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REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONSUMERS ENERGY COMPANY
(Exact name of registrant as specified in its charter)
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MICHIGAN 4939 38-0442310
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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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)
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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) 436-9200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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(d)
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. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
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Senior Remarketed Secured Notes,
Series B, Due 2018 $200,000,000 100% $200,000,000 $59,000.00
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(1) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
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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CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF THE
INFORMATION REQUIRED BY PART I OF FORM S-4
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ITEM NUMBER AND CAPTION LOCATION IN THE PROSPECTUS
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A. Information About the Transaction
1. Forepart of Registration Statement and
Outside Front Cover Page of the Prospectus................. Front Cover Page of the Registration Statement; Outside Front
Cover Page of the Prospectus
2. Inside Front and Outside Back Cover Pages of the
Prospectus................................................. Inside Front Cover Page of the Prospectus; Outside Back Cover
Page of the Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information...................................... Prospectus Summary; Selected Consolidated Financial Data;
Ratio of Earnings to Fixed Charges; Incorporation of Certain
Documents by Reference
4. Terms of the Transaction................................... Prospectus Summary; Use of Proceeds; The Exchange Offer;
Description of Exchange Notes; Certain United States Federal
Income Tax Consequences; Plan of Distribution
5. Pro Forma Financial Information............................ *
6. Material Contracts with the Company Being
Acquired................................................... *
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be Underwriters........... *
8. Interests of Named Experts and Counsel..................... Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities............................. *
B. Information About the Registrant
10. Information with Respect to S-3 Registrants................ Available Information; Incorporation of Certain Documents by
Reference; Prospectus Summary; Consumers Energy Company;
Selected Consolidated Financial Data; Use of Proceeds; Ratio
of Earnings to Fixed Charges
11. Incorporation of Certain Information by
Reference.................................................. Incorporation of Certain Documents by Reference
12. Information With Respect to S-2 or S-3
Registrants................................................ *
13. Incorporation of Certain Information by
Reference.................................................. *
14. Information With Respect to Registrants Other
Than S-3 or S-2 Registrants................................ *
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C. Information About the Company Being Acquired
15. Information With Respect to S-3 Companies.................. *
16. Information With Respect to S-2 or S-3
Companies.................................................. *
17. Information With Respect to Companies Other than
S-3 or S-2 Companies....................................... *
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations are
to be Solicited............................................ *
19. Information if Proxies, Consents or Authorizations are
not to be Solicited, or in an Exchange Offer............... Directors and Executive Officers; Executive Compensation; The
Exchange Offer
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* Item is omitted because response is negative or item is inapplicable.
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PROSPECTUS
DATED OCTOBER __, 1998
OFFER TO EXCHANGE
SENIOR REMARKETED SECURED NOTES, SERIES B, DUE 2018
FOR ANY AND ALL OUTSTANDING SENIOR REMARKETED SECURED NOTES, SERIES A, DUE
2018 OF
[CONSUMERS ENERGY LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED.
Consumers Energy Company, a Michigan corporation ("Consumers"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal, to exchange up to
an aggregate principal amount of $200 million of its Senior Remarketed Secured
Notes, Series B, Due 2018 (the "Exchange Notes") for an equal principal amount
of its Senior Remarketed Secured Notes, Series A, Due 2018 (the "Notes"). The
Exchange Notes will be substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Notes for which they may
be exchanged pursuant to the Exchange Offer, except for certain transfer
restrictions, registration rights and interest rate step-up provisions
applicable only to the Notes. The Notes have been, and the Exchange Notes will
be, issued under the Indenture (as defined herein). The Exchange Notes will bear
interest from (the date of issuance of the Notes for which the Exchange Offer is
being made) or from the most recent interest payment date to which interest on
the Exchange Notes has been paid at the rate of 6.50% per annum (the "Initial
Interest Rate") until June 15, 2005 (the "Initial Interest Rate Period").
Interest on the Exchange Notes during the Initial Interest Rate Period will be
payable semiannually on June 15 and December 15, commencing December 15, 1998.
