is made by the Company
or the Underwriter as to the accuracy or completeness of any such information.
THE POLICY
The Insurer will issue a financial guaranty insurance policy relating to
the Notes (the "Policy"). The following summary of the terms of the Policy does
not purport to be complete and is qualified in its entirety by reference to the
Policy.
The Insurer has made a commitment to issue the Policy effective as of the
date of issuance of the Notes. Under the terms of the Policy, the Insurer will
pay to the United States Trust Company of New York, in New York, New York, or
any successor thereto (the "Insurance Trustee") that portion of the principal of
and interest on the Notes which shall become Due for Payment but shall be unpaid
by reason of Nonpayment (as such terms are defined in the Policy) by the
Company. The Insurer will make such payments to the Insurance Trustee on the
later of the date on which such principal and interest becomes Due for Payment
or within one business day following the date on which the Insurer shall have
received notice of Nonpayment from the Trustee. The insurance will extend for
the term of the Notes and, once issued, cannot be canceled by the Insurer.
The Policy will insure payment only on the stated date of maturity, in the
case of principal, and on Interest Payment Dates, in the case of interest. In
the event of any acceleration of the principal of the Notes which occurs prior
to the Release Date, the Insurer will continue to pay interest on the Interest
Payment Dates as would have been made had there not been an acceleration until
such time, if at all, as the Insurer has received payment pursuant to the
remedies under the Mortgage Indenture ("Mortgage Indenture Proceeds"). Any and
all Mortgage Indenture Proceeds received by the Insurer shall immediately be
paid over to the Noteholders of record at the time the Mortgage Indenture
Proceeds are received by the Insurer. In the event of any acceleration of the
principal of the Notes which occurs after the Release Date, the insured payments
will be made at such times and in such amounts as would have been made had there
not been an acceleration.
In the event the Trustee has received notice that any payment of principal
of or interest on a Note which has become Due for Payment and which is made to a
holder by or on behalf of the Company has been deemed a preferential transfer
and therefore recovered from its registered owner pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court of
competent jurisdiction, such registered owner will be entitled to payment from
the Insurer to the extent of such recovery if sufficient funds are not otherwise
available.
The Policy does NOT insure any risk other than Nonpayment, as defined in
the Policy. Specifically, the Policy does NOT cover:
1. payment on acceleration, as a result of a call for redemption (including
any redemption in connection with a Beneficial Owner's Redemption Request)
or as a result of any other advancement of maturity.
2. payment of any redemption, prepayment or acceleration premium.
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3. nonpayment of principal or interest caused by the insolvency or
negligence of the Trustee.
If it becomes necessary to call upon the Policy, payment of principal
requires surrender of Notes to the Insurance Trustee together with an
appropriate instrument of assignment so as to permit ownership of such Notes to
be registered in the name of the Insurer to the extent of the payment under the
Policy. Payment of interest pursuant to the Policy requires proof of holder
entitlement to interest payments and an appropriate assignment of the holder's
right to payment to the Insurer. Each holder of Notes will be responsible for
preparing and submitting to the Insurance Trustee such required documentation,
and the Policy does not provide for payment of any interest to a holder in
respect of any period of time between a scheduled payment date under the Notes
and the date of actual disbursement of related insurance benefits by the
Insurance Trustee.
Upon payment of the insurance benefits, in the case of the payment of
principal, whether at maturity or acceleration, the Insurer will become the
owner of the Notes and shall be entitled to all the rights as a noteholder
thereunder, and in the case of payment of interest, the Insurer will be fully
subrogated to the rights of the holders of the Notes under the Indenture to the
extent of the insurance payments made by the Insurer.
The insurance provided by the Policy is not covered by the
property/casualty insurance security fund specified by the insurance laws of the
State of New York.
THE INSURER
The Insurer is a Wisconsin-domiciled stock insurance corporation regulated
by the Office of the Commissioner of Insurance of the State of Wisconsin and
licensed to do business in 50 states, the District of Columbia, the Commonwealth
of Puerto Rico and Guam. The Insurer primarily insures newly issued municipal
and structured finance obligations. The Insurer is a wholly-owned subsidiary of
Ambac Financial Group, Inc. (formerly AMBAC Inc.) (the "Parent"), a 100%
publicly-held company. Moody's Investor Services, Inc. ("Moody's"), Standard &
Poor's Ratings Services ("S&P") have each assigned a triple-A financial strength
rating to the Insurer. Fitch IBCA has assigned a rating of "AAA" to the
claims-paying ability of the Insurer.
The Parent is subject to the informational requirements of the 1934 Act,
and in accordance therewith files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional
offices at 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the public reference section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, the aforementioned material may also be inspected at the offices of
the New York Stock Exchange, Inc. (at the "NYSE") at 20 Broad Street, New York,
New York 10005. The Parent's Common Stock is listed on the NYSE.
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The following documents filed by the Parent with the SEC (File No. 1-10777)
are incorporated by reference herein:
(1) The Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and filed on March 31, 1998;
(2) The Parent's Current Report on Form 8-K dated March 27, 1998 and filed
on March 27, 1998;
(3) The Parent's Amendment to its Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1997 and filed on March 31, 1998;
(4) The Parent's Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 31, 1998 and filed on May 15, 1998; and
(5) The Parent's Quarterly Report on Form 10-Q for the fiscal quarterly
period ended June 30, 1998 and filed on August 14, 1998.
All documents subsequently filed by the Parent pursuant to the requirements
of the 1934 Act after the date of this Prospectus will be available in the same
manner as described in the second preceding paragraph.
Any statement contained in a document incorporated herein by reference
shall be modified or superseded for the purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
All financial statements of the Insurer and its subsidiaries included in
documents filed by the Parent with the SEC pursuant to Section 13(a), 13(c), 14
or 15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Notes shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing such documents.
The following table sets forth the capitalization of the Insurer as of
December 31, 1995, December 31, 1996, December 31, 1997 and June 30, 1998, in
conformity with generally accepted accounting principles.
32
<PAGE> 34
AMBAC ASSURANCE CORPORATION
CONSOLIDATED CAPITALIZATION TABLE
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997 1998
------------ ------------ ------------ --------
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C>
Unearned premiums........... $ 906 $ 995 $1,184 $1,228
Other liabilities........... 295 259 562 657
------ ------ ------ ------
Total liabilities........... 1,201 1,254 1,746 1,885
------ ------ ------ ------
Stockholder's equity:
Common stock.............. 82 82 82 82
Additional paid-in
capital................ 481 515 521 526
Accumulated other
comprehensive income... 87 66 118 124
Retained earnings......... 907 992 1,180 1,290
------ ------ ------ ------
Total stockholder's
equity.................... 1,557 1,655 1,901 2,022
------ ------ ------ ------
Total liabilities and
stockholder's equity...... $2,758 $2,909 $3,647 $3,907
====== ====== ====== ======
</TABLE>
- -------------------------
(1) Components of stockholder's equity have been restated for all periods
presented to reflect "accumulated other comprehensive income" in accordance
with the Statement of Financial Accounting Standards No 130 "Reporting
Comprehensive Income" adopted by the Insurer effective January 1, 1998. As
this new standard only requires additional information in the financial
statements, it does not affect the Insurer's financial position or results
of operations.
For additional financial information concerning the Insurer, see the
audited and unaudited financial statements of the Insurer incorporated by
reference herein. Copies of the financial statements of the Insurer incorporated
by reference and copies of the Insurer's annual statement for the year ended
December 31, 1997 prepared in accordance with statutory accounting standards are
available, without charge from the Insurer, at One State Street Plaza, 17th
Floor, New York, New York 10004 and its telephone number is (212) 668-0340.
The Insurer makes no representation regarding the Notes or the advisability
of investing in the Notes and makes no representation regarding, nor has it
participated in the preparation of, this Prospectus other than the information
supplied by the Insurer and presented under the heading "Ambac Assurance
Corporation" and in the financial statements incorporated herein by reference.
33
<PAGE> 35
RATINGS
It is anticipated that S&P and Moody's will assign the Notes the ratings
set forth on the cover page hereof conditioned upon the issuance and delivery by
the Insurer at the time of delivery of the Notes of the Policy, insuring the
timely payment of the principal of and interest on the Notes. Such ratings
reflect only the views of such rating agencies, and an explanation of the
significance of such ratings may be obtained only from such rating agencies at
the following addresses: Moody's Investors Service, Inc., 99 Church Street, New
York, New York 10007; and Standard & Poor's, 25 Broadway, New York, New York
10004. There is no assurance that such ratings will remain in effect for any
period of time or that they will not be revised downward or withdrawn entirely
by the rating agencies if, in their judgment, circumstances warrant. The Insurer
does not guarantee the market price of the Notes nor does it guarantee that the
ratings on the Notes will not be revised or withdrawn. Neither the Company nor
the Underwriter has undertaken any responsibility to oppose any proposed
downward revision or withdrawal of a rating on the Notes. Any such downward
revision or withdrawal of such ratings may have an adverse effect on the market
price of the Notes.
At present, each of such rating agencies maintains four categories of
investment grade ratings. They are for S&P -- AAA, AA, A and BBB and for Moody's
- -- aa, Aa, A and Baa. S&P defines "AAA" as the highest rating assigned to a debt
obligation. Moody's defines "Aaa" as representing the best quality debt
obligation carrying the smallest degree of investment risk.
34
<PAGE> 36
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement relating
to the offering of Notes (the "Underwriting Agreement"), between the Company and
Edward D. Jones & Co., L.P. (the "Underwriter"), a form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part, the
Company has agreed to sell to the Underwriter, and the Underwriter has agreed to
purchase from the Company, the entire principal amount of the Notes.
The Underwriter has advised the Company that it proposes to offer the Notes
from time to time for sale in one or more negotiated transactions or otherwise,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Underwriter may effect
such transactions by selling the Notes to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter and/or the purchasers of the Notes for whom
they may act as agent. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the Notes may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of the Notes by them may be deemed to be underwriting discounts or commissions,
under the 1933 Act.
The Company has agreed, during the period of 10 days from the date on which
the Notes are purchased by the Underwriters, not to sell, offer to sell, grant
any option for the sale of, or otherwise dispose of any Notes, any security
convertible into or exchangeable into or exercisable for Notes or any debt
securities substantially similar to the Notes (except for the Notes issued
pursuant to the Underwriting Agreement and any offering of Senior Note Mortgage
Bonds), without the prior written consent of the Underwriter.
Prior to this Offering, there has been no public market for the Notes. The
Underwriter has advised the Company that it intends to make a market in the
Notes. The Underwriter will have no obligation to make a market in the Notes,
however, and may cease market making activities, if commenced, at any time.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the 1933 Act and to contribute to
payments the Underwriter may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Company by Michael D. VanHemert, Assistant General Counsel for CMS Energy.
Certain legal matters relating to the Notes will be passed upon for any
underwriters, dealers or agents by Skadden, Arps, Slate, Meagher & Flom LLP. As
of June 30, 1998, an attorney currently employed by Skadden, Arps, Slate,
Meagher & Flom LLP, and formerly employed by CMS Energy, owned approximately
50,326 shares of CMS Energy Common Stock, $.01 par value ("CMS Energy Common
Stock"), 2,000 shares of CMS Energy Class G Common Stock, no par value, options
to acquire approximately 142,000 shares of CMS Energy Common Stock, 10 shares of
Consumers $4.50 Series Preferred Stock, $100 par value, and $50,000 aggregate
principal amount of certain debt securities issued by CMS Energy. As of June 30,
1998, Mr. VanHemert beneficially owned approximately 2,785 shares of CMS Energy
Common Stock.
35
<PAGE> 37
EXPERTS
The consolidated financial statements and schedules of Consumers as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997 incorporated by reference in this Offering Memorandum, have
been audited by Arthur Andersen LLP (formerly Arthur Andersen & Co.),
independent public accountants, as indicated in their reports with respect
thereto.
With respect to the unaudited interim consolidated financial information
for the periods ended March 31 and June 30, 1998 and 1997, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports thereon state 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
reports 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
reports on the unaudited interim consolidated financial information because
these reports are not "reports" or part of a registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements of the Insurer, Ambac Assurance
Corporation, as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997, are incorporated by reference herein and in
the registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
36
<PAGE> 38
INCORPORATION BY REFERENCE:
INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file with
them, which means:
- - incorporated documents are considered part of the prospectus;
- - we can disclose important information to you by referring you to those
documents; and
- - information that we file with the SEC will automatically update and supersede
certain information in this prospectus.
We incorporate by reference the documents listed below which were filed with the
SEC under the Securities Exchange Act of 1934 ("Exchange Act"):
- - our Annual Report on Form 10-K for the year ended December 31, 1997;
- - our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31
and June 30, 1998; and
- - our Current Report on Form 8-K, dated October 2, 1998.
We also incorporate by reference each of the following documents that we will
file with the SEC after the date of this prospectus but before the end of the
notes offering:
- - reports filed under Sections 13(a) and (c) of the Exchange Act;
- - definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
- - any reports filed under Section 15(d) of the Exchange Act.
You may request a copy of any filings referred to above (excluding exhibits), at
no cost, by contacting us at the following address:
Consumers Energy Company
Attention: Chief Financial Officer
212 West Michigan Avenue
Jackson, Michigan 49201
517-788-0550
37
<PAGE> 39
---------------------------------------------------------------
---------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, THE SENIOR SECURED INSURED QUARTERLY NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information........... 2
Forward-Looking Statements.................... 2
Prospectus Summary............................ 3
Consumers Energy Company...................... 6
Selected Consolidated Financial Data.......... 8
Ratio of Earnings to Fixed Charges............ 8
Capitalization................................ 9
Use of Proceeds............................... 9
Description of the Notes...................... 11
Description of First Mortgage Bonds........... 26
Ambac Assurance Corporation................... 30
Ratings....................................... 34
Underwriting.................................. 35
Legal Matters................................. 35
Experts....................................... 36
Incorporation by Reference.................... 37
</TABLE>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
$150,000,000
LOGO
[ ]% SENIOR SECURED INSURED QUARTERLY
NOTES DUE OCTOBER 1, 2028
(IQ NOTES(SM))
--------------------
PROSPECTUS
--------------------
EDWARD D. JONES & CO., L.P.
OCTOBER [ ], 1998
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE> 40
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............... $ 44,250
*Trustees expenses.......................................... 18,000
*Printing and engraving..................................... 80,000
*Services of counsel........................................ 50,000
*Services of independent public accountants, Arthur Anderson
LLP....................................................... 10,000
*Rating Agency Fees......................................... 80,000
*Blue Sky fees and expenses................................. 20,000
*Miscellaneous.............................................. 5,000
--------
*Total.................................................... $307,250
========
</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
II-1
<PAGE> 41
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.
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 provides
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 and directors 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 of 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.
II-2
<PAGE> 42
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
1 -- Form of Underwriting Agreement.
*3(a) -- Certificate of Amendment to the Articles of Incorporation of
Consumers dated March 10, 1997 and Restated Articles of
Incorporation of Consumers. (Designated in Consumers' Form
10-K for the year ended December 31, 1996, File No. 1-5611,
as Exhibit 3(c).)
*3(b) -- By-Laws of Consumers. (Designated in Consumers' Form 10-K
for the year ended December 31, 1996, File No. 1-5611 as
Exhibit 3(d).)
*4(a) -- Indenture dated as of February 1, 1998 between Consumers
Energy Company and The Chase Manhattan Bank, as Trustee.
(Designated in Consumers' Form 10-K for the year ended
December 31, 1997, File No. 1-5611, as Exhibit (4)(c).)
-- First Supplemental Indenture dated as of May 1, 1998 between
Consumers Energy Company and The Chase Manhattan Bank, as
Trustee (Designated in Consumers= Form 10-Q for the quarter
ended March 31, 1998, File No. 1-5611, as Exhibit (4)(a).)
*4(b) -- Second Supplemental Indenture dated as of June 15, 1998
between Consumers Energy Company and The Chase Manhattan
Bank, as Trustee. (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated July 13, 1998, File
No. 333-58943, as Exhibit 4(b).)
4(c) -- Third Supplemental Indenture dated as of October , 1998
between Consumers Energy Company and The Chase Manhattan
Bank, as Trustee.
*4(d) -- Indenture dated as of September 1, 1945, between Consumers
Energy Company and Chemical Bank (successor to Manufacturers
Hanover Trust Company, as Trustee, including therein
indentures supplemental thereto through the Forty-third
supplemental Indenture dated as of May 1, 1979. (Designated
in Consumers Energy Company's Registration Statement No.
2-65973 as Exhibit (b)(1)-(4).)
Indentures Supplemental thereto:
</TABLE>
<TABLE>
<CAPTION>
CONSUMERS
ENERGY COMPANY
SUP IND/DATED AS OF FILE REFERENCE EXHIBITS
------------------- -------------- --------
<S> <C> <C>
67th 11/15/89 (4)(d)
Reg. No. 33-31866
68th 06/15/93 (4)(d)
Reg. No. 33-41126
69th 09/15/93 (4)
Form 8-K dated September 21, 1993,
File No. 1-5611
70th 02/01/98 (4)
Form 10-K for year ended
December 31, 1997, File No. 1-5611
71st 03/01/98 (4)
Form 10-K for year ended
December 31, 1997, File No. 1-5611
72nd 05/01/98 (4)(b)
Form 10-Q for period ended
March 31, 1998, File No. 1-5611
73rd 06/15/98 (4)(d)
Reg. No. 333-58943
4(e) Form of 74th 10/ /98
</TABLE>
II-3
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
4(f) -- Form of Financial Guaranty Insurance Policy issued by Ambac
Assurance Corporation
4(g) -- Instruments defining the rights of security holders,
including indentures. Consumers Energy Company hereby agrees
to furnish to the Commission upon request a copy of any
instrument covering securities the amount of which does not
exceed 10% of the total assets of Consumers Energy Company
and its subsidiaries on a consolidated basis.
*5 -- Opinion of Michael D. Van Hemert, Assistant General Counsel
for CMS Energy.
*12 -- Statement re: computation of Ratios of Earnings to Fixed
Charges. (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated September 22, 1998,
File No. 333-63969, as Exhibit 12.)
*15 -- Letter re: unaudited interim financial information.
*23(a) -- Consent of Michael D. Van Hemert, Assistant General Counsel
for CMS Energy (included in Exhibit 5 above).
*23(c) -- Consent of Arthur Andersen LLP.
*24 -- Powers of Attorney of Directors whose names are signed to
this registration statement pursuant to such powers.
*25 -- Statement of Eligibility and Qualification of The Chase
Manhattan Bank (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated July 13, 1998, File
No. 333-58943, as Exhibit 25).
</TABLE>
- -------------------------
* 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 of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this registration statement shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 20 above,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that as claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of
II-4
<PAGE> 44
the 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, the 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 be governed by the final adjudication of such issue.
(3) That (1) for purposes of determining any liability under the Securities
Act of 1933, 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 registrant 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; and (2) for the purpose of determining any liability under the
Securities Act of 1933, 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.
II-5
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to its Registration Statement on Form S-3
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jackson, and State of Michigan, on the 16th day of October 1998.
CONSUMERS ENERGY COMPANY
By: /s/ AM WRIGHT
-----------------------------------
Alan M. Wright
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
(i) Principal executive officer:
/s/ VICTOR J. FRYLING President October 16, 1998
- ---------------------------------------------
Victor J. Fryling
(ii) Principal financial officer:
/s/ AM WRIGHT Senior Vice President and October 16, 1998
- --------------------------------------------- Chief Financial Officer
Alan M. Wright
(iii) Controller or principal accounting officer:
/s/ DENNIS DAPRA Vice President and October 16, 1998
- --------------------------------------------- Controller
Dennis DaPra
* Director October 16, 1998
- ---------------------------------------------
(William T. McCormick, Jr.)
* Director October 16, 1998
- ---------------------------------------------
(John M. Deutch)
* Director October 16, 1998
- ---------------------------------------------
(James J. Duderstadt)
* Director October 16, 1998
- ---------------------------------------------
(Kathleen R. Flaherty)
* Director October 16, 1998
- ---------------------------------------------
(Victor J. Fryling)
</TABLE>
II-6
<PAGE> 46
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
* Director October 16, 1998
- ---------------------------------------------
(Earl D. Holton)
* Director October 16, 1998
- ---------------------------------------------
(William U. Parfet)
* Director October 16, 1998
- ---------------------------------------------
(Percy A. Pierre)
* Director October 16, 1998
- ---------------------------------------------
(Kenneth L. Way)
* Director October 16, 1998
- ---------------------------------------------
(Kenneth Whipple)
* Director October 16, 1998
- ---------------------------------------------
(John B. Yasinsky)
*By: /s/ AM WRIGHT
---------------------------------------
Alan M. Wright
Attorney in-fact
</TABLE>
II-7
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
1 -- Form of Underwriting Agreement.
*3(a) -- Certificate of Amendment to the Articles of Incorporation of
Consumers dated March 10, 1997 and Restated Articles of
Incorporation of Consumers. (Designated in Consumers' Form
10-K for the year ended December 31, 1996, File No. 1-5611,
as Exhibit 3(c).)
*3(b) -- By-Laws of Consumers. (Designated in Consumers' Form 10-K
for the year ended December 31, 1996, File No. 1-5611 as
Exhibit 3(d).)
*4(a) -- Indenture dated as of February 1, 1998 between Consumers
Energy Company and The Chase Manhattan Bank, as Trustee.
(Designated in Consumers' Form 10-K for the year ended
December 31, 1997, File No. 1-5611, as Exhibit (4)(c).)
-- First Supplemental Indenture dated as of May 1, 1998 between
Consumers Energy Company and The Chase Manhattan Bank, as
Trustee (Designated in Consumers' Form 10-Q for the quarter
ended March 31, 1998, File No. 1-5611, as Exhibit (4)(a).)
*4(b) -- Second Supplemental Indenture dated as of June 15, 1998
between Consumers Energy Company and The Chase Manhattan
Bank, as Trustee. (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated July 13, 1998, File
No. 333-58943, as Exhibit 4(b).)
4(c) -- Third Supplemental Indenture dated as of October , 1998
between Consumers Energy Company and The Chase Manhattan
Bank, as Trustee.
*4(d) -- Indenture dated as of September 1, 1945, between Consumers
Energy Company and Chemical Bank (successor to Manufacturers
Hanover Trust Company, as Trustee, including therein
indentures supplemental thereto through the Forty-third
supplemental Indenture dated as of May 1, 1979. (Designated
in Consumers Energy Company's Registration Statement No.
2-65973 as Exhibit (b)(1)-(4).)
Indentures Supplemental thereto:
</TABLE>
<TABLE>
<CAPTION>
CONSUMERS
ENERGY COMPANY
SUP IND/DATED AS OF FILE REFERENCE EXHIBITS
------------------- -------------- --------
<S> <C> <C> <C>
67th 11/15/89 (4)(d)
Reg. No. 33-31866
68th 06/15/93 (4)(d)
Reg. No. 33-41126
69th 09/15/93 (4)
Form 8-K dated September 21, 1993,
File No. 1-5611
70th 02/01/98 (4)
Form 10-K for year ended
December 31, 1997, File No. 1-5611
71st 03/01/98 (4)
Form 10-K for year ended
December 31, 1997, File No. 1-5611
72nd 05/01/98 (4)(b)
Form 10-Q for period ended
March 31, 1998, File No. 1-5611
73rd 06/15/98 (4)(d)
Reg. No. 333-58943
4(e) Form of 74th 10/ /98
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C> <C>
4(f) -- Form of Financial Guaranty Insurance Policy issued by Ambac
Assurance Corporation.
4(g) -- Instruments defining the rights of security holders,
including indentures. Consumers Energy Company hereby agrees
to furnish to the Commission upon request a copy of any
instrument covering securities the amount of which does not
exceed 10% of the total assets of Consumers Energy Company
and its subsidiaries on a consolidated basis.
*5 -- Opinion of Michael D. Van Hemert, Assistant General Counsel
for CMS Energy.
*12 -- Statement re: computation of Ratios of Earnings to Fixed
Charges. (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated September 22, 1998,
File No. 333-63969, as Exhibit 12.)
*15 -- Letter re: unaudited interim financial information.
*23(a) -- Consent of Michael D. Van Hemert, Assistant General Counsel
for CMS Energy (included in Exhibit 5 above).
*23(c) -- Consent of Arthur Andersen LLP.
*24 -- Powers of Attorney of Directors whose names are signed to
this registration statement pursuant to such powers.
*25 -- Statement of Eligibility and Qualification of The Chase
Manhattan Bank (Designated in Consumers Energy Company's
Registration Statement on Form S-4 dated July 13, 1998, File
No. 333-58943, as Exhibit 25).
</TABLE>
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* 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.
<PAGE> 1
EXHIBIT (1)
$____________
CONSUMERS ENERGY COMPANY
__% Senior Secured Insured Quarterly Notes Due 2028
Underwriting Agreement
October , 1998
To the Representatives named
in Schedule I hereto of the
Underwriters named in
Schedule II hereto
Dear Sirs:
Consumers Energy Company, a Michigan corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several Underwriters (as defined in Section 14 hereof) certain debt
securities, to be in the aggregate principal amount, to mature in the year and
to have the interest rate specified in Schedule III hereto (the "Securities"),
and hereby confirms its agreement with the Underwriters as set forth herein. The
Securities shall be issued pursuant to the Indenture dated as of February 1,
1998, between the Company and The Chase Manhattan Bank, as Trustee (the
"Trustee"), as amended and supplemented and to be supplemented by various
supplemental indentures, including the Third Supplemental Indenture dated as of
October __, 1998 relating to the Securities (such Indenture as so amended and
supplemented and to be supplemented, the "Indenture"). The Underwriters have
designated the Representa-
<PAGE> 2
tives to execute this Agreement on their behalf and to act for them in the
manner provided in this Agreement.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission"), in accordance with the provisions of the
Securities Act of 1933, as amended (the "Act"), a registration statement on Form
S-3 (Registration No. 333-65619) including a prospectus relating to the
Securities and such registration statement has become effective under the Act.
The registration statement, at the time such registration statement became
effective and as it may have been thereafter amended to the date of this
Agreement (including the documents then incorporated by reference therein) is
hereinafter referred to as the "Registration Statement." The prospectus forming
a part of the Registration Statement at the time the Registration Statement
became effective (including the documents then incorporated by reference
therein) is hereinafter referred to as the "Basic Prospectus," provided that in
the event that the Basic Prospectus shall have been amended, revised or
supplemented prior to the date of this Agreement, or if the Company shall have
supplemented the Basic Prospectus by filing any documents pursuant to Section 13
or 14 or 15 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the time the Registration Statement became effective and prior to
the date of this Agreement, which documents are deemed to be incorporated in the
Basic Prospectus, the term "Basic Prospectus" shall also mean such prospectus as
so amended, revised or supplemented. The Basic Prospectus, as it shall be
revised or supplemented to reflect the final terms of the offering and sale of
the Securities by a prospectus supplement relating to the Securities, and in the
form to be filed with, or transmitted for filing to, the Commission pursuant to
Rule 424 under the Act, is hereinafter referred to as the "Prospectus." Any
reference herein to the terms "amend," "amendment" or "supplement" with respect
to the Registration Statement or the Prospectus shall be deemed to include only
amendments or supplements to the Registration Statement or Prospectus, as the
case may be, and documents incorporated by reference therein after the date of
this Agreement and prior to the termination of the offering of the Securities by
the Underwriters.
Each of the Securities will be secured by First Mortgage Bonds ("First
Mortgage Bonds"), in the same aggregate principal amount, having the same stated
interest rate, maturity date and other terms as the Securities they secure, as
described in the Prospectus (as defined below). The First Mortgage Bonds are to
be issued by the Company under its Indenture, dated as of September 1, 1945,
between the Company and The Chase Manhattan Bank, as trustee (in such capacity,
the "Mortgage Trustee"), as amended and supplemented and to be supplemented by
various supplemental indentures (such Indenture, as so amended and supplemented
and to be supplemented, the "Mortgage").
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1. Purchase and Sale: Upon the basis of the representations and
warranties and on the terms and subject to the conditions herein set forth, the
Company agrees to sell to the respective Underwriters, severally and not
jointly, and the respective Underwriters, severally and not jointly, agree to
purchase from the Company, at the purchase price specified in Schedule III
hereto, the respective principal amounts of Securities set opposite their names
in Schedule II hereto.
The Company is advised by the Representatives that the Underwriter
propose to make a public offering of their respective portions of the Securities
as soon as practicable, in their judgment, after this Agreement has become
effective. The Company is further advised by the Representatives that the
Securities are to be offered to the public initially at ___% of the principal
amount of the Securities and to certain dealers selected by you at a price that
represents a concession not in excess of __% of the principal amount of the
Securities, and that any Underwriter may allow, and such dealers may reallow, a
concession not in excess of __% of the principal amount of the Securities to
certain other dealers.
2. Payment and Delivery: Payment for the Securities shall be made to
the Company or its order in Federal or other immediately available funds in New
York City (or such other place or places of payment as shall be agreed upon by
the Company and the Representatives in writing), upon the delivery of the
Securities at the offices of ________________(or such other place or places of
delivery as shall be agreed upon by the Company and the 2. Representatives) to
the Representatives for the respective accounts of the Underwriters against
receipt therefor signed by the Representatives on behalf of themselves and as
agent for the other Underwriters. Such payment and delivery shall be made at
10:00 A.M., New York time on __________________(or on such later business day as
shall be agreed upon by the Company and the Representatives in writing), unless
postponed in accordance with the provisions of Section 10 hereof. The day and
time at which payment and delivery for the Securities are to be made is herein
called the "Time of Purchase."
Delivery of the Securities shall be made in definitive, fully
registered form in authorized denominations registered in such names as the
Representatives may request in writing to the Company not later than two full
business days prior to the Time of Purchase, or if no such request is received,
in the names of the respective Underwriters for the respective principal amounts
of Securities set forth opposite the name of each Underwriter in Schedule II, in
denominations selected by the Company.
The Company agrees to make the Securities available for inspection
by the Underwriters at the offices of _________________________________ at least
24 hours
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<PAGE> 4
prior to the Time of Purchase, in definitive, fully registered form, and as
requested pursuant to the preceding paragraph.
3. Conditions of Underwriters' Obligations: The several obligations
of the Underwriters hereunder are subject to the accuracy of the warranties and
representations on the part of the Company and to the following other
conditions:
(a) That all legal proceedings to be taken in connection with the
issue and sale of the Securities shall be reasonably
satisfactory in form and substance to Skadden, Arps, Slate
Meagher & Flom, L.L.P. ("Skadden, Arps"), counsel to the
Underwriters.
(b) That, at the Time of Purchase, the Representatives shall be
furnished with the following opinions, dated the day of the
Time of Purchase:
(1) Opinion of Michael D. VanHemert, Esq.,counsel to the
Company, substantially to the effect set forth in
Exhibit A to this Agreement; and
(2) Opinion of Skadden, Arps, counsel to the Underwriters,
substantially to the effect set forth in Exhibit B to
this Agreement.
(c) That on the date of the Time of Purchase the Representatives
shall have received a letter from Arthur Andersen LLP
("Arthur Andersen") in form and substance satisfactory to the
Representatives, dated as of such date, (i) confirming that
they are independent public accountants within the meaning of
the Act and the applicable published rules and regulations of
the Commission thereunder, (ii) stating that in their opinion
the financial statements examined by them and included or
incorporated by reference in the Registration Statement
complied as to form in all material respects with the
applicable accounting requirements of the Commission,
including applicable published rules and regulations of the
Commission, and (iii) covering, as of a date not more than
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<PAGE> 5
five business days prior to the date of such letter, such
other matters as the Representatives reasonably request.
(d) That, between the date of the execution of this Agreement and
the Time of Purchase, no material and adverse change shall
have occurred in the business, properties or financial
condition of the Company which, in the judgment of the
Representatives, after reasonable inquiries on the part of
the Representatives, impairs the marketability of the
Securities (other than changes referred to in or contemplated
by the Registration Statement or Prospectus).
(e) That, prior to the Time of Purchase, no stop order suspending
the effectiveness of the Registration Statement shall have
been issued under the Act by the Commission or proceedings
therefor initiated or threatened.
(f) That, at the Time of Purchase, the Company shall have
delivered to the Representatives a certificate of an
executive officer of the Company to the effect that, to the
best of his knowledge, information and belief there shall
have been no material adverse change in the business,
properties or financial condition of the Company from that
set forth in the Registration Statement or Prospectus (other
than changes referred to in or contemplated by the
Registration Statement or Prospectus).
(g) That the Company shall have performed such of its obligations
under this Agreement as are to be performed at or before the
Time of Purchase by the terms hereof.
(h) That any additional documents or agreements reasonably
requested by the Representatives or their counsel to permit
the Underwriters to perform their obligations or permit their
counsel to deliver opinions hereunder shall have been
provided to them.
(i) That between the date of the execution of this Agreement and
the day of the Time of Purchase there has been no
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<PAGE> 6
downgrading of the investment ratings of any of the Company's
securities by Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Duff & Phelps Credit Rating Co.,
and the Company shall not have been placed on "credit watch"
or "credit review" with negative implications by any of such
statistical rating organizations if any of such occurrences
shall, in the reasonable judgment of the Representatives,
after reasonable inquiries on the part of the
Representatives, impair the marketability of the Securities.
(j) That any filing of the Prospectus and any supplements thereto
required pursuant to Rule 424 under the Act have been made in
compliance with Rule 424 in the time periods provided by Rule
424.
4. Conditions of the Company's Obligations: The obligations of the
Company hereunder are subject to the satisfaction of the condition set forth in
Section 3(e).