Thereafter, each Exchange Note will bear interest at Consumers' option in either
the Daily Interest Rate Mode, the Weekly Interest Rate Mode, the Commercial
Paper Rate Mode, the Long Term Rate Mode (each a "Floating Interest Rate Mode"),
or the Fixed Interest Rate Mode (all such terms as defined herein). Each
Exchange Note may have the same or a different interest rate, Interest Rate
Mode, Interest Rate Adjustment Date or Interest Rate Period (all such terms as
defined herein) from each other Exchange Note. See "Description of Exchange
Notes" herein. The Exchange Notes will be redeemable, in whole or in part, at
the option of Consumers, until 60 days prior to the expiration of the Initial
Interest Rate Period at a redemption price equal to the greater of (i) 100% of
their principal amount or (ii) the sum of the present values of the remaining
scheduled payments of principal and interest (not including the portion of any
such payments of interest accrued as of the redemption date) discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Yield (as defined herein) plus 20 basis
points, plus, in each case, accrued interest to the date of redemption. Interest
rates on any Exchange Notes in a Floating Interest Rate Mode, Long Term Rate
Mode or Fixed Rate Mode will be periodically established as described herein by
one or more Remarketing Agents (as defined herein) selected by Consumers. The
Exchange Notes will then be subject, at any time, to the optional redemption, in
whole or in part, by Consumers commencing 60 days after the Initial Interest
Rate Period, subject to certain exceptions, as provided in the applicable
Prospectus Supplement. See "Description of Exchange Notes" herein.
Until the Release Date (as defined herein), the Exchange Notes will be secured
by First Mortgage Bonds (as defined herein) issued and delivered by Consumers to
the Trustee. See "Description of Exchange Notes -- Security; Release Date." On
the Release Date, the Exchange Notes will cease to be secured, will become
unsecured general obligations of Consumers and will rank on a parity with other
unsecured indebtedness of Consumers (unless otherwise secured under the limited
circumstances described under the caption "Description of Exchange Notes --
Limitation on Liens").
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October , 1998.
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(continued from front cover page)
The Notes were sold by Consumers on June 24, 1998 to the Initial Purchasers (as
defined herein) who offered a portion of the Notes in the United States to
qualified institutional buyers in reliance on Rule 144A of the Securities Act of
1933, as amended (the "Securities Act"), and the remainder of the Notes were
offered by the Initial Purchasers outside the United States in reliance on
Regulation S under the Securities Act. See "The Exchange Offer." Accordingly,
the Notes may not be reoffered, resold or otherwise transferred in the United
States unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of Consumers contained in the Registration Rights Agreement dated
June 24, 1998 (the "Registration Rights Agreement") by and among Consumers and
Goldman, Sachs & Co. Morgan Stanley Dean Witter, and First Chicago Capital
Markets, Inc. (the last three named entities collectively referred to herein as
the "Initial Purchasers"), with respect to the initial sale of the Notes.
Consumers will not receive any proceeds from the Exchange Offer. Consumers will
pay all the expenses incident to the Exchange Offer. Tenders of Notes pursuant
to the Exchange Offer may be withdrawn at any time prior to the Expiration Date
(as defined) for the Exchange Offer. See "The Exchange Offer."
The Exchange Offer is being made in reliance on certain no-action positions that
have been published by the staff of the Securities and Exchange Commission (the
"Commission") which require each tendering note holder to represent that it is
acquiring the Exchange Notes in the ordinary course of its business and that
such holder does not intend to participate and has no arrangement or
understanding with any person to participate in a distribution of the Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of the Exchange Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Notes where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities.
There has not previously been any public market for the Exchange Notes.
Consumers does not intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system. There
can be no assurance that an active market for the Exchange Notes will develop.
To the extent that an active market for the Exchange Notes does develop, the
market value of the Exchange Notes will depend on market conditions, Consumers's
financial conditions and other factors. Such conditions might cause the Exchange
Notes, to the extent they are actively traded, to trade at a significant
discount from face value.
The Exchange Offer will expire at 5:00 p.m., New York City time, on 1998,
or such later date and time to which it may be extended by Consumers, which in
no event shall be later than 1998. The Exchange Offer is not conditioned
upon any minimum principal amount of Notes being tendered for exchange pursuant
to the Exchange Offer.