5. Certain Covenants of the Company: In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To use its best efforts to cause any post-effective
amendments to the Registration Statement to become effective
as promptly as possible. During the time when a Prospectus is
required to be delivered under the Act, the Company will
comply so far as it is able with all requirements imposed
upon it by the Act and the rules and regulations of the
Commission to the extent necessary to permit the continuance
of sales of or dealings in the Securities in accordance with
the provisions hereof and of the Prospectus.
(b) To deliver to each of the Representatives a conformed copy of
the Registration Statement and any amendments thereto
(including all exhibits thereto) and full and complete sets
of all comments of the Commission or its staff and all
responses thereto with respect to the Registration Statement
and any amendments thereto, and to furnish to the
Representatives, for each of the Underwriters, conformed
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<PAGE> 7
copies of the Registration Statement and any amendments
thereto, without exhibits.
(c) As soon as the Company is advised thereof, the Company will
advise the Representatives and confirm the advice in writing
of: (i) the effectiveness of any amendment to the
Registration Statement, (ii) any request made by the
Commission for amendments to the Registration Statement or
Prospectus or for additional information with respect
thereto, (iii) the suspension of qualification of the
Securities for sale under Blue Sky or state securities laws,
and (iv) the entry of a stop order suspending the
effectiveness of the Registration Statement or of the
initiation or threat or any proceedings for that purpose and,
if such a stop order should be entered by the Commission, to
make every reasonable effort to obtain the lifting or removal
thereof.
(d) To deliver to the Underwriters, without charge, as soon as
practicable, and from time to time during such period of time
(not exceeding nine months) after the date of the Prospectus
as they are required by law to deliver a prospectus, as many
copies of the Prospectus (as supplemented or amended if the
Company shall have made any supplements or amendments
thereto) as the Representatives may reasonably request; 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 Representatives, 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 Act.
(e) The Company shall not, for a period of ten (10) days from the
Time of Purchase, without the prior written consent of the
Underwriter, offer or sell, enter into any agreement to sell,
grant any option for the sale of or otherwise dispose of any
Securities, any security convertible into or exchangeable
into or exercisable for Securities or any debt securities
substantially similar to the Securities (except for
Securities
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<PAGE> 8
issued pursuant to this Agreement and any offering of Senior
Note Mortgage Bonds),
(f) For such period of time (not exceeding nine months) after the
date of the Prospectus as the Underwriters are required by
law to deliver a prospectus in respect of the Securities, if
any event shall have occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to
make the statements therein, in light of the circumstances
when the Prospectus is delivered to a purchaser, not
misleading, or if it becomes necessary to amend or supplement
the Prospectus to comply with law, to forthwith prepare and
file with the Commission an appropriate amendment or
supplement to the Prospectus and deliver to the Underwriters,
without charge, such number of copies thereof as may be
reasonably requested.
(g) To use its best efforts to qualify the Securities for offer
and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may designate and to pay
(or cause to be paid), or reimburse (or cause to be
reimbursed) the Underwriters and their counsel for,
reasonable filing fees and expenses in connection therewith
(including the reasonable fees and disbursements of counsel
to the Underwriters and filing fees and expenses paid and
incurred prior to the date hereof), provided, however, that
the Company shall not be required to qualify to do business
as a foreign corporation or as a securities dealer or to file
a general consent to service of process or to file annual
reports or to comply with any other requirements deemed by
the Company to be unduly burdensome.
(h) To pay all expenses, fees and taxes (other than transfer
taxes on sales by the respective Underwriters) in connection
with the issuance and delivery of the Securities, except that
the Company shall be required to pay the fees and
disbursements (other than disbursements referred to in
paragraph (g) of this Section 5) of Skadden, Arps, counsel to
the Underwriters, only in the events provided in paragraph
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<PAGE> 9
(i) of this Section 5, the Underwriters hereby agreeing to
pay such fees and disbursements in any other event, and that
except as provided in Section (i), the Company shall not be
responsible for any out-of-pocket expenses of the
Underwriters in connection with their services hereunder
(i) If the Underwriters shall not take up and pay for the
Securities due to the failure of the Company to comply with
any of the conditions specified in Section 3 hereof, or, if
this Agreement shall be terminated in accordance with the
provisions of Section 11 hereof prior to the Time of
Purchase, to pay the reasonable fees and disbursements of
Skadden, Arps, counsel to the Underwriters, and, if the
Underwriters shall not take up and pay for the Securities due
to the failure of the Company to comply with any of the
conditions specified in Section 3 hereof, to reimburse the
Underwriters for their reasonable out-of-pocket expenses, in
an aggregate amount not exceeding a total of $____________,
incurred in connection with the financing contemplated by
this Agreement.
(j) Prior to the termination of the offering of the Securities,
to not file any amendment to the Registration Statement or
supplement to the Prospectus (including the Basic Prospectus)
unless the Company has furnished the Representatives and
counsel to the Underwriters with a copy for their review and
comment a reasonable time prior to filing and has reasonably
considered any comments of the Representatives, or any such
amendment or supplement to which such counsel shall
reasonably object on legal grounds in writing, after
consultation with the Representatives.
(k) To furnish the Representatives with copies of all documents
required to be filed with the Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act subsequent to the time
the Registration Statement becomes effective and prior to the
termination of the offering of the Securities.
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<PAGE> 10
(l) So long as may be required by law for the distribution of the
Securities by the Underwriters or by any dealers that
participate in the distribution thereof, the Company will
comply with all requirements under the Exchange Act relating
to the timely filing with the Commission of its reports
pursuant to Section 13 of the Exchange Act and of its proxy
statements pursuant to Section 14 of the Exchange Act.
6. Representations and Warranties of the Company: The Company
represents and warrants to, and agrees with, each of the Underwriters that:
(a) The Registration Statement has become effective under the
Act; a true and correct copy of the Registration Statement in
the form in which it became effective has been delivered to
each of the Representatives and to the Representatives for
each of the Underwriters (except that copies delivered for
the Underwriters excluded exhibits to such Registration
Statement); any filing of the Prospectus and any supplements
thereto required pursuant to Rule 424(b) has been or will be
made in the manner required by Rule 424(b) and within the
time period required by Section 3(j) hereof; no stop order
suspending the effectiveness of the Registration Statement is
in effect, and no proceedings for such purposes are pending
before or, to the knowledge of the Company, threatened by the
Commission. On the effective date of the Registration
Statement, the Registration Statement and the Basic
Prospectus complied, or were deemed to have complied, and on
its respective issue date, each preliminary prospectus filed
pursuant to Rule 424(b) complied, and the Basic Prospectus
complied, and on its issue date, the Prospectus will comply,
or will be deemed to comply, in all material respects with
the applicable provisions of the Act, the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act") and the
published rules and regulations of the Commission, none of
the Registration Statement on its effective date, the Basic
Prospectus on its issue date, or any other preliminary
prospectus, on its issue date, 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, and the Prospectus, as of
its issue date and, as amended or supplemented, if
applicable, as of the Time of Purchase, will not contain any
untrue statement
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<PAGE> 11
of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that the Company makes no warranty or representation
to any Underwriter with respect to any statements or
omissions made therein in reliance upon and in conformity
with information furnished in writing to the Company by, or
through the Representatives on behalf of, any Underwriter
expressly for use therein, or to any statements in or
omissions from that part of the Registration Statement that
shall constitute the Statement of Eligibility and
Qualification under the Trust Indenture Act of the Trustee
under the Indenture.
(b) The documents incorporated by reference in the Registration
Statement, any preliminary prospectus, the Basic Prospectus
and the Prospectus, when they were filed (or, if an amendment
with respect to any such document was filed, when such
amendment was filed) with the Commission, conformed in all
material respects to the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated
thereunder, and any further documents so filed and
incorporated by reference will, when they are filed with the
Commission, conform in all material respects to the
requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder; none of
such documents, when it was filed (or, if an amendment with
respect to any such document was filed, when 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 light
of the circumstances under which they were made, not
misleading; and no such further document, when it is filed,
will contain an untrue statement
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<PAGE> 12
of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they are made, not misleading.
(c) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State
of Michigan and has all requisite authority to own or lease
its properties and conduct its business as described in the
Prospectus and to consummate the transactions contemplated
hereby, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of
its business as described in the Prospectus or its ownership
or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the
Company.
(d) The Securities are in the form contemplated by the Indenture
and have been duly authorized by the Company. At the Time of
Purchase, the Securities will have been duly executed and
delivered by the Company and, when authenticated by the
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 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 Securities conform in
all material respects to the descriptions thereof in the
Prospectus.
(e) This Agreement has been duly authorized, executed and
delivered by the Company, and the Company has full corporate
power and authority to enter into this Agreement.
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<PAGE> 13
(f) Each of the Indenture and the Mortgage has been duly
authorized by the Company. At the Time of Purchase, the
Indenture and the Mortgage will have been duly executed and
delivered by the Company and 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 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
Indenture and the Mortgage conform in all material respects
to the description thereof in the Prospectus; and the
Indenture and the Mortgage conform to the requirements of the
Trust Indenture Act.
(g) The First Mortgage Bonds are in the form contemplated by the
Mortgage and have been duly authorized by the Company. At the
Time of Purchase, the First Mortgage Bonds (i) will have been
duly executed and delivered by the Company and, when
authenticated by the Mortgage Trustee in the manner provided
for in the Mortgage, (ii) 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 bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principals of
equity (regardless of whether enforcement is considered in a
proceeding at law or in equity), will be entitled to the
security afforded by the Mortgage equally and ratably with
all securities outstanding thereunder and (iii) will be owned
and held by the Trustee, in trust, for the benefit of the
holders of all securities from time to time outstanding under
the Indenture. The First Mortgage Bonds conform in all
material respects to the descriptions thereof in the
Prospectus.
(h) The Company has all necessary consents, authorizations,
approvals, orders, certificates and permits of and from, and
has made all declarations and filings with, all federal,
state,
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<PAGE> 14
local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own,
lease, license and use its properties and assets and to
conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain
or file would not have a material adverse effect on the
Company.
(i) An appropriate order has been entered by the Federal Energy
Regulatory Commission under the Federal Power Act authorizing
the issuance and sale of the Securities and the issuance of
the First Mortgage Bonds, and such order is in full force and
effect. No other 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 to be obtained by the Company to authorize
its execution or delivery of, or the performance of its
obligations under, this Agreement or the Securities, except
such as have been obtained or may be required under state
securities or Blue Sky laws or as referred to in the Basic
Prospectus.
(j) None of the issuance and sale of the Securities, or the First
Mortgage Bonds, or the execution or delivery by the Company
of, or the performance by the Company of its obligations
under, this Agreement did or will conflict with, 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
Company's Articles of Incorporation or by-laws, any material
agreement or instrument to which it 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 the
Company or any of its properties or assets, or did or will
result in the creation or imposition of any lien on the
Company's properties or assets.
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<PAGE> 15
(k) Except as disclosed in the Basic Prospectus, there is no
action, suit, proceeding, inquiry or investigation (at law or
in equity or otherwise) pending or, to the knowledge of the
Company, threatened against the Company, by any governmental
authority that (i) questions the validity, enforceability or
performance of this Agreement or the Securities or (ii) if
determined adversely, is likely to have a material adverse
effect on the business or financial condition of the Company,
or materially adversely affect the ability of the Company to
perform its obligations hereunder or the consummation of the
transactions contemplated by this Agreement.
(l) There has not been any material and adverse change in the
business, properties or financial condition of the Company
from that set forth in the Registration Statement (other than
changes referred to in or contemplated by the Registration
Statement or the Basic Prospectus).
(m) Except as set forth in the Basic Prospectus, no event or
condition exists that constitutes, or with the giving of
notice or lapse of time or both would constitute, a default
or any breach or failure to perform by the Company in any
material respect under any indenture, mortgage, loan
agreement, lease or other material agreement or instrument to
which the Company is a party or by which it or any of its
properties may be bound.
(n) The Company has duly authorized all necessary action to be
taken by it for the procurement of an irrevocable financial
guarantee insurance policy issued by Ambac Assurance
Corporation, insuring the payment of principal and interest
on the Securities when due.
7. Representation and Warranties of Underwriters: Each Underwriter
warrants and represents that the information, if any, furnished in writing to
the Company through the Representatives expressly for use in the Registration
Statement and Prospectus is correct in all material respects as to such
Underwriter. Each Underwriter, in addition to other information furnished to the
Company for use in the Registration Statement and
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<PAGE> 16
Prospectus, herewith furnishes to the Company for use in the Registration
Statement and Prospectus, the information stated herein with regard to the
public offering, if any, by such Underwriter and represents and warrants that
such information is correct in all material respects as to such Underwriter.
8. Indemnification:
(a) The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each of the Underwriters and each
person, if any, who controls any such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the
Exchange 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 Act or otherwise, and 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) as
provided in Section 8(c) hereof, 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,
any preliminary prospectus as of its issue date (if used
prior to the date of the Basic Prospectus), the Basic
Prospectus (if used prior to the date of the Prospectus), 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 5(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 Act), or arise out of or are
based upon any omission or
16
<PAGE> 17
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, Basic Prospectus, Registration
Statement 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 the Representatives on behalf of, any Underwriter
expressly for use therein or with any statements in or
omissions from that part of the Registration Statement that
shall constitute the Statement of Eligibility and
Qualification under the Trust Indenture Act of the Trustee
under the Indenture, and except that this indemnity shall not
inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses,
claims, damages, liabilities or actions, suits or proceedings
arising from the sale of the Securities to any person if a
copy of the Prospectus, as the same may then be supplemented
or amended (excluding, however, any document then
incorporated or deemed incorporated therein by reference),
was not sent or given by or on behalf of such Underwriter to
such person (i) with or prior to the written confirmation of
sale involved or (ii) as soon as available after such written
confirmation, relating to an event occurring prior to the
payment for and delivery to such person of the Securities
involved in such sale, and the omission or alleged omission
or untrue statement or alleged untrue statement was corrected
in the Prospectus as supplemented or amended at such time.
The Company's indemnity agreement contained in this Section 8(a), and
the covenants, representations and warranties of the Company 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 Securities hereunder, and the indemnity agreement contained in
this Section 8 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 8(a) are in addition to any other liabilities of
the Company under this Agreement or otherwise.
(b) Each Underwriter agrees, severally and not jointly, to the
extent permitted by law, to indemnify, hold harmless and
17
<PAGE> 18
reimburse the Company, its directors and such of its officers
as shall have signed the Registration Statement, each other
Underwriter and each person, if any, who controls the Company
or any such other Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, to the same
extent and upon the same terms as the indemnity agreement of
the Company set forth in Section 8(a) hereof, but only with
respect to alleged untrue statements or omissions made in the
Registration Statement, the Basic Prospectus or in the
Prospectus, as amended or supplemented, (if applicable) in
reliance upon and in conformity with information furnished in
writing to the Company by such Underwriter expressly for use
therein.
The indemnity agreement on the part of each Underwriter contained in
this Section 8(b) and the representations and warranties of such Underwriter
contained in this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any other person, and
shall survive the delivery of and payment for the Securities hereunder, and the
indemnity agreement contained in this Section 8(b) shall survive any termination
of this Agreement. The liabilities of each Underwriter in Section 8(b) are in
addition to any other liabilities of such Underwriter under this Agreement or
otherwise.
18
<PAGE> 19
(c) If a claim is made or an action, suit or proceeding
(including governmental investigations) is commenced or
threatened against any person as to which indemnity may be
sought under Section 8(a) or 8(b), 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
8(a) or 8(b) 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, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by
the Representatives in the case of parties indemnified
pursuant to Section 8(b) and by the Company in the case of
parties indemnified pursuant to Section 8(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) 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
19
<PAGE> 20
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, in connection with any litigation or proceeding or
related litigation or proceedings in the same jurisdiction as
to which the Indemnified Persons are entitled to such
separate representation, 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.
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
Representatives and the Company 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;
(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
20
<PAGE> 21
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 Representatives shall cooperate in
monitoring and controlling the fees and expenses of
separate counsel for Indemnified Persons for which the
Indemnifying Person is liable hereunder, and the
Indemnified Person shall use every reasonable effort to
cause such separate counsel to minimize the duplication
of activities as 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 8, 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.
9. Contribution: If the indemnification provided for in Section 8
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 8
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
21
<PAGE> 22
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 Company 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 Company and the total underwriting discounts
and commission 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 by the Company 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 Company and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 9 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 9. 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 9 shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Person in
connection with investigating or defending any such action, suits or proceedings
(including governmental proceedings) or claim, provided that the provisions of
Section 8 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 9, no Underwriter shall be required to contribute any amount
greater than the excess of (i) the total price at which the Securities
underwritten by it and distributed to the public were offered to the public over
(ii) the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 9 to contribute are several in
proportion to their respective underwriting obligations and not joint.
The agreement with respect to contribution contained in Section 9
hereof 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 Securities hereunder and any termination of this
Agreement.