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AVAILABLE INFORMATION
Consumers is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Consumers has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act for the registration of the Exchange Notes
offered hereby (the "Exchange Offer Registration Statement"). This Prospectus,
which constitutes a part of the Exchange Offer Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in exhibits and schedules to the Exchange Offer
Registration Statement as permitted by the rules and regulations of the
Commission. For further information about Consumers and the Exchange Notes
offered hereby, reference is made to the Exchange Offer Registration Statement,
including the exhibits thereto, which may, along with reports, proxy statements
and other information filed by Consumers with the Commission pursuant to the
informational requirements of the Exchange Act, be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048; and Citicorp Center, 5000 West Madison Street (Suite 1400), Chicago,
Illinois 60601. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates, or through the World Wide Web (http://www.sec.gov).
Such reports, proxy statements and other information concerning consumers may
also be inspected and copied at the offices of the New York Stock Exchange, Inc.
20 Broad Street, New York, New York 10005, the securities exchange on which
certain of Consumers' securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Consumers (File No. 1-5611)
are incorporated by reference in this Prospectus:
(a) Consumers' Annual Report on Form 10-K for the year ended December 31,
1997;
(b) Consumers' Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; and
(c) Consumers' Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
All documents and reports subsequently filed by Consumers with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of the Exchange Notes shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents (such documents, and the documents enumerated
above, being hereinafter referred to as "Incorporated Documents").
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN. CONSUMERS WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY Of THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE
FOREGOING DOCUMENTS INCORPORATED BY REFERENCE HEREIN, OTHER THAN CERTAIN
EXHIBITS TO SUCH DOCUMENTS. REQUESTS SHOULD BE DIRECTED TO CONSUMERS ENERGY
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES LOCATED AT 212 WEST MICHIGAN AVENUE,
JACKSON, MICHIGAN 49201, ATTENTION: CHIEF FINANCIAL OFFICER, TELEPHONE: (517)
788-0550. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS
SHOULD BE MADE BY , 1998.
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent any
statement contained herein or in any subsequently filed document, which is also
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
Certain information contained in this Prospectus summarizes, is based upon or
refers to information and financial statements contained in one or more
Incorporated Documents; accordingly, such information contained herein is
qualified in its entirety by reference to such documents and should be read in
conjunction therewith.
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PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Prospectus and is qualified in its entirety by
such more detailed information and consolidated financial statements, including
the notes thereto, incorporated by reference in this Prospectus.
THE NOTE OFFERING
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THE NOTES ........................................... The Notes were sold by Consumers on June 24, 1998 and were subsequently
offered to qualified institutional buyers pursuant to Rule 144A and to
institutional investors that are accredited investors in a manner exempt
from registration under the Securities Act as well as to purchasers pursuant
to Regulation S under the Securities Act.
REGISTRATION RIGHTS AGREEMENT........................ In connection with the offering of the Notes, Consumers entered into the
Registration Rights Agreement, which granted holders of the Notes certain
exchange and registration rights. The Exchange Offer is intended to satisfy
the obligations of Consumers with respect to such exchange and registration
rights which, except for limited instances involving the Initial Purchasers
(as defined in the Registration Rights Agreement) or Holders (as defined in
the Registration Rights Agreement) who are not eligible to participate in
the Exchange Offer, terminate upon the consummation of the Exchange Offer.
See "The Exchange Offer."
THE EXCHANGE OFFER
SECURITIES OFFERED................................... $200 million aggregate principal amount of Senior Remarketed Secured Notes,
Series B, Due 2018.
THE EXCHANGE OFFER................................... The Exchange Notes are being offered in exchange for an equal principal
amount of Notes. As of the date hereof, $200 million aggregate principal
amount of Notes are outstanding. The Notes may be tendered only in integral
multiples of $1,000.