22
<PAGE> 23
10. Substitution of Underwriters: If any Underwriter under this
agreement 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 on the
Time of Purchase, the Representatives shall immediately notify the Company and
the Representatives 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 Exchange 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 principal amount of Securities which the
defaulting Underwriter had agreed to purchase. If any non-defaulting Underwriter
or Underwriters shall determine to exercise such right, the Representatives
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 Time of Purchase 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 Representatives 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 Representatives 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 principal amounts of Securities which
they had severally agreed to purchase hereunder, as herein
above provided, and, in addition, the principal amount of
Securities which the defaulting Underwriter shall have so
failed to purchase up to a principal amount thereof equal to
one-ninth (1/9) of the respective principal amounts 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 Exchange Act and who
agree in making sales to comply with the NASD's Rules of Fair
Practice), to purchase, upon the terms herein set forth, the
principal amount of Securities which such
23
<PAGE> 24
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
Representatives within such further period of 36 hours, and thereupon the Time
of Purchase 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.
11. Termination of Agreement: This Agreement may be terminated at any
time prior to the Time of Purchase by the Representatives, if, prior to such
time (i) trading generally in securities on the New York Stock Exchange shall
have been suspended by the Commission or the New York Stock Exchange, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or over-the-counter market, (iii) a general moratorium on commercial
banking activities in New York shall have been declared by federal or New York
State authorities or (iv) there shall have occurred any outbreak or material
escalation of hostilities or any material adverse disruption in financial
markets or any other calamity or crisis, the effect of which on the financial
markets of the United States is such as to impair, in the Representatives'
reasonable judgment, after having made due inquiry, the marketability of the
Securities.
If the Representatives elect to terminate this Agreement, as provided
in this Section 11, the Representatives will promptly notify the Company and
each other Underwriter by telephone or telecopy, confirmed by letter. If this
Agreement shall not be carried out by any Underwriter for any reason permitted
hereunder, or if the sale of the Securities to the Underwriters as herein
contemplated shall not be carried out because the Company is not able to comply
with the terms hereof, the Company shall not be under any obligation
24
<PAGE> 25
under this Agreement and shall not be liable to any Underwriter or to any member
of any selling group for the loss of anticipated profits from the transactions
contemplated by this Agreement and the Underwriters shall be under no liability
to the Company nor be under any liability under this Agreement to one another.
Notwithstanding the foregoing, the provisions of Sections 5(g), 5(i), 8
and 9 shall survive any termination of this Agreement.
12. Notices: All notices hereunder shall, unless otherwise expressly
provided, be in writing and be delivered at or mailed to the following addresses
or be sent by telecopy as follows: if to the Underwriters or the
Representatives, to the Representatives at the address or number, as
appropriate, designated in Schedule I hereto, and, if to the Company, to
Consumers Energy Company, 212 West Michigan Avenue, Jackson, Michigan, 49201,
Attention: Senior Vice President and Chief Financial Officer (Telecopy:
517-788-0351).
13. Parties in Interest: The Agreement herein set forth has been and
is made solely for the benefit of the Underwriters, the Company (including the
directors thereof and such of the officers thereof as shall have signed the
Registration Statement), and the controlling persons, if any, referred to in
Section 8 hereof, and their respective successors, assigns, executors and
administrators, and, except as expressly otherwise provided in Section 10
hereof, no other person shall acquire or have any right under or by virtue of
this Agreement.
14. Definition of Certain Terms: The term "Underwriters," as used
herein, shall be deemed to mean the several persons, firms or corporations,
named in Schedule II hereto (including the Representatives herein mentioned, if
so named), and the term "Representatives," as used herein, shall be deemed to
mean the representative or representatives designated by, or in the manner
authorized by, the Underwriters in Schedule I hereto. All obligations of the
Underwriters hereunder are several and not joint. If there shall be only one
person, firm or corporation named in Schedule I and Schedule II hereto, the term
"Underwriters" and the term "Representatives," as used herein, shall mean such
person, firm or corporation. If the firm or firms listed in Schedule I hereto
are the same as the firm or firms listed in Schedule II hereto, then the terms
"Underwriters" and "Representatives," as used herein, shall each be deemed to
refer to such firm or firms. The term "successors" as used in this Agreement
shall not include any purchaser, as such purchaser, of any of the Securities
from any of the respective Underwriters.
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<PAGE> 26
15. Governing Law: This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
16. 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.
If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Underwriters and the Company.
Very truly yours,
CONSUMERS ENERGY COMPANY
By:
Accepted: [DATE]
- -------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
As Representatives
By:
----------------------------------
By:
26
<PAGE> 27
Schedule I
- -------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
Attention: Syndicate Desk
Telecopy:
27
<PAGE> 28
Schedule II
Underwriters Principal Amount of Securities
to be Purchased
. . . . . . . . . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . . . . . . . . __________
. . . . . . . . . . . . . . . . . . . . . . . . . . . __________
Total. . . . . . . __________
28
<PAGE> 29
Schedule III
Information Regarding the Securities
1. Aggregate Principal Amount:
2. Maturity Date:
3. Interest Rate: ___%
4. Price to be paid to the Company: ___% of the principal amount
29
<PAGE> 1
EXHIBIT 4(c)
THIRD SUPPLEMENTAL INDENTURE
DATED AS OF OCTOBER __, 1998
--------------------
This Third Supplemental Indenture, dated as of the ___ day of October,
1998 between Consumers Energy Company, a corporation duly organized and existing
under the laws of the State of Michigan (hereinafter called the "Company") and
having its principal office at 212 West Michigan Avenue, Jackson, Michigan
49201, and The Chase Manhattan Bank, a New York banking corporation (hereinafter
called the "Trustee") and having its principal Corporate Trust Office at 450 W.
33rd Street, 15th Floor, New York, New York, 10001.
WITNESSETH:
WHEREAS, the Company and the Trustee entered into an Indenture, dated
as of February 1, 1998 (the "Original Indenture"), pursuant to which one or more
series of debt of the Company (the "Notes") may be issued from time to time; and
WHEREAS, Section 2.01 of the Original Indenture permits the terms of
any series of Notes to be established in an indenture supplemental to the
Original Indenture; and
WHEREAS, Section 13.01 of the Original Indenture provides that a
supplemental indenture may be entered into by the Company and the Trustee
without the consent of any Holders of the Notes to establish the form and terms
of the Notes of any series; and
WHEREAS, the Company has requested the Trustee to join with it in the
execution and delivery of this Third Supplemental Indenture in order to
supplement and amend the Original Indenture by, among other things, establishing
the form and terms of a series of Notes to be known as the Company's " ___%
Senior Secured Insured Quarterly Notes due __, 2028" (the "Senior Secured
Insured Quarterly Notes"); and
WHEREAS, the Company and the Trustee desire to enter into this Third
Supplemental Indenture for the purposes set forth in Sections 2.01 and 13.01 of
the Original Indenture as referred to above; and
WHEREAS, the Company has furnished the Trustee with a Board Resolution
authorizing the execution of this Third Supplemental Indenture; and
<PAGE> 2
WHEREAS, all things necessary to make this Third Supplemental Indenture
a valid agreement of the Company and the Trustee and a valid supplement to the
Original Indenture have been done,
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Senior
Secured Insured Quarterly Notes to be issued hereunder by holders thereof, the
Company and the Trustee mutually covenant and agree, for the equal and
proportionate benefit of the respective holders from time to time of the Senior
Secured Insured Quarterly Notes as follows:
ARTICLE I
STANDARD PROVISIONS; DEFINITIONS
SECTION 1.01. Standard Provisions. The Original Indenture together with
this Third Supplemental Indenture are hereinafter sometimes collectively
referred to as the "Indenture." All capitalized terms which are used herein and
not otherwise defined herein or in Exhibit A hereto are defined in the Original
Indenture and are used herein with the same meanings as in the Original
Indenture.
ARTICLE II
DESIGNATION AND TERMS OF THE NOTES; FORMS
SECTION 2.01. Establishment of Series. There is hereby created a series
of Notes to be known and designated as the " ___% Senior Secured Insured
Quarterly Notes due ________, 2028," such series limited in aggregate principal
amount (except as contemplated in Section 2.05(c) of the Original Indenture) to
$150,000,000. The form and terms of the Senior Secured Insured Quarterly Notes
are established in the form of Senior Secured Insured Quarterly Notes attached
hereto as Exhibit A.
ARTICLE III
DEFINITIONS
SECTION 3.01. Definitions. The following defined terms used herein
shall, unless the context otherwise requires, have the meanings specified below.
"Holder" means any person in whose name a Senior Secured Insured
Quarterly Note is registered on the records of the Depository.
"Insurance Trustee" means United States Trust Company of New York, or
any successor thereto, as the Insurance Trustee under the Policy.
2
<PAGE> 3
"Insurer" means Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company.
"Interest Payment Dates" means January 1, April 1, July 1 and October 1
of each year.
"Original Issue Date" means October __, 1998.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of or interest on the
Senior Secured Insured Quarterly Notes on behalf of the Company.
"Policy" shall mean the financial guaranty insurance policy issued by
the Insurer insuring the payment when due of the principal of and interest on
the Senior Secured Insured Quarterly Notes as provided therein.
"Redemption Date" means with respect to any Senior Secured Insured
Quarterly Note to be redeemed, in whole or in part, the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" means with respect to any Senior Secured Insured
Quarterly Note to be redeemed, the price at which it is to be redeemed pursuant
to this Indenture.
"Regular Record Date" means the 15th calendar day of the month
preceding the month in which the respective Interest Payment Date occurs
(whether or not a Business Day).
"Stated Maturity" means October 1, 2028.
ARTICLE IV
PAYMENT OF PRINCIPAL AND INTEREST
SECTION 4.01. Payment of Principal and Interest. The principal of the
Senior Secured Insured Quarterly Notes shall be due at Stated Maturity (unless
earlier redeemed). The unpaid principal amount of the Senior Secured Insured
Quarterly Notes shall bear interest at the rate of ____% per annum until paid or
duly provided for. Interest shall be paid quarterly in arrears on each Interest
Payment Date to the Person in whose name the Senior Secured Insured Quarterly
Notes are registered on the Regular Record Date for such Interest Payment Date.
Any such interest that is not so punctually paid or duly provided for will
forthwith cease to be payable to the Holders on such Regular Record Date and may
either be paid to the Person or Persons in whose name the Senior Secured Insured
Quarterly Notes are registered at the close of business on a Special Record Date
for the payment of such defaulted interest to be fixed by the Trustee, notice
whereof shall be given to Holders of the Senior Secured Insured Quarterly Notes
not less than ten days prior to such Special Record Date.
3
<PAGE> 4
Payments of interest on the Senior Secured Insured Quarterly Notes will
include interest accrued to but excluding the respective Interest Payment Dates.
Interest payments for the Senior Secured Insured Quarterly Notes shall be
computed and paid on the basis of a 360-day year of twelve 30 day months.
ARTICLE V
REDEMPTION
SECTION 5.01. Redemption at the Company's Option. The Senior Secured
Insured Quarterly Notes shall be subject to redemption at the option of the
Company, in whole or in part, without premium or penalty, at any time or from
time to time on or after October 1, 2003, 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 accrued but unpaid interest to the Redemption Date.
If notice of redemption is given as aforesaid, the Senior Secured
Insured Quarterly Notes so to be redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price together with any accrued interest
thereon, and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued interest) the Senior Secured Insured
Quarterly Notes hall cease to bear interest. If any Senior Secured Insured
Quarterly Note called for redemption shall not be paid upon surrender thereof
for redemption, the principal shall, until paid, bear interest from the
Redemption Date at __%. Subject to the foregoing and applicable law (including
without limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding Senior
Secured Insured Quarterly Notes by tender, in the open market or by private
agreement.
SECTION 5.02. Redemption at the Holder's Option. For purposes of this
Section 5.02 a "Beneficial Owner" means the Person who has the right to sell,
transfer or otherwise dispose of an interest in Senior Secured Insured Quarterly
Notes and the right to receive the proceeds therefrom, as well as the interest
and principal payable to the Holder thereof. In general, a determination of
beneficial ownership in the Senior Secured Insured Quarterly Notes wil be
determined by the Company, in its sole discretion, which determinations shall be
final and binding on all parties.
Unless the Senior Secured Insured Quarterly Notes have been declared
due and payable prior to their maturity by reason of an Event of Default, the
personal representative or other Person authorized to represent the estate of
the deceased Beneficial Owner or from a surviving joint tenant(s) or tenant(s)
by the entirety (each, a "Representative") of a deceased Beneficial Owner has
the right to request redemption prior to Stated Maturity of all or part of such
interest, expressed in integral multiples of $1,000 principal amount, in the
Senior Secured Insured Quarterly Notes, and the Company will redeem the same
subject to the limitations that the Company will not be obligated to redeem,
during the period from the Original Issue Date through and including October 1,
1999 (the "Initial Period"), and during any twelve-month period which ends on
and includes each October 1 thereafter (each such twelve-month period being
hereinafter referred to as a "Subsequent Period"),
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<PAGE> 5
(i) on behalf of a deceased Beneficial Owner any interest in the Senior Secured
Insured Quarterly Notes which exceeds an aggregate principal amount of $25,000
or (ii) interests in the Senior Secured Insured Quarterly Notes in an aggregate
principal amount exceeding $3,000,000. A request for redemption may be initiated
by the Representative of a deceased Beneficial Owner at any time and in any
principal amount in integral multiples of $1,000. Representatives of deceased
Beneficial Owners must make arrangements with the Participant through whom such
interest is owned in order that timely presentation of redemption requests can
be made by the Participant to the Trustee. If the Company, although not
obligated to do so, chooses to redeem interests of any deceased Beneficial Owner
in the Senior Secured Insured Quarterly Notes in the Initial Period or any
Subsequent Period in excess of the $25,000 limitation, such redemption, to the
extent that it exceeds the $25,000 limitation for any deceased Beneficial Owner,
shall not be included in the computation of the $3,000,000 limitation for such
Initial Period or such Subsequent Period, as the case may be, or for any
succeeding Subsequent Period. Any Senior Secured Insured Note (or portion
thereof) tendered pursuant to a redemption request may be withdrawn by a written
request by the Representative received by the Trustee at least 10 days prior to
its repayment.
Subject to the $25,000 and $3,000,000 limitations, the Company will,
after the death of any Beneficial Owner, redeem the interest of such Beneficial
Owner in the Senior Secured Insured Quarterly Notes on the next Interest Payment
Date following receipt by the Trustee of a redemption request received at least
20 days in advance of the next Interest Payment Date. The Trustee will notify
the Company promptly after receipt of any redemption request and the Company
will provide all funds necessary for such redemption prior to the date of
redemption to the Paying Agent. If redemption requests exceed the aggregate
principal amount of interests in Senior Secured Insured Quarterly Notes required
to be redeemed during the Initial Period or during any Subsequent Period, then
such excess redemption requests will be applied in the order received by the
Trustee to successive Subsequent Periods, regardless of the number of Subsequent
Periods required to redeem such interests. All redemption requests will be
redeemed in the order in which the trustee receives the redemption request. To
obtain repayment pursuant to a redemption request, the Representative must
provide to the Participant (i) a written request for repayment signed by the
Representative, and such signature must be guaranteed by a member firm of a
registered national securities exchange or of the NASD or a commercial bank or
trust company having an office or correspondent in the United States, (ii)
appropriate evidence satisfactory to the Company and the Trustee that (A) the
Representative has authority to act on behalf of the deceased Beneficial Owner,
(B) the death of such Beneficial Owner has occurred and (C) the deceased was the
owner of a beneficial interest in such Senior Secured Insured Quarterly Note at
the time of death, (iii) if applicable, a properly executed assignment or
endorsement, and (iv) if the beneficial interest in such Senior Secured Insured
Quarterly Note is held by a nominee of the deceased Beneficial Owner, a
certificate satisfactory to the Trustee from such nominee attesting to the
deceased's ownership of a beneficial interest in such Senior Secured Insured
Quarterly Note. The Participant will provide these documents to the Trustee. All
questions as to the eligibility or validity of any exercise of redemption on
behalf of a deceased Beneficial Owner will be determined by the Company, in its
sole discretion, which determinations will be final and binding on all parties.
5
<PAGE> 6
For purposes of this Section 5.02 an interest in Senior Secured Insured
Quarterly Notes held in tenancy by the entirety, joint tenancy or by tenants in
common will be deemed to be held by a single Beneficial Owner and the death of a
tenant by the entirety, joint tenant or tenant in common will be deemed the
death of a Beneficial Owner. The death of a Person who, during his lifetime, was
entitled to substantially all of the rights of a Beneficial Owner of an interest
in the Senior Secured Insured Quarterly Notes will be deemed the death of the
Beneficial Owner, regardless of the recordation of such interest on the records
of the Participant, if such rights can be established to the satisfaction of the
Participant and the Company.
In the case of any redemption request which is presented pursuant to
this Section 5.02 and which has not been fulfilled at the time the Company gives
notice of its election to partially redeem Senior Secured Insured Quarterly
Notes pursuant to Section 5.01 hereof, such interest or portion thereof shall
not be subject to redemption pursuant to such Section 5.01, but shall remain
subject to redemption pursuant to this Section 5.02
ARTICLE VI
SPECIAL INSURANCE PROVISIONS
SECTION 6.01. Insurer as Third Party Beneficiary. To the extent that
the Indenture confers upon or gives or grants to the Insurer any right, remedy
or claim, the Insurer is hereby explicitly recognized as being a third-party
beneficiary hereunder and may enforce any such right remedy or claim conferred,
given or granted hereunder.