RESALE OF EXCHANGE NOTES............................. Based on interpretations by the Staff of the Commission as set forth in no
action letters issued to third parties, Consumers believes that the
Exchange Notes issued pursuant to the Exchange Offer may be offered for
resale, resold or otherwise transferred by any holder thereof (other
than any such holder that is a broker-dealer or an "affiliate" of Consumers
within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that (i) such Exchange Notes are acquired in the
ordinary course of business, (ii) at the time of the commencement
of the Exchange Offer, such holder has no arrangement with any
person to participate in a distribution of the Exchange Notes and (iii)
such holder is not engaged in, and does not intend to engage in, a
distribution of the Exchange Notes. By tendering the Notes in exchange for
the Exchange Notes, each holder will represent to Consumers that: (i) it
is not such an affiliate of Consumers, (ii) any Exchange Notes to be
received by it will be acquired in the ordinary course of business and
(iii) at the time of the commencement of the Exchange Offer it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Exchange Notes. If a holder of Notes is unable to make the foregoing
representations, such holder may not rely on the
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applicable interpretations of the Staff of the Commission and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that, by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of the
Exchange Notes received in exchange for the Notes where such Exchange Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. Consumers has agreed that, starting on the Expiration
Date and ending on the close of business on the first anniversary of the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
To comply with the securities laws of certain jurisdictions, it may be necessary
to qualify for sale or to register the Exchange Notes prior to offering or selling
such Exchange Notes. Consumers has agreed, pursuant to the Registration Rights
Agreement and subject to certain specified limitations therein, to cooperate with
selling Holders or underwriters in connection with the registration and
qualification of the Exchange Notes for offer or sale under the securities or "blue
sky" laws of such jurisdictions as may be necessary to permit the holders of
Exchange Notes to trade the Exchange Notes without any restrictions or
limitations under the securities laws of the several states of the United States.
CONSEQUENCES OF FAILURE TO
EXCHANGE NOTES............................... Upon consummation of the Exchange Offer, subject to certain limited
exceptions, holders of Notes who do not exchange their Notes for Exchange
Notes in the Exchange Offer will no longer be entitled to registration rights and
will not be able to offer or sell their Notes, unless such Notes are subsequently
registered under the Securities Act (which, subject to certain limited exceptions,
Consumers will have no obligation to do), except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable state
securities laws. See "The Exchange Offer -- Consequences of Failure to
Exchange."
EXPIRATION DATE ............................. 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer
is extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
CONDITIONS TO THE EXCHANGE OFFER............. The Exchange Offer is not conditioned upon any minimum principal amount of
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions, which may be waived by Consumers. See "The
Exchange Offer- Conditions." Except for the requirements of applicable United
States federal and state securities laws, there are no United States federal or
state regulatory requirements to be complied with or obtained by Consumers in
connection with the Exchange Offer.
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PROCEDURES FOR TENDERING
NOTES..................................... Each holder of Notes wishing to accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, in accordance with the
instructions contained herein and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together with any other required
documentation to the Exchange Agent at the address set forth herein and effect
a tender of Notes pursuant to the procedures for book-entry transfer as provided
for herein. See "The Exchange Offer - Procedures for Tendering" and "Book-
Entry Transfer."
GUARANTEED DELIVERY PROCEDURES............ Holders of Notes who wish to tender their Notes and who cannot deliver their
Notes and a properly completed Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Notes according to the guaranteed delivery
procedures set forth under "The Exchange Offer - Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS......................... Tenders of Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. To withdraw a tender of Notes, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth under "The Exchange Offer-Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF NOTES
AND DELIVERY OF EXCHANGE NOTES............ Subject to certain conditions, any and all Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date
will be accepted for exchange. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly following the Expiration Date. See
"The Exchange Offer - Acceptance of Notes for Exchange; Delivery of
Exchange Notes."
CERTAIN UNITED STATES TAX CONSEQUENCES ... The exchange of Notes for Exchange Notes will not constitute a taxable
exchange for United States federal income tax purposes. See "Certain United
States Federal Income Tax Consequences."
EXCHANGE AGENT............................ The Chase Manhattan Bank is serving as exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
FEES AND EXPENSES......................... All expenses incident to Consumers's consummation of the Exchange Offer and
compliance with the Registration Rights Agreement will be borne by Consumers.
See "The Exchange Offer- Fees and Expenses."
USE OF PROCEEDS........................... There will be no cash proceeds payable to Consumers from the issuance of the
Exchange Notes pursuant to the Exchange Offer. Approximately $136 million
of the proceeds from the sale of the Notes were used to effect the tender for the
then outstanding Consumers' 8 7/8% First Mortgage Bonds which were due
November 1999. The remaining net proceeds of approximately $64 million
were used for general corporate purposes. See "Use of Proceeds."