SECTION 6.02. Notices and Information.
(a) The Company shall furnish to the Insurer:
(i) Any notice that is required to be given to a Holder of
the Senior Secured Insured Quarterly Notes or to the Trustee pursuant to the
Indenture.
(ii) As soon as practicable after the filing thereof, a copy
of any financial statement of the Company and a copy of any audit and annual
report of the Company; a copy of any notice to be given to the registered owners
of the Senior Secured Insured Quarterly Notes including, without limitation,
notice of any redemption of or defeasance of the Senior Secured Insured
Quarterly Notes; and such additional information it may reasonably request.
(b) The Company will permit the Insurer to have access to and to
make copies of all books and records relating to the Senior Secured Insured
Quarterly Notes at any reasonable time.
(c) Notwithstanding any other provision of the Indenture, the
Trustee and the Company shall immediately notify the Insurer in accordance with
Section 6.06 if at any time after
6
<PAGE> 7
such amounts are due to be paid to the Trustee or Paying Agent there are
insufficient moneys to make any payments of principal and/or interest as
required and promptly upon the occurrence of any Event of Default hereunder.
All notices and information required to be given to the Insurer
shall be in writing and shall be sent by overnight delivery to Ambac Assurance
Corporation, One State Street Plaza, New York, NY 10004, Attention: Dennis
Pidherny.
SECTION 6.03. Concerning the Special Insurance Provisions. The
provisions of this Article VI shall apply notwithstanding anything in the
Indenture to the contrary, but only so long as the Policy shall be in full force
and effect and the Insurer is not in default thereunder.
SECTION 6.04. Amendments. Any provision of the Indenture expressly
recognizing or granting rights in or to the Insurer may not be amended in any
manner which affects the rights of the Insurer hereunder without the prior
written consent of the Insurer.
SECTION 6.05. Defeasance. Notwithstanding anything herein to the
contrary, in the event that the principal and/or interest due on the Senior
Secured Insured Quarterly Notes shall be paid by the Insurer pursuant to the
Policy, the Senior Secured Insured Quarterly Notes shall remain Outstanding for
all purposes, not be defeased or otherwise satisfied and not be considered paid
by the Company, and the assignment and pledge of moneys held in trust by the
Trustee and all covenants, agreements and other obligations of the Company to
the registered owners shall continue to exist and shall run to the benefit of
the Insurer, and the Insurer shall be subrogated to the rights of such
registered owners.
SECTION 6.06. Insurer's Rights to Notice; Subrogation.As long as the
Policy shall be in full force and effect, the Company, the Trustee and any
Paying Agent agree to comply with the following provisions:
(a) If the Trustee or Paying Agent determines that there will be
insufficient funds to pay the principal of or interest on the Senior Secured
Insured Quarterly Notes on an Interest Payment Date, the Trustee or Paying Agent
shall so notify the Insurer within one business day after such determination.
Such notice shall specify the amount of the anticipated deficiency, the Senior
Secured Insured Quarterly Notes to which such deficiency is applicable and
whether such Senior Secured Insured Quarterly Notes will be deficient as to
principal or interest, or both. The Insurer will make payments of principal or
interest due on the Senior Secured Insured Quarterly Notes on or before the
first day next following the date on which the Insurer shall have received
notice of nonpayment from the Trustee or Paying Agent.
(b) The Trustee or Paying Agent shall, after giving notice to the
Insurer as provided in (a) above, make available to the Insurer and, at the
Insurer's direction, to the Insurance
7
<PAGE> 8
Trustee, the registration books of the Company maintained by the Trustee or
Paying Agent and all records relating to the Senior Secured Insured Quarterly
Notes maintained under the Indenture.
(c) The Trustee or Paying Agent shall provide the Insurer and the
Insurance Trustee with a list of registered owners of Senior Secured Insured
Quarterly Notes entitled to receive principal or interest payments from the
Insurer under the terms of the Policy, and shall make arrangements with the
Insurance Trustee (i) to mail checks or pay by wire transfer to the registered
owners of Senior Secured Insured Quarterly Notes entitled to receive all or
partial interest payments from the Insurer and (ii) to pay principal upon Senior
Secured Insured Quarterly Notes surrendered to the Insurance Trustee by the
registered owners of Senior Secured Insured Quarterly Notes entitled to receive
full or partial principal payments from the Insurer.
(d) The Trustee or Paying Agent shall, at the time it provides
notice to the Insurer pursuant to (a) above, notify registered owners of Senior
Secured Insured Quarterly Notes entitled to receive the payment of principal or
interest thereon from the Insurer (i) as to the fact of such entitlement, (ii)
that the Insurer will remit to them all or a part of the interest payments next
coming due upon proof of any Holder's entitlement to interest payments and
delivery to the Insurance Trustee, in form satisfactory to the Insurance
Trustee, of an appropriate assignment of the registered owner's right to
payment, (iii) that should they be entitled to receive full payment of principal
from the Insurer, they must surrender their Senior Secured Insured Quarterly
Notes (along with an appropriate instrument of assignment in form satisfactory
to the Insurance Trustee to permit ownership of such Senior Secured Insured
Quarterly Notes to be registered in the name of the Insurer) for payment to the
Insurance Trustee, and not the Trustee or Paying Agent and (iv) that should they
be entitled to receive partial payment of principal from the Insurer, they must
surrender their Senior Secured Insured Quarterly Notes for payment thereon first
to the Trustee or Paying Agent who shall note on such Senior Secured Insured
Quarterly Notes the portion of the principal paid by the Company through the
Trustee or Paying Agent and then, along with an appropriate instrument of
assignment in form satisfactory to the Insurance Trustee, to the Insurance
Trustee, which will then pay the unpaid portion of principal.
(e) In the event that the Trustee or Paying Agent has notice that
any payment of principal of or interest on Senior Secured Insured Quarterly
Notes which has become Due for Payment (as defined in the Policy) and which is
made to a Holder of Senior Secured Insured Quarterly Notes by or on behalf of
the Company has been deemed a preferential transfer and theretofore recovered
from its registered owner pursuant to the United States Bankruptcy Code by a
trustee in bankruptcy in accordance with the final, nonappealable order of a
court having competent jurisdiction, the Trustee or Paying Agent shall, at the
time the Insurer is notified pursuant to (a) above, notify all registered owners
that in the event that any registered owner's payment is so recovered, such
registered owner will be entitled to payment from the Insurer to the extent of
such recovery if sufficient funds are not otherwise available, and the Trustee
or Paying Agent shall furnish to the Insurer its records evidencing the payments
of principal of and interest on the Senior Secured Insured Quarterly Notes which
have been made by the Trustee or Paying Agent and subsequently recovered from
registered owners and the dates on which such payments were made.
8
<PAGE> 9
(f) In addition to those rights granted the Insurer under the
Indenture, the Insurer shall, to the extent it makes payment of principal of or
interest on the Senior Secured Insured Quarterly Notes, become subrogated to the
rights of the recipients of such payments in accordance with the terms of the
Policy, and to evidence such subrogation (i) in the case of subrogation as to
claims for past due interest, the Trustee or Paying Agent shall note the
Insurer's rights as subrogee on the registration books of the Company maintained
by the Trustee or Paying Agent upon receipt from the Insurer of proof of the
payment of interest thereon to the registered owners of the Senior Secured
Insured Quarterly Notes, and (ii) in the case of subrogation as to claims for
past due principal, the Trustee or Paying Agent shall note the Insurer's rights
as subrogee on the registration books of the Company maintained by the Trustee
or Paying Agent upon surrender of the Senior Secured Insured Quarterly Notes by
the registered owners thereof together with proof from the Insurer of the
payment of principal thereof.
SECTION 6.07. Insurer's Rights Concerning the Trustee.
(a) The Insurer shall receive prompt written notice of any Trustee
or Paying Agent resignation.
(b) Notwithstanding any other provision of the Indenture, in
determining whether the rights of the Holders of Senior Secured Insured
Quarterly Notes will be adversely affected in any material respect by any action
taken pursuant to the terms and provisions of the Indenture, the Trustee or
Paying Agent shall consider the effect on the Holders of Senior Secured Insured
Quarterly Notes as if there were no Policy.
SECTION 6.08. Insurer's Right to Accelerate, etc. Anything in the
Indenture to the contrary notwithstanding, upon the occurrence and continuance
of an Event of Default, so long as the Policy shall be in full force and effect
and the Insurer is not in default under the terms of the Policy, the Insurer
shall be entitled to control and direct the enforcement of all rights and
remedies granted to the Holders of Senior Insured Quarterly Notes.
9
<PAGE> 10
ARTICLE VII
SUPPLEMENTAL INDENTURES
SECTION 7.01. Effect On Original Indenture This Third Supplemental
Indenture is a supplement to the Original Indenture. As supplemented by this
Third Supplemental Indenture, the Original Indenture is in all respects
ratified, approved and confirmed, and the Original Indenture and this Third
Supplemental Indenture shall together constitute one and the same instrument.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 8.02. Recitals. The recitals contained herein shall be taken as
the statements of the Company and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Third Supplemental Indenture.
SECTION 8.03. Governing Law. This Third Supplemental Indenture shall be
governed by and construed in accordance with the laws of the jurisdiction which
govern the Original Indenture and its construction.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first written
above.
CONSUMERS ENERGY COMPANY
By:
--------------------------------
Name: Alan M. Wright
Title: Senior Vice President and
Chief Financial Officer
Attest:
(Corporate Seal)
THE CHASE MANHATTAN BANK,
AS TRUSTEE
By:
--------------------------------
Name:
Title:
Attest:
(Corporate Seal)
11
<PAGE> 12
EXHIBIT A
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
===============================================================================
NO._________ $____________
CONSUMERS ENERGY COMPANY
__________% SENIOR SECURED INSURED QUARTERLY NOTES DUE _____ 2028
CUSIP:___________
CONSUMERS ENERGY COMPANY, a Michigan corporation (herein called the
"Company," which term includes any successor corporation under the Indenture
referred to herein), for value received, hereby promises to pay to:
or registered assigns, the principal sum of
*ONE HUNDRED AND FIFTY MILLION DOLLARS*
on ____________, _______ and to pay interest on such principal sum at the rate
of ____ percent (____%) per annum.
The Company will pay interest quarterly in arrears January 1 (beginning
January 1, 1999), April 1, July 1 and October 1 (each such date an "Interest
Payment Date"), until the principal hereof is otherwise paid or duly provided
for. The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture (as defined below), be
paid to the holder (the "Holder") of this Note (or one or more predecessor
Notes) of record at the close of business on the regular record date (the
"Regular Record Date") for such Interest Payment Date, which, except in the case
of interest payable at the Stated Maturity (as
12
<PAGE> 13
defined in the Indenture), shall be the fifteenth calendar day of the month
preceding the month in which the respective Interest Payment Date occurs
(whether or not a Business Day), and, in the case of interest payable at the
Stated Maturity, shall be the date such that interest payable at the Stated
Maturity is payable to the same Person to whom principal on this Note is
payable. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date by
virtue of his having been such Holder, and may be paid to the Holder of this
Note (or one or more predecessor Notes) of record at the close of business on a
special record date (the "Special Record Date") fixed by the Company for the
payment of such defaulted interest, notice whereof shall be given to Holders not
less than 10 days prior to such Special Record Date, all as more fully provided
in the Indenture.
Payment of the principal of this Note and the interest thereon will be
made at the office or agency of the Company in the Borough of Manhattan, City
and State of New York in such currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
Financial Guaranty Insurance Policy No. _______________ (the "Policy")
with respect to payments due for principal of and interest on this Note has been
issued by Ambac Assurance Corporation (the "Insurer"). The Policy has been
delivered to___________________, as the Insurance Trustee under said Policy and
will be held by such Insurance Trustee or any successor insurance trustee. The
Policy is on file and available for inspection at the principal office of the
Insurance Trustee and a copy thereof may be secured from the Insurer or the
Insurance Trustee. All payments required to be made under the Policy shall be
made in accordance with the provisions thereof. The owner of this Note
acknowledges and consents to the subrogation rights of the Insurer as more fully
set forth in the Policy.
13
<PAGE> 14
CONSUMERS ENERGY COMPANY
______% Senior Secured Insured Quarterly Notes due October 1, 2028
This Note is one of a duly authorized issue of debt securities of the
Company (herein called the "Securities"), issuable in one or more series, issued
and to be issued under and pursuant to an Indenture dated as of February 1,
1998, as previously supplemented and as further supplemented by that certain
Third Supplemental Indenture, dated as of October ____ , 1998 (such Indenture,
as so supplemented, the "Indenture"), duly executed and delivered by the Company
to The Chase Manhattan Bank, as trustee (the "Trustee," which term includes any
successor trustee under the Indenture), and is one of a series limited in
aggregate principal amount to One Hundred and Fifty Million Dollars
($150,000,000) and designated as ____ % Senior Secured Insured Quarterly Notes
due October 1, 2028 (the "Notes"). Reference is hereby made to the Indenture for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of Securities
(including Holders of the Notes).
The Notes are subject to defeasance at the option of the Company as
provided in the Indenture.
As long as this Note is represented in global form (the "Global
Security") registered in the name of the Depositary or its nominee, except as
provided in the Indenture and subject to certain limitations therein set forth,
no Global Security shall be exchangeable or transferrable.
If an Event of Default (as defined in the Indenture) with respect to
the Notes shall occur and be continuing, the principal plus any accrued interest
may be declared due and payable in the manner and with the effect and subject to
the conditions provided in the Indenture.
Prior to the Release Date (as hereinafter defined), the Notes will be
secured by first mortgage bonds (the "Senior Note Mortgage Bonds") delivered by
the Company to the Trustee for the benefit of the Holders of the Notes, issued
under the Indenture, dated as of September 1, 1945, from the Company to The
Chase Manhattan Bank, as trustee (the "Mortgage Trustee"), as amended and
supplemented by various supplemental indentures and as supplemented by a
Supplemental
14
<PAGE> 15
Indenture dated October __, 1998 providing for a series of Senior Note Mortgage
Bonds relating to the Notes (collectively, the "Mortgage"). Reference is made to
the Mortgage and the Indenture for a description of the rights of the Trustee as
holder of the Senior Note Mortgage Bonds, the property mortgaged and pledged,
the nature and extent of the security, the rights of the holders of first
mortgage bonds under the Mortgage and the rights of the Company and of the
Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage
Trustee and the terms and conditions upon which the Senior Note Mortgage Bonds
are secured and the circumstances under which additional first mortgage bonds
may be issued.
From and after such time as all first mortgage bonds (other than Senior
Note Mortgage Bonds) issued under the Mortgage have been retired through
payment, redemption or otherwise at, before or after the maturity thereof (the
"Release Date"), the Senior Note Mortgage Bonds shall cease to secure the Notes
in any manner. In certain circumstances prior to the Release Date as provided in
the Indenture, the Company is permitted to reduce the aggregate principal amount
of a series of Senior Note Mortgage Bonds held by the Trustee, but in no event
prior to the Release Date to amount less than the aggregate outstanding
principal amount of the series of Notes initially issued contemporaneously with
such Senior Note Mortgage Bonds.
The Indenture permits the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the Holders under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Securities then
Outstanding (as defined in the Indenture) of all series which are affected by
such amendment or modification, except that certain amendments which do not
adversely affect the rights of any Holder of the Securities may be made without
the approval of Holders of the Securities. No amendment or modification may,
among other things, change the Stated Maturity of any Security, reduce the
principal amount thereof, reduce the rate or change the time of payment of any
interest thereon, or reduce the aforesaid majority in aggregate principal amount
of Securities of any series, the consent of the Holders of which is required for
any such amendment or modification, without the consent of each Securityholder
affected.
Any provision of the Indenture expressly recognizing or granting rights
in or to the Insurer may not be amended in any manner which affects the rights
of the Insurer hereunder without the prior written consent of the Insurer.
15
<PAGE> 16
Notwithstanding any provision in the Indenture or any provision of this
Note, the Holder of this Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
interest on this Note at the times, place and rate, and in the currency herein
prescribed.
The Company shall have the right, subject to the terms and conditions
of the Indenture, to redeem this Note, in whole or in part, without premium or
penalty, at any time or from time to time on or after October 1, 2003, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest to the Redemption Date. If any Note called for
redemption shall not be paid upon surrender thereof for redemption, the
principal shall, until paid, bear interest from the Redemption Date at __%.
In addition, at the option of any deceased Beneficial Owner's
Representative (as such terms are defined in the Indenture), interests in Notes
are redeemable at 100% of their principal amount, plus accrued interest, subject
to certain limitations provided in the Indenture.
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 surrender of the Note or the Note will be reduced
in accordance with the provisions of the Indenture. The Notes will not have a
sinking fund.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.
All terms used in this Note which are defined in the Indenture have the
meanings assigned to them in the Indenture.
16
<PAGE> 17
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
CONSUMERS ENERGY COMPANY
By:
------------------------------------
Name:
Title:
Attested:
------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
- ---------------------------------------
Dated:
-------------------------
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK
as Trustee
By:
------------------------------------
Authorized Signatory
17
<PAGE> 18
SCHEDULE OF EXCHANGES OF INTERESTS IN THE NOTE
The following exchanges of interests in this Note have been made:
<TABLE>
<CAPTION>
Principal
Amount of this Signature of
Amount of Amount of Note following authorized
decrease in increase in such decrease signatory of
Date of Exchange this Note this Note (or increase) Trustee
- ---------------------- ------------------ ---------------- -------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
18
<PAGE> 19
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
----------------------------
----------------------------
Insert assignee's social security or tax I.D. no.
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and all rights thereunder and irrevocably appoint
------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Dated:
----------------------- ----------------------------------------
----------------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT
APPEARS ON THE FIRST PAGE OF THE WITHIN NOTE.
THE SIGNATURE MUST BE GUARANTEED BY AN "ELIGIBLE GUARANTOR INSTITUTION"
THAT IS A MEMBER OR PARTICIPANT IN A "SIGNATURE GUARANTEE PROGRAM" (E.G., THE
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM, THE STOCK EXCHANGE MEDALLION
PROGRAM OR THE NEW YORK STOCK EXCHANGE, INC. MEDALLION PROGRAM).
19
<PAGE> 20
EXHIBIT B
CERTIFICATE OF AUTHENTICATION
This is one of the Senior Secured Insured Quarterly Notes referred to
in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By:
Authorized Signatory
Dated:
20
<PAGE> 21
EXHIBIT C
FORM OF REQUEST FOR REDEMPTION
CONSUMERS ENERGY COMPANY
____% Senior Secured Insured Quarterly Notes
due October, 2028
CUSIP No.
The undersigned Participant does hereby certify, pursuant to Section
5.01 of the _____ Supplemental Indenture dated as of __________, 1998 to the
Indenture dated as of _______________ between CONSUMERS ENERGY COMPANY (the
"Company") and THE CHASE MANHATTAN BANK, as trustee (the "Trustee"), to the
Company and the Trustee that:
1. [Name of deceased Beneficial Owner] is deceased.
2. [Name of deceased Beneficial Owner] had a $_________________
interest in the Company's ____% Senior Secured Insured Quarterly Notes due
October 1, 2028 (the "Notes").
3. [Name of Representative] is [Beneficial Owner's personal
representative/other person authorized to represent the estate of the Beneficial
Owner/surviving joint tenant/surviving tenant by the entirety] of [Name of
deceased Beneficial Owner] and has delivered to the undersigned a request for
redemption in form satisfactory to the undersigned, requesting that $__________
[$ 1,000 or an integral multiple thereof] be redeemed pursuant to said Section
108. Such request and the documents accompanying such request, all of which are
satisfactory to the undersigned, are delivered herewith.
4. [Name of Participant] holds the interest in the Notes with respect
to which this Request for Redemption is being made on behalf of [Name of
deceased Beneficial Owner].
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<PAGE> 22
IN WITNESS WHEREOF, the undersigned has executed this Request for
Redemption as of ___________, ______.
[Name of Participant]
By:_____________________________
Name:___________________________
Title:__________________________
22
<PAGE> 1
EXHIBIT 4(e)
SEVENTY-FOURTH SUPPLEMENTAL INDENTURE
Providing among other things for
FIRST MORTGAGE BONDS,
____% Senior Secured Insured Quarterly Notes due October 1, 2028
--------------
Dated as of October ___, 1998
--------------
CONSUMERS ENERGY COMPANY
TO
THE CHASE MANHATTAN BANK,
TRUSTEE
<PAGE> 2
SEVENTY-FOURTH SUPPLEMENTAL INDENTURE, dated as of October ___, 1998
(herein sometimes referred to as "this Supplemental Indenture"), made and
entered into by and between CONSUMERS ENERGY COMPANY, a corporation organized
and existing under the laws of the State of Michigan, with its principal
executive office and place of business at 212 West Michigan Avenue, in Jackson,
Jackson County, Michigan 49201, formerly known as Consumers Power Company,
(hereinafter sometimes referred to as the "Company"), and THE CHASE MANHATTAN
BANK, a corporation organized and existing under the laws of the State of New
York, with its corporate trust offices at 450 W. 33rd Street, in the Borough of
Manhattan, The City of New York, New York 10001 (hereinafter sometimes referred
to as the "Trustee"), as Trustee under the Indenture dated as of September 1,
1945 between Consumers Power Company, a Maine corporation (hereinafter sometimes
referred to as the "Maine corporation"), and City Bank Farmers Trust Company
(Citibank, N.A., successor, hereinafter sometimes referred to as the
"Predecessor Trustee"), securing bonds issued and to be issued as provided
therein (hereinafter sometimes referred to as the "Indenture"),
WHEREAS at the close of business on January 30, 1959, City Bank Farmers
Trust Company was converted into a national banking association under the title
"First National City Trust Company"; and
WHEREAS at the close of business on January 15, 1963, First National
City Trust Company was merged into First National City Bank; and
WHEREAS at the close of business on October 31, 1968, First National
City Bank was merged into The City Bank of New York, National Association, the
name of which was thereupon changed to First National City Bank; and
WHEREAS effective March 1, 1976, the name of First National City Bank
was changed to Citibank, N.A.; and
WHEREAS effective July 16, 1984, Manufacturers Hanover Trust Company
succeeded Citibank, N.A. as Trustee under the Indenture; and
WHEREAS effective June 19, 1992, Chemical Bank succeeded by merger to
Manufacturers Hanover Trust Company as Trustee under the Indenture; and
WHEREAS effective July 15, 1996, The Chase Manhattan Bank (National
Association), merged with and into Chemical Bank which thereafter was renamed
The Chase Manhattan Bank as Trustee under the Indenture; and
WHEREAS the Indenture was executed and delivered for the purpose of
securing such bonds as may from time to time be issued under and in accordance
with the terms of the Indenture, the aggregate principal amount of bonds to be
secured thereby being limited to $5,000,000,000 at any one time outstanding
(except as provided in Section 2.01 of the Indenture), and the Indenture
describes and sets forth the property conveyed thereby and is filed in the
Office of the Secretary of State of the State of Michigan and is of record in
the Office of the Register of Deeds of each county in the State of Michigan in
which this Supplemental Indenture is to be recorded; and
WHEREAS the Indenture has been supplemented and amended by various
indentures supplemental thereto, each of which is filed in the Office of the
Secretary of State of the State of Michigan and is of record in the Office of
the Register of Deeds of each county in the State of Michigan in which this
Supplemental Indenture is to be recorded; and
<PAGE> 3
WHEREAS the Company and the Maine corporation entered into an Agreement
of Merger and Consolidation, dated as of February 14, 1968, which provided for
the Maine corporation to merge into the Company; and
WHEREAS the effective date of such Agreement of Merger and
Consolidation was June 6, 1968, upon which date the Maine corporation was merged
into the Company and the name of the Company was changed from "Consumers Power
Company of Michigan" to "Consumers Power Company"; and
WHEREAS the Company and the Predecessor Trustee entered into a
Sixteenth Supplemental Indenture, dated as of June 4, 1968, which provided,
among other things, for the assumption of the Indenture by the Company; and
WHEREAS said Sixteenth Supplemental Indenture became effective on the
effective date of such Agreement of Merger and Consolidation; and
WHEREAS the Company has succeeded to and has been substituted for the
Maine corporation under the Indenture with the same effect as if it had been
named therein as the mortgagor corporation; and
WHEREAS effective March 11, 1997, the name of Consumers Power Company
was changed to Consumers Energy Company; and
WHEREAS, the Company has entered into an Indenture dated as of February
1, 1998, as amended and supplemented, ("Senior Note Indenture") with The Chase
Manhattan Bank, as trustee ("Senior Note Trustee") providing for the issuance of
notes thereunder, and pursuant to such Senior Note Indenture the Company has
agreed to issue to the Senior Note Trustee, as security for the notes ("Senior
Notes") to be issued thereunder, a new series of bonds under the Indenture at
the time of authentication of each series of Senior Notes issued under such
Senior Note Indenture; and
WHEREAS, for such purposes the Company desires to issue a new series of
bonds, to be designated First Mortgage Bonds, ___% Senior Secured Insured
Quarterly Notes due October 1, 2028 each of which bonds shall also bear the
descriptive title "First Mortgage Bond" (hereinafter provided for and
hereinafter sometimes referred to as the "Senior IQ Note Bonds"), the bonds of
which series are to be issued as registered bonds without coupons and are to
bear interest at the rate per annum specified herein and are to mature October
1, 2028; and
WHEREAS, the Senior IQ Note Bonds shall be issued to the Senior Note
Trustee in connection with the issuance by the Company of its ___% Senior
Secured Insured Quarterly Notes due October 1, 2028, (the "Notes"); and
WHEREAS each of the registered bonds without coupons of the Senior IQ
Note Bonds and the Trustee's Authentication Certificate thereon are to be
substantially in the following forms, to wit:
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<PAGE> 4
[FORM OF REGISTERED BOND OF THE SENIOR IQ NOTE BONDS]
[FACE]
NOTWITHSTANDING ANY PROVISIONS HEREOF OR IN THE INDENTURE, THIS BOND IS
NOT ASSIGNABLE OR TRANSFERABLE EXCEPT AS PERMITTED OR REQUIRED BY SECTION 4.04
OF THE INDENTURE, DATED AS OF FEBRUARY 1, 1998 BETWEEN CONSUMERS ENERGY COMPANY
AND THE CHASE MANHATTAN BANK, AS TRUSTEE.
CONSUMERS ENERGY COMPANY
FIRST MORTGAGE BOND, ____% SENIOR SECURED INSURED QUARTERLY NOTES
DUE OCTOBER 1, 2028
No. $
CONSUMERS ENERGY COMPANY, a Michigan corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to The Chase
Manhattan Bank, as trustee under the Senior Note Indenture hereinafter referred
to, or registered assigns, the principal sum of One Hundred Fifty Million
Dollars on October 1, 2028, and to pay to the registered holder hereof interest
on said sum from the latest quarterly interest payment date to which interest
has been paid on the bonds of this series preceding the date hereof, unless the
date hereof be an interest payment date to which interest is being paid, in
which case from the date hereof, or unless the date hereof is prior to January
1, 1999, in which case from October ___, 1998, (or if this bond is dated between
the record date for any interest payment date and such interest payment date,
then from such interest payment date, provided, however, that if the Company
shall default in payment of the interest due on such interest payment date, then
from the next preceding quarterly interest payment date to which interest has
been paid on the bonds of this series, or if such interest payment date is
January 1, 1999, from October ___, 1998), at the rate per annum of ___% until
the principal hereof shall have become due and payable, payable on each January
1, April 1, July 1 and October 1 in each year, commencing January 1, 1999.
Under an Indenture dated as of February 1, 1998 (hereinafter sometimes
referred to as the "Senior Note Indenture"), between Consumers Energy Company
and The Chase Manhattan Bank, as trustee (hereinafter sometimes called the
"Senior Note Trustee"), the Company will issue, concurrently with the issuance
of this bond, an issue of notes under the Senior Note Indenture entitled ___%
Senior Secured Insured Quarterly Notes due October 1, 2028 (the "Notes").
Pursuant to Article IV of the Senior Note Indenture, this bond is issued to the
Senior Note Trustee to secure any and all obligations of the Company under the
Notes and any other series of senior notes from time to time outstanding under
the Senior Note Indenture. Payment of principal of, or premium, if any, or
interest on, the Notes shall constitute payments on this bond as further
provided herein and in the supplemental indenture pursuant to which this bond
has been issued (the "Supplemental Indenture").
The provisions of this bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by the
Trustee or its successor in trust under the Indenture of the certificate hereon.
IN WITNESS WHEREOF, Consumers Energy Company has caused this bond to be
executed in its name by its Chairman of the Board, its President or one of its
Vice Presidents by his signature or a
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<PAGE> 5
facsimile thereof, and its corporate seal or a facsimile thereof to be affixed
hereto or imprinted hereon and attested by its Secretary or one of its Assistant
Secretaries by his signature or a facsimile thereof.
CONSUMERS ENERGY COMPANY,
Dated: By
-------------------------------
Its
-------------------------------
Attest:
--------------------
Secretary
[FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This is one of the bonds, of the series designated therein,
described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, Trustee
By
-------------------------------------
Authorized Officer
[REVERSE]
CONSUMERS ENERGY COMPANY
FIRST MORTGAGE BOND, ____% SENIOR SECURED INSURED QUARTERLY NOTES
DUE OCTOBER 1, 2028
The interest payable on any January 1, April 1, July 1 and October 1
(each "Interest Payment Date") will, subject to certain exceptions provided in
the Indenture hereinafter mentioned, be paid to the person in whose name this
bond is registered at the close of business on the record date, which shall be
on the fifteenth calendar day of the month preceding the month in which the
respective Interest Payment Date occurs ("Record Date"), or, if such Record Date
shall be a legal holiday or a day on which banking institutions in the City of
New York, New York or the City of Detroit, Michigan are authorized by law to
close, the next succeeding day which shall not be a legal holiday or a day on
which such institutions are so authorized to close. The principal of and the
premium, if any, and the interest on this bond shall be payable at the office or
agency of the Company in the City of Jackson, Michigan designated for that
purpose, in any coin or currency of the United States of America which at the
time of payment is legal tender for public and private debts.
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<PAGE> 6
Upon any payment of the principal of, premium, if any, and interest on,
all or any portion of the Notes, whether at maturity or prior to maturity by
redemption or otherwise or upon provision for the payment thereof having been
made in accordance with Section 5.01(a) of the Senior Note Indenture, Senior IQ
Note Bonds in a principal amount equal to the principal amount of such Notes and
having both a corresponding maturity date and interest rate shall, to the extent
of such payment of principal, premium, if any, and interest, be deemed paid and
the obligation of the Company thereunder to make such payment shall be
discharged to such extent and, in the case of the payment of principal (and
premium, if any) such bonds of said series shall be surrendered to the Company
for cancellation as provided in Section 4.08 of the Senior Note Indenture. The
Trustee may at anytime and all times conclusively assume that the obligation of
the Company to make payments with respect to the principal of and premium, if
any, and interest on the Senior IQ Note Bonds, so far as such payments at the
time have become due, has been fully satisfied and discharged pursuant to the
foregoing sentence unless and until the Trustee shall have received a written
notice from the Senior Note Trustee signed by one of its officers stating (i)
that timely payment of, or premium or interest on, the Notes has not been made,
(ii) that the Company is in arrears as to the payments required to be made by it
to the Senior Note Trustee pursuant to the Senior Note Indenture, and (iii) the
amount of the arrearage.
For purposes of Section 4.09 of the Senior Note Indenture, this bond
shall be deemed to be the "related series of Senior Note First Mortgage Bonds"
in respect of the Notes.
This bond is one of the bonds issued and to be issued from time to time
under and in accordance with and all secured by an Indenture dated as of
September 1, 1945, given by the Company (or its predecessor, Consumers Power
Company, a Maine corporation) to City Bank Farmers Trust Company (The Chase
Manhattan Bank, successor) (hereinafter sometimes referred to as the "Trustee"),
and indentures supplemental thereto, heretofore or hereafter executed, to which
indenture and indentures supplemental thereto (hereinafter referred to
collectively as the "Indenture") reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security and
the rights, duties and immunities thereunder of the Trustee and the rights of
the holders of said bonds and of the Trustee and of the Company in respect of
such security, and the limitations on such rights. By the terms of the
Indenture, the bonds to be secured thereby are issuable in series which may vary
as to date, amount, date of maturity, rate of interest and in other respects as
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than seventy-five per
centum in principal amount of the bonds (exclusive of bonds disqualified by
reason of the Company's interest therein) at the time outstanding, including, if
more than one series of bonds shall be at the time outstanding, not less than
sixty per centum in principal amount of each series affected, to effect, by an
indenture supplemental to the Indenture, modifications or alterations of the
Indenture and of the rights and obligations of the Company and the rights of the
holders of the bonds and coupons; provided, however, that no such modification
or alteration shall be made without the written approval or consent of the
holder hereof which will (a) extend the maturity of this bond or reduce the rate
or extend the time of payment of interest hereon or reduce the amount of the
principal hereof, or (b) permit the creation of any lien, not otherwise
permitted, prior to or on a parity with the lien of the Indenture, or (c) reduce
the percentage of the principal amount of the bonds the holders of which are
required to approve any such supplemental indenture.