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THE EXCHANGE NOTES
SECURITIES OFFERED....................... $200 million aggregate principal amount of Senior Remarketed Secured Notes,
Series B, Due 2018.
MATURITY................................. June 15, 2018
INTEREST RATE............................ The Exchange Notes will bear interest at the rate of 6.50% per annum until June
15, 2005 (the "Initial Interest Rate Period"). Interest on the Exchange Notes
during the Initial Interest Rate Period will be payable semiannually on June 15
and December 15, commencing December 15, 1998. Thereafter, each Exchange
Note will bear interest at Consumers' option in either the Daily Interest Rate
Mode, the Weekly Interest Rate Mode, the Commercial Paper Rate Mode, the
Long Term Rate Mode or the Fixed Interest Rate Mode (all such terms as
defined herein). Each Exchange Note may have the same or a different interest
rate, Interest Rate Mode, Interest Rate Adjustment Date or Interest Rate Period
(all such terms as defined herein) from each other Exchange Note. After June 15,
2005, interest rates will be periodically established by one or more Remarketing
Agents (as defined herein) selected by Consumers. See "Description of
Exchange Notes - Interest - Floating Interest Rates - Interest Rate Modes -
Conversion."
OPTIONAL REDEMPTION...................... The Exchange Notes will be redeemable, in whole or in part, at the option of
Consumers, until 60 days prior to the expiration of the Initial Interest Rate Period
at a redemption price equal to the greater of (i) 100% of their principal amount
or (ii) the sum of the present values of the remaining scheduled payments of
principal and interest (not including the portion of any such payments of interest
accrued as of the redemption date) discounted to the date of redemption on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Yield (as defined herein) plus 20 basis points, plus, in each case,
accrued interest to the date of redemption. The Exchange Notes will then be
subject, at any time, to the optional redemption, in whole or in part, by
Consumers commencing 60 days after the expiration of the Initial Interest Rate
Period, subject to certain exceptions. See "Description of Exchange Notes -
Optional Redemption."
RANKING.................................. Until the Release Date (as defined herein), all of the Senior Notes (as defined
herein) outstanding will be secured by one or more series of First Mortgage
Bonds issued and delivered by Consumers to the Trustee. On the Release Date,
the Senior 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
senior unsecured indebtedness of Consumers. See "Description of Exchange
Notes - General."
CERTAIN COVENANTS........................ The Exchange Notes will be issued under an Indenture which contains covenants
that, among other things, limit the ability of Consumers to incur certain
additional liens or engage in certain sale-leaseback transactions following the
Release Date. See "Description of Exchange Notes - Certain Covenants of
Consumers."
FORM AND DENOMINATION.................... The Exchange Notes will be fully registered under the Securities Act and will be
issued in the form of one or more Global Exchange Notes in fully registered
form, deposited with a custodian for and registered in the name of a nominee
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of the Depositary. Beneficial interests in the Global Exchange Notes will be
shown on, and transfers thereof will be effected through, records maintained
by the Depositary and its Participants. See "Description of Exchange Notes -
Registration, Transfer and Exchange."
EXCHANGE OFFER, REGISTRATION RIGHTS....... Pursuant to a Registration Rights Agreement among Consumers and the Initial
Purchasers, Consumers agreed, among other things, (i) to file a registration
statement (the "Exchange Offer Registration Statement") on or prior to 150 days
after the closing of the offering (the "Closing") with respect to an offer to
exchange the Notes for a new issue of debt securities of Consumers (the
"Exchange Notes") registered under the Securities Act, with terms substantially
identical to those of the Notes (the "Exchange Offer") and (ii) to use its best
efforts to cause the Exchange Offer Registration Statement to be declared
effective by the Commission on or prior to 180 days after Closing. In certain
circumstances, Consumers will be required to provide a shelf registration
statement (the "Shelf Registration Statement") to cover resales of the Notes by
the Holders thereof. If Consumers fails to satisfy its registration obligation under
the Registration Rights Agreement, Consumers will be required to pay liquidated
damages ("Liquidated Damages") to the Holders of Notes under certain
circumstances. See "The Exchange Offer - Registration Rights; Liquidated
Damages."