The Company reserves the right, without any consent, vote or other
action by holders of bonds of this series or any other series created after the
Sixty-eighth Supplemental Indenture to amend the Indenture to reduce the
percentage of the principal amount of bonds the holders of which are required to
approve any supplemental indenture (other than any supplemental indenture which
is subject to the proviso contained in the immediately preceding sentence) (a)
from not less than seventy-five per centum (including sixty per centum of each
series affected) to not less than a majority in principal amount of the bonds at
the time outstanding or
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<PAGE> 7
(b) in case fewer than all series are affected, not less than a majority in
principal amount of the bonds of all affected series, voting together.
This bond is not redeemable except on the respective dates, in the
respective principal amounts and for the respective redemption prices which
correspond to the redemption dates for, the principal amounts to be redeemed of,
and the redemption prices for, the Notes, and except upon written demand of the
Senior Note Trustee following the occurrence of an Event of Default under the
Senior Note Indenture and the acceleration of the senior notes, as provided in
Section 8.01 of the Senior Note Indenture. This bond is not redeemable by the
operation of the improvement fund or the maintenance and replacement provisions
of the Indenture or with the proceeds of released property.
This bond shall not be assignable or transferable except as permitted
or required by Section 4.04 of the Senior Note Indenture. Any such transfer
shall be effected at the Investor Services Department of the Company, as
transfer agent (hereinafter referred to as "corporate trust office"). This bond
shall be exchangeable for other registered bonds of the same series, in the
manner and upon the conditions prescribed in the Indenture, upon the surrender
of such bonds at said corporate trust office of the transfer agent. However,
notwithstanding the provisions of Section 2.05 of the Indenture, no charge shall
be made upon any registration of transfer or exchange of bonds of said series
other than for any tax or taxes or other governmental charge required to be paid
by the Company.
As provided in Section 4.11 of the Senior Note Indenture, from and
after the Release Date (as defined in the Senior Note Indenture), the
obligations of the Company with respect to this bond shall be deemed to be
satisfied and discharged, this bond shall cease to secure in any manner any
senior notes outstanding under the Senior Note Indenture, and, pursuant to
Section 4.08 of the Senior Note Indenture, the Senior Note Trustee shall
forthwith deliver this bond to the Company for cancellation.
In case of certain defaults as specified in the Indenture, the
principal of this bond may be declared or may become due and payable on the
conditions, at the time, in the manner and with the effect provided in the
Indenture.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this bond, or for any claim based hereon, or
otherwise in respect hereof or of the Indenture, to or against any incorporator,
stockholder, director or officer, past, present or future, as such, of the
Company, or of any predecessor or successor company, either directly or through
the Company, or such predecessor or successor company, or otherwise, under any
constitution or statute or rule of law, or by the enforcement of any assessment
or penalty, or otherwise, all such liability of incorporators, stockholders,
directors and officers, as such, being waived and released by the holder and
owner hereof by the acceptance of this bond and being likewise waived and
released by the terms of the Indenture.
--------------------
AND WHEREAS all acts and things necessary to make the bonds of the
Senior IQ Note Bonds, when duly executed by the Company and authenticated by the
Trustee or its agent and issued as prescribed in the Indenture, as heretofore
supplemented and amended, and this Supplemental Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute the Indenture,
as supplemented and amended as aforesaid, as well as by this Supplemental
Indenture, a valid, binding and legal instrument for the security thereof, have
been done and performed, and the creation, execution and delivery of this
Supplemental Indenture and the creation, execution and issuance of bonds subject
to the terms hereof and of the Indenture, as so supplemented and amended, have
in all respects been duly authorized;
6
<PAGE> 8
NOW, THEREFORE, in consideration of the premises, of the acceptance and
purchase by the holders thereof of the bonds issued and to be issued under the
Indenture, as supplemented and amended as above set forth, and of the sum of One
Dollar duly paid by the Trustee to the Company, and of other good and valuable
considerations, the receipt whereof is hereby acknowledged, and for the purpose
of securing the due and punctual payment of the principal of and premium, if
any, and interest on all bonds now outstanding under the Indenture and the
$150,000,000 principal amount of Senior IQ Note Bonds proposed to be issued
initially and all other bonds which shall be issued under the Indenture, as
supplemented and amended from time to time, and for the purpose of securing the
faithful performance and observance of all covenants and conditions therein, and
in any indenture supplemental thereto, set forth, the Company has given,
granted, bargained, sold, released, transferred, assigned, hypothecated,
pledged, mortgaged, confirmed, set over, warranted, alienated and conveyed and
by these presents does give, grant, bargain, sell, release, transfer, assign,
hypothecate, pledge, mortgage, confirm, set over, warrant, alien and convey unto
The Chase Manhattan Bank, as Trustee, as provided in the Indenture, and its
successor or successors in the trust thereby and hereby created and to its or
their assigns forever, all the right, title and interest of the Company in and
to all the property, described in Section 13 hereof, together (subject to the
provisions of Article X of the Indenture) with the tolls, rents, revenues,
issues, earnings, income, products and profits thereof, excepting, however, the
property, interests and rights specifically excepted from the lien of the
Indenture as set forth in the Indenture.
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the premises, property,
franchises and rights, or any thereof, referred to in the foregoing granting
clause, with the reversion and reversions, remainder and remainders and (subject
to the provisions of Article X of the Indenture) the tolls, rents, revenues,
issues, earnings, income, products and profits thereof, and all the estate,
right, title and interest and claim whatsoever, at law as well as in equity,
which the Company now has or may hereafter acquire in and to the aforesaid
premises, property, franchises and rights and every part and parcel thereof.
SUBJECT, HOWEVER, with respect to such premises, property, franchises
and rights, to excepted encumbrances as said term is defined in Section 1.02 of
the Indenture, and subject also to all defects and limitations of title and to
all encumbrances existing at the time of acquisition.
TO HAVE AND TO HOLD all said premises, property, franchises and rights
hereby conveyed, assigned, pledged or mortgaged, or intended so to be, unto the
Trustee, its successor or successors in trust and their assigns forever;
BUT IN TRUST, NEVERTHELESS, with power of sale for the equal and
proportionate benefit and security of the holders of all bonds now or hereafter
authenticated and delivered under and secured by the Indenture and interest
coupons appurtenant thereto, pursuant to the provisions of the Indenture and of
any supplemental indenture, and for the enforcement of the payment of said bonds
and coupons when payable and the performance of and compliance with the
covenants and conditions of the Indenture and of any supplemental indenture,
without any preference, distinction or priority as to lien or otherwise of any
bond or bonds over others by reason of the difference in time of the actual
authentication, delivery, issue, sale or negotiation thereof or for any other
reason whatsoever, except as otherwise expressly provided in the Indenture; and
so that each and every bond now or hereafter authenticated and delivered
thereunder shall have the same lien, and so that the principal of and premium,
if any, and interest on every such bond shall, subject to the terms thereof, be
equally and proportionately secured, as if it had been made, executed,
authenticated, delivered, sold and negotiated simultaneously with the execution
and delivery thereof.
AND IT IS EXPRESSLY DECLARED by the Company that all bonds
authenticated and delivered under and secured by the Indenture, as supplemented
and amended as above set forth, are to be
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<PAGE> 9
issued, authenticated and delivered, and all said premises, property, franchises
and rights hereby and by the Indenture and indentures supplemental thereto
conveyed, assigned, pledged or mortgaged, or intended so to be, are to be dealt
with and disposed of under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes expressed in the
Indenture, as supplemented and amended as above set forth, and the parties
hereto mutually agree as follows:
SECTION 1. There is hereby created one series of bonds (the "Senior IQ
Note Bonds") designated as hereinabove provided, which shall also bear the
descriptive title "First Mortgage Bond", and the form thereof shall be
substantially as hereinbefore set forth. Senior IQ Note Bonds shall be issued in
the aggregate principal amount of $150,000,000, shall mature on October 1, 2028
and shall be issued only as registered bonds without coupons in denominations of
$1,000 and any multiple thereof. The serial numbers of bonds of the Senior IQ
Note Bonds shall be such as may be approved by any officer of the Company, the
execution thereof by any such officer either manually or by facsimile signature
to be conclusive evidence of such approval. Senior IQ Note Bonds shall bear
interest at a rate of ____% per annum until the principal thereof shall have
become due and payable, payable quarterly on January 1, April 1, July 1 and
October 1 in each year commencing January 1, 1999. The principal of and the
premium, if any, and the interest on said bonds shall be payable in any coin or
currency of the United States of America which at the time of payment is legal
tender for public and private debts, at the office or agency of the Company in
the City of Jackson, Michigan designated for that purpose.
Upon any payment of the principal of, premium, if any, and interest on,
all or any portion of the Notes whether at maturity or prior to maturity by
redemption or otherwise or upon provision for the payment thereof having been
made in accordance with Section 5.01(a) of the Senior Note Indenture, Senior IQ
Note Bonds in a principal amount equal to the principal amount of such Notes and
having both a corresponding maturity date and interest rate shall, to the extent
of such payment of principal, premium, if any, and interest, be deemed paid and
the obligation of the Company thereunder to make such payment shall be
discharged to such extent and, in the case of the payment of principal (and
premium, if any) such bonds of said series shall be surrendered to the Company
for cancellation as provided in Section 4.08 of the Senior Note Indenture. The
Trustee may at anytime and all times conclusively assume that the obligation of
the Company to make payments with respect to the principal of and premium, if
any, and interest on the Senior IQ Note Bonds, so far as such payments at the
time have become due, has been fully satisfied and discharged pursuant to the
foregoing sentence unless and until the Trustee shall have received a written
notice from the Senior Note Trustee signed by one of its officers stating (i)
that timely payment of, or premium or interest on, the Notes has not been so
made, (ii) that the Company is in arrears as to the payments required to be made
by it to the Senior Note Trustee pursuant to the Senior Note Indenture, and
(iii) the amount of the arrearage.
Each Senior IQ Note Bond is to be issued to and registered in the name
of The Chase Manhattan Bank, as trustee, or a successor trustee (said trustee or
any successor trustee being hereinafter referred to as the "Senior Note
Trustee") under the Indenture, dated as of February 1, 1998 (hereinafter
sometimes referred to as the "Senior Note Indenture") between Consumers Energy
Company and the Senior Note Trustee, to secure any and all obligations of the
Company under the Notes and any other series of senior notes from time to time
outstanding under the Senior Note Indenture.
The Senior IQ Note Bonds shall not be assignable or transferable except
as permitted or required by Section 4.04 of the Senior Note Indenture. Any such
transfer shall be effected at the Investor Services Department of the Company,
as transfer agent (hereinafter referred to as "corporate trust office"). The
Senior IQ Note Bonds shall be exchangeable for other registered bonds of the
same series, in the manner and upon the conditions prescribed in the Indenture,
upon the surrender of such bonds at said corporate trust office of the transfer
agent. However, notwithstanding the provisions of Section 2.05 of the Indenture,
no
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<PAGE> 10
charge shall be made upon any registration of transfer or exchange of bonds
of said series other than for any tax or taxes or other governmental charge
required to be paid by the Company.
SECTION 2. Senior IQ Note Bonds shall not be redeemable except on the
respective dates, in the respective principal amounts and for the respective
redemption prices which correspond to the redemption dates for, the principal
amounts to be redeemed of, and the redemption prices for, the Notes, and except
as set forth in Section 3 hereof.
In the event the Company redeems any Notes prior to maturity in
accordance with the provisions of the Senior Note Indenture or in accordance
with the provisions of the Third Supplemental Indenture to the Senior Note
Indenture dated as of October ___, 1998 (the "Third Supplemental Indenture to
the Senior Note Indenture"), the Senior Note Trustee shall on the same date
deliver to the Company the Senior IQ Note Bonds in principal amounts
corresponding to the Notes so redeemed, as provided in Section 4.08 of the
Senior Note Indenture. The Company agrees to give the Senior Note Trustee notice
of any such redemption of the Notes on or before the date fixed for any such
redemption.
In the event a Beneficial Owner (as such term is defined in the Third
Supplemental Indenture to the Senior Note Trust Indenture) redeems any Notes
prior to maturity in accordance with the provisions of the Third Supplemental
Indenture to the Senior Note Indenture, the Senior Note Trustee shall on the
same date deliver to the Company the Senior IQ Note Bonds in principal amounts
corresponding to the Notes so redeemed, as provided in Section 4.08 of the
Senior Note Indenture. The Company agrees to give the Senior Note Trustee notice
of any such redemption of the Notes on or before the date fixed for any such
redemption.
Senior IQ Note Bonds are not redeemable by the operation of the
improvement fund or the maintenance and replacement provisions of this Indenture
or with the proceeds of released property.
SECTION 3. Upon the occurrence of an Event of Default under the Senior
Note Indenture and the acceleration of the Notes, the Senior IQ Note Bonds shall
be redeemable in whole upon receipt by the Trustee of a written demand
(hereinafter called a "Redemption Demand") from the Senior Note Trustee stating
that there has occurred under the Senior Note Indenture both an Event of Default
and a declaration of acceleration of payment of principal, accrued interest and
premium, if any, on the Notes, specifying the last date to which interest on
such notes has been paid (such date being hereinafter referred to as the
"Initial Interest Accrual Date") and demanding redemption of Senior IQ Note
Bonds. The Company waives any right it may have to prior notice of such
redemption under the Indenture. Upon surrender of the Senior IQ Note Bonds by
the Senior Note Trustee to the Trustee, the Senior IQ Note Bonds shall be
redeemed at a redemption price equal to the principal amount thereof plus
accrued interest thereon from the Initial Interest Accrual Date to the date of
the Redemption Demand; provided, however, that in the event of a recision of
acceleration of senior notes pursuant to the last paragraph of Section 8.01(a)
of the Senior Note Indenture, then any Redemption Demand shall thereby be deemed
to be rescinded by the Senior Note Trustee; but no such recision or annulment
shall extend to or affect any subsequent default or impair any right consequent
thereon.
SECTION 4. For purposes of Section 4.09 of the Senior Note Indenture,
this bond shall be deemed to be the "related series of Senior Note First
Mortgage Bonds" in respect of the Notes.
SECTION 5. As provided in Section 4.11 of the Senior Note Indenture,
from and after the Release Date (as defined in the Senior Note Indenture), the
obligations of the Company with respect to the Senior IQ Note Bonds (the
"Bonds") shall be deemed to be satisfied and discharged, the Bonds shall cease
to secure in any manner any senior notes outstanding under the Senior Note
Indenture, and, pursuant to Section 4.08 of the Senior Note Indenture, the
Senior Note Trustee shall forthwith deliver the Bonds to the Company for
cancellation.
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<PAGE> 11
SECTION 6. The Company reserves the right, without any consent, vote or
other action by the holder of the Senior IQ Note Bonds or the holders of any
Notes, or of any subsequent series of bonds issued under the Indenture, to make
such amendments to the Indenture, as supplemented, as shall be necessary in
order to amend Section 17.02 to read as follows:
SECTION 17.02. With the consent of the holders of not less than a
majority in principal amount of the bonds at the time outstanding or
their attorneys-in-fact duly authorized, or, if fewer than all series
are affected, not less than a majority in principal amount of the bonds
at the time outstanding of each series the rights of the holders of
which are affected, voting together, the Company, when authorized by a
resolution, and the Trustee may from time to time and at any time enter
into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or
modifying the rights and obligations of the Company and the rights of
the holders of any of the bonds and coupons; provided, however, that no
such supplemental indenture shall (1) extend the maturity of any of the
bonds or reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or reduce any
premium payable on the redemption thereof, without the consent of the
holder of each bond so affected, or (2) permit the creation of any
lien, not otherwise permitted, prior to or on a parity with the lien of
this Indenture, without the consent of the holders of all the bonds
then outstanding, or (3) reduce the aforesaid percentage of the
principal amount of bonds the holders of which are required to approve
any such supplemental indenture, without the consent of the holders of
all the bonds then outstanding. For the purposes of this Section, bonds
shall be deemed to be affected by a supplemental indenture if such
supplemental indenture adversely affects or diminishes the rights of
holders thereof against the Company or against its property. The
Trustee may in its discretion determine whether or not, in accordance
with the foregoing, bonds of any particular series would be affected by
any supplemental indenture and any such determination shall be
conclusive upon the holders of bonds of such series and all other
series. Subject to the provisions of Sections 16.02 and 16.03 hereof,
the Trustee shall not be liable for any determination made in good
faith in connection herewith.
Upon the written request of the Company, accompanied by a
resolution authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the
consent of bondholders as aforesaid (the instrument or instruments
evidencing such consent to be dated within one year of such request),
the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion but shall
not be obligated to enter into such supplemental indenture.
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<PAGE> 12
It shall not be necessary for the consent of the bondholders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
The Company and the Trustee, if they so elect, and either before
or after such consent has been obtained, may require the holder of any
bond consenting to the execution of any such supplemental indenture to
submit his bond to the Trustee or to ask such bank, banker or trust
company as may be designated by the Trustee for the purpose, for the
notation thereon of the fact that the holder of such bond has consented
to the execution of such supplemental indenture, and in such case such
notation, in form satisfactory to the Trustee, shall be made upon all
bonds so submitted, and such bonds bearing such notation shall
forthwith be returned to the persons entitled thereto.
Prior to the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the
Company shall publish a notice, setting forth in general terms the
substance of such supplemental indenture, at least once in one daily
newspaper of general circulation in each city in which the principal of
any of the bonds shall be payable, or, if all bonds outstanding shall
be registered bonds without coupons or coupon bonds registered as to
principal, such notice shall be sufficiently given if mailed, first
class, postage prepaid, and registered if the Company so elects, to
each registered holder of bonds at the last address of such holder
appearing on the registry books, such publication or mailing, as the
case may be, to be made not less than thirty days prior to such
execution. Any failure of the Company to give such notice, or any
defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.
SECTION 7. As supplemented and amended as above set forth, the
Indenture is in all respects ratified and confirmed, and the Indenture and all
indentures supplemental thereto shall be read, taken and construed as one and
the same instrument.
SECTION 8. Nothing contained in this Supplemental Indenture shall, or
shall be construed to, confer upon any person other than a holder of bonds
issued under the Indenture, as supplemented and amended as above set forth, the
Company, the Trustee and the Senior Note Trustee, for the benefit of the holder
or holders of the Notes, any right or interest to avail himself of any benefit
under any provision of the Indenture, as so supplemented and amended.
SECTION 9. The Trustee assumes no responsibility for or in respect of
the validity or sufficiency of this Supplemental Indenture or of the Indenture
as hereby supplemented or the due execution hereof by the Company or for or in
respect of the recitals and statements contained herein (other than those
contained in the sixth and seventh recitals hereof), all of which recitals and
statements are made solely by the Company.
SECTION 10. This Supplemental Indenture may be simultaneously executed
in several counterparts and all such counterparts executed and delivered, each
as an original, shall constitute but one and the same instrument.
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<PAGE> 13
SECTION 11. In the event the date of any notice required or permitted
hereunder or the date of maturity of interest on or principal of the Senior IQ
Note Bonds or the date fixed for redemption or repayment of the Senior IQ Note
Bonds shall not be a Business Day, then (notwithstanding any other provision of
the Indenture or of any supplemental indenture thereto) such notice or such
payment of such interest or principal need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the date fixed for such notice or as if made on the date of maturity or
the date fixed for redemption or repayment, and no interest shall accrue for the
period from and after such date. "Business Day" means, with respect to this
Section 11, a day of the year on which banks are not required or authorized to
close in New York City or Detroit, Michigan.
SECTION 12. This Supplemental Indenture and the Senior IQ Note Bonds
shall be governed by and deemed to be a contract under, and construed in
accordance with, the laws of the State of Michigan, and for all purposes shall
be construed in accordance with the laws of such state, except as may otherwise
be required by mandatory provisions of law.
SECTION 13. Detailed Description of Property Mortgaged:
I.
ELECTRIC GENERATING PLANTS AND DAMS
All the electric generating plants and stations of the Company,
constructed or otherwise acquired by it and not heretofore described in the
Indenture or any supplement thereto and not heretofore released from the lien of
the Indenture, including all powerhouses, buildings, reservoirs, dams,
pipelines, flumes, structures and works and the land on which the same are
situated and all water rights and all other lands and easements, rights of way,
permits, privileges, towers, poles, wires, machinery, equipment, appliances,
appurtenances and supplies and all other property, real or personal, forming a
part of or appertaining to or used, occupied or enjoyed in connection with such
plants and stations or any of them, or adjacent thereto.
II.
ELECTRIC TRANSMISSION LINES
All the electric transmission lines of the Company, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including towers, poles, pole lines, wires, switches, switch racks,
switchboards, insulators and other appliances and equipment, and all other
property, real or personal, forming a part of or appertaining to or used,
occupied or enjoyed in connection with such transmission lines or any of them or
adjacent thereto; together with all real property, rights of way, easements,
permits, privileges, franchises and rights for or relating to the construction,
maintenance or operation thereof, through, over, under or upon any private
property or any public streets or highways, within as well as without the
corporate limits of any municipal corporation. Also all the real property,
rights of way, easements, permits, privileges and rights for or relating to the
construction, maintenance or operation of certain transmission lines, the land
and rights for which are owned by the Company, which are either not built or now
being constructed.
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<PAGE> 14
III.
ELECTRIC DISTRIBUTION SYSTEMS
All the electric distribution systems of the Company, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including substations, transformers, switchboards, towers, poles, wires,
insulators, subways, trenches, conduits, manholes, cables, meters and other
appliances and equipment, and all other property, real or personal, forming a
part of or appertaining to or used, occupied or enjoyed in connection with such
distribution systems or any of them or adjacent thereto; together with all real
property, rights of way, easements, permits, privileges, franchises, grants and
rights, for or relating to the construction, maintenance or operation thereof,
through, over, under or upon any private property or any public streets or
highways within as well as without the corporate limits of any municipal
corporation.
IV.
ELECTRIC SUBSTATIONS,
SWITCHING STATIONS AND SITES
All the substations, switching stations and sites of the Company,
constructed or otherwise acquired by it and not heretofore described in the
Indenture or any supplement thereto and not heretofore released from the lien of
the Indenture, for transforming, regulating, converting or distributing or
otherwise controlling electric current at any of its plants and elsewhere,
together with all buildings, transformers, wires, insulators and other
appliances and equipment, and all other property, real or personal, forming a
part of or appertaining to or used, occupied or enjoyed in connection with any
of such substations and switching stations, or adjacent thereto, with sites to
be used for such purposes.
V.
GAS COMPRESSOR STATIONS, GAS PROCESSING PLANTS,
DESULPHURIZATION STATIONS, METERING STATIONS,
ODORIZING STATIONS, REGULATORS AND SITES
All the compressor stations, processing plants, desulphurization
stations, metering stations, odorizing stations, regulators and sites of the
Company, constructed or otherwise acquired by it and not heretofore described in
the Indenture or any supplement thereto and not heretofore released from the
lien of the Indenture, for compressing, processing, desulphurizing, metering,
odorizing and regulating manufactured or natural gas at any of its plants and
elsewhere, together with all buildings, meters and other appliances and
equipment, and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with any of such
purposes, with sites to be used for such purposes.
VI.
GAS STORAGE FIELDS
The natural gas rights and interests of the Company, including wells
and well lines (but not including natural gas, oil and minerals), the gas
gathering system, the underground gas storage rights, the
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<PAGE> 15
underground gas storage wells and injection and withdrawal system used in
connection therewith, constructed or otherwise acquired by it and not heretofore
described in the Indenture or any supplement thereto and not heretofore released
from the lien of the Indenture: In the Overisel Gas Storage Field, located in
the Township of Overisel, Allegan County, and in the Township of Zeeland, Ottawa
County, Michigan; in the Northville Gas Storage Field located in the Township of
Salem, Washtenaw County, Township of Lyon, Oakland County, and the Townships of
Northville and Plymouth and City of Plymouth, Wayne County, Michigan; in the
Salem Gas Storage Field, located in the Township of Salem, Allegan County, and
in the Township of Jamestown, Ottawa County, Michigan; in the Ray Gas Storage
Field, located in the Townships of Ray and Armada, Macomb County, Michigan; in
the Lenox Gas Storage Field, located in the Townships of Lenox and Chesterfield,
Macomb County, Michigan; in the Ira Gas Storage Field, located in the Township
of Ira, St. Clair County, Michigan; in the Puttygut Gas Storage Field, located
in the Township of Casco, St. Clair County, Michigan; in the Four Corners Gas
Storage Field, located in the Townships of Casco, China, Cottrellville and Ira,
St. Clair County, Michigan; in the Swan Creek Gas Storage Field, located in the
Township of Casco and Ira, St. Clair County, Michigan; and in the Hessen Gas
Storage Field, located in the Townships of Casco and Columbus, St. Clair,
Michigan.
VII.
GAS TRANSMISSION LINES
All the gas transmission lines of the Company, constructed or otherwise
acquired by it and not heretofore described in the Indenture or any supplement
thereto and not heretofore released from the lien of the Indenture, including
gas mains, pipes, pipelines, gates, valves, meters and other appliances and
equipment, and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with such
transmission lines or any of them or adjacent thereto; together with all real
property, right of way, easements, permits, privileges, franchises and rights
for or relating to the construction, maintenance or operation thereof, through,
over, under or upon any private property or any public streets or highways,
within as well as without the corporate limits of any municipal corporation.
VIII.
GAS DISTRIBUTION SYSTEMS
All the gas distribution systems of the Company, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including tunnels, conduits, gas mains and pipes, service pipes, fittings,
gates, valves, connections, meters and other appliances and equipment, and all
other property, real or personal, forming a part of or appertaining to or used,
occupied or enjoyed in connection with such distribution systems or any of them
or adjacent thereto; together with all real property, rights of way, easements,
permits, privileges, franchises, grants and rights, for or relating to the
construction, maintenance or operation thereof, through, over, under or upon any
private property or any public streets or highways within as well as without the
corporate limits of any municipal corporation.
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IX.
OFFICE BUILDINGS,
SERVICE BUILDINGS, GARAGES, ETC.
All office, garage, service and other buildings of the Company,
wherever located, in the State of Michigan, constructed or otherwise acquired by
it and not heretofore described in the Indenture or any supplement thereto and
not heretofore released from the lien of the Indenture, together with the land
on which the same are situated and all easements, rights of way and
appurtenances to said lands, together with all furniture and fixtures located in
said buildings.
X.
TELEPHONE PROPERTIES AND
RADIO COMMUNICATION EQUIPMENT
All telephone lines, switchboards, systems and equipment of the
Company, constructed or otherwise acquired by it and not heretofore described in
the Indenture or any supplement thereto and not heretofore released from the
line of the Indenture, used or available for use in the operation of its
properties, and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with such telephone
properties or any of them or adjacent thereto; together with all real estate,
rights of way, easements, permits, privileges, franchises, property, devices or
rights related to the dispatch, transmission, reception or reproduction of
messages, communications, intelligence, signals, light, vision or sound by
electricity, wire or otherwise, including all telephone equipment installed in
buildings used as general and regional offices, substations and generating
stations and all telephone lines erected on towers and poles; and all radio
communication equipment of the Company, together with all property, real or
personal (except any in the Indenture expressly excepted), fixed stations,
towers, auxiliary radio buildings and equipment, and all appurtenances used in
connection therewith, wherever located, in the State of Michigan.
XI.
OTHER REAL PROPERTY
All other real property of the Company and all interests therein, of
every nature and description (except any in the Indenture expressly excepted)
wherever located, in the State of Michigan, acquired by it and not heretofore
described in the Indenture or any supplement thereto and not heretofore released
from the line of the Indenture.)
[Insert legal descriptions for land in each county.]
SECTION 9. The Company is a transmitting utility under Section 9401(5)
of the Michigan Uniform Commercial Code (M.C.L. 440.9401(5)) as defined in
M.C.L. 440.9105(n).
IN WITNESS WHEREOF, said Consumers Energy Company has caused this
Supplemental Indenture to be executed in its corporate name by its Chairman of
the Board, President, a Vice President or its Treasurer and its corporate seal
to be hereunto affixed and to be attested by its Secretary or an Assistant
Secretary, and said The Chase Manhattan Bank, as Trustee as aforesaid, to
evidence its acceptance hereof, has caused this Supplemental Indenture to be
executed in its corporate name by a Vice President and its
15
<PAGE> 17
corporate seal to be hereunto affixed and to be attested by a Trust Officer, in
several counterparts, all as of the day and year first above written.
16
<PAGE> 18
CONSUMERS ENERGY COMPANY
(SEAL) By
-----------------------------------
Attest:
- ----------------------------
Signed, sealed and delivered
by CONSUMERS ENERGY COMPANY
in the presence of
- ----------------------------
- ----------------------------
STATE OF MICHIGAN )
ss.
COUNTY OF JACKSON )
The foregoing instrument was acknowledged before me this
______ day of ______________, 1998, by _______________________________,
_________________________________________________ of CONSUMERS ENERGY COMPANY, a
Michigan corporation, on behalf of the corporation.
----------------------------------------
, Notary Public
[Seal] Jackson County, Michigan
My Commission Expires:
S-1
<PAGE> 19
THE CHASE MANHATTAN BANK, AS TRUSTEE
(SEAL) By
------------------------------------
Attest: Vice President
- ----------------------------
Trust Officer
Signed, sealed and delivered
by THE CHASE MANHATTAN BANK
in the presence of
- ----------------------------
- ----------------------------
STATE OF NEW YORK )
ss.
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this
______ day of ________________, 1998, by _____________________________________,
a Vice President of THE CHASE MANHATTAN BANK, a New York corporation, on behalf
of the corporation.
--------------------------------------
Notary Public
New York County, New York
My Commission Expires:
Prepared by: When recorded, return to:
Kimberly A. Connelly Consumers Energy Company
212 West Michigan Avenue General Services Real Estate Department
Jackson, MI 49201 Attn: Nancy P. Fisher, P-21-410B
1945 W. Parnall Road
Jackson, MI 49201
S-2
<PAGE> 1
[SPECIMEN]
EXHIBIT 4(f)
[AMBAC FINANCIAL GUARANTY INSURANCE POLICY LETTERHEAD]
Obligor: Policy Number:
Obligations: Premium:
AMBAC ASSURANCE CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of
this Policy, hereby agrees to pay to United States Trust Company of New
York, as trustee, or its successor (the "Insurance Trustee"), for the
benefit of the Obligees, that portion of the principal of and interest on
the above-described obligations (the "Obligations") which shall become
Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor.
Ambac will make such payments to the Insurance Trustee within one (1)
business day following notification to Ambac of Nonpayment. Upon an
Obligee's presentation and surrender to the Insurance Trustee of such
unpaid Obligations or appurtenant coupons, uncanceled and in bearer form
and free of any adverse claim, the Insurance Trustee will disburse to the
Obligee the face amount of principal and interest which is then Due for
Payment but is unpaid. Upon such disbursement, Ambac shall become the
owner of the surrendered Obligations and coupons and shall be fully subrogated
to all of the Obligee's rights to payment.
In cases where the Obligations are issuable only in a form whereby principal
is payable to registered Obligees or their assigns, the Insurance Trustee
shall disburse principal to an Obligee as aforesaid only upon presentation
and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled
and free of any adverse claim, together with an instrument of assignment, in
form satisfactory to the Insurance Trustee duly executed by the Obligee or
such Obligee's duly authorized representative, so as to permit ownership of
such Obligation to be registered in the name of Ambac or its nominee. In
cases where the Obligations are issuable only in a form whereby interest is
payable to registered Obligees or their assigns the Insurance Trustee shall
disburse interest to an Obligee as aforesaid only upon presentation to the
Insurance Trustee of proof that the claimant is the person entitled to the
payment of interest on the Obligation and delivery to the Insurance Trustee
of an instrument of assignment, in form satisfactory to the Insurance
Trustee, duly executed by the claimant Obligee or such Obligee's duly
authorized representative, transferring to Ambac all rights under such
Obligation to receive the interest in respect of which the insurance
disbursement was made. Ambac shall be subrogated to all of the Obligees'
rights to payment on registered Obligations to the extent of the insurance
disbursements so made.
In the event that a trustee or paying agent for the Obligations has notice
that any payment of principal of or interest on an Obligation which has become
Due for Payment and which is made to an Obligee by or on behalf of the Obligor
has been deemed a preferential transfer and theretofore recovered from the
Obligee pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court of competent jurisdiction, such
Obligee will be entitled to payment from Ambac to the extent of such
recovery if sufficient funds are not otherwise available.
As used herein, the term "Obligee" means any person other than the Obligor who,
at the time of Nonpayment, is the owner of an Obligation or of a coupon
appertaining to an Obligation. As used herein, "Due for Payment", when
referring to the principal of Obligations, is when the stated maturity date
or mandatory redemption date for the application of a required sinking fund
installment has been reached and does not refer to any earlier date on which
payment is due by reason of call for redemption (other than by application of
required sinking fund installments), acceleration or other advancement of
maturity; and, when referring to interest on the Obligations, is when the stated
date for payment of interest has been reached. As used herein, "Nonpayment"
means the failure of the Obligor to have provided sufficient funds to the paying
agent for payment in full of all principal of and interest on the Obligations
which are Due for Payment.
This Policy is noncancelable. The premium on this Policy is not refundable for
any reason, including payment of the Obligations prior to maturity. This Policy
does not insure against loss of any prepayment or other acceleration payment
which at any time may become due in respect of any Obligation, other than at the
sole option of Ambac, nor against any risk other than Nonpayment.
In witness whereof, Ambac has caused this Policy to be affixed with a facsimile
of its corporate seal and to be signed by its duly authorized officers in
facsimile to become effective as its original seal and signatures and binding
upon Ambac by virtue of the countersignature of its duly authorized
representative.
P. Lassiter [SEAL] Stephen D. Cooke
President Secretary
Effective Date: Authorized Representative
UNITED STATES TRUST COMPANY OF NEW YORK acknowledges H. William Weber
that it has agreed to perform the duties of Insurance Authorized Officer
Trustee under this Policy.
Form No.: 2B-0012 (7/97)