</TABLE>
6
<PAGE> 12
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 megawatts ("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,
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 of Certain Documents by Reference."
7
<PAGE> 13
\
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 of Certain Documents by Reference."
<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>
USE OF PROCEEDS
There will be no cash proceeds payable to Consumers from the issuance
of the Exchange Notes pursuant to the Exchange Offer. Net proceeds from the sale
of the Notes in the amount of approximately $136 million were used to effect the
tender for the then outstanding Consumers' 8 7/8% First Mortgage Bonds which
were due November 15, 1999. The remaining net proceeds of approximately $64
million were used for general corporate purposes.
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>
Year Ended December 31,
-----------------------
Twelve Months
Ended 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.
8
<PAGE> 14
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued under the Indenture, dated as of February
1, 1998, as supplemented (collectively, the "Indenture") between Consumers and
The Chase Manhattan Bank (the "Trustee"). 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.
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." ON THE
RELEASE DATE, THE SENIOR NOTES (INCLUDING THE EXCHANGE 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 Exchange 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 Exchange Notes), in connection with future
issues of such other debt securities.
There are no provisions in the Indenture or the Exchange Notes that require
Consumers to redeem, or permit the holders to cause a redemption of, the
Exchange Notes or that otherwise protect the holders in the event that Consumers
incurs substantial additional indebtedness, whether or not in connection with a
change in control of Consumers.
INTEREST
General. The Exchange Notes will initially bear interest at a rate 6.50% per
annum (the "Initial Interest Rate") through June 15, 2005 (the "Initial Interest
Rate Period"). Thereafter, each Exchange Note will bear interest at Consumers'
option in either the Daily Interest Rate Mode, the Weekly Interest Rate Mode,
the Commercial Paper Term Mode, the Long Term Rate Mode or the Fixed Interest
Rate Mode. Each Exchange Note may bear interest in the same or a different
Interest Rate Mode from other Exchange Notes. The interest rate for Exchange
Notes will be established periodically as described herein by a remarketing
agent selected by Consumers (the "Remarketing Agent"). Consumers also may
appoint one or more standby remarketing agents for any Remarketing Agent (each,
a "Standby Remarketing Agent") by an agreement supplemental to the Remarketing
Agreement. See "-- Remarketing -- The Remarketing Agreement."
Interest will be payable on any Exchange Note at maturity and (i) bearing
interest at the Initial Interest Rate, on June 15 and December 15 of each year
through the Initial Interest Rate Period; (ii) for any Interest Rate Period in
the Commercial Paper Term Mode, on the Interest Rate Adjustment Date commencing
the next succeeding Interest Rate Period for such Exchange Note and on such
other dates (if any) as will be established upon conversion of such Exchange
Note to the Commercial Paper Term Mode or upon remarketing of the Exchange Note
in a new Interest Rate Period in the Commercial Paper Mode; (iii) in the Daily
or Weekly Interest Rate Mode, on the first Business Day of each month (unless
such day is less than 11 days after conversion to such Interest Rate Mode, in
which case interest will be payable on the first Business Day of the next
succeeding month); (iv) in the Long Term Rate Mode or Fixed Interest Rate Mode,
at least semiannually on such dates as will be established by Consumers upon
conversion of such Exchange Note to such Long Term Rate Mode (or upon
remarketing of the Exchange Note in a new Interest Rate Period in the Long Term
Rate Mode, as the case may be) or Fixed Interest Rate Mode and set forth in the
applicable Exchange Note in the case of a fixed interest rate, or as described
below under "Floating Interest Rates" in the case of a floating interest rate,
and on the Interest Rate Adjustment Date commencing the
9
<PAGE> 15
next succeeding Interest Rate Period, in the case of Exchange Notes in the Long
Term Rate Mode. Such interest will be payable to the holder thereof as of the
related Record Date, which for any Exchange Note (x) in the Daily or Weekly
Interest Rate Mode, is the last calendar day of the month preceding an Interest
Payment Date; (y) in the Commercial Paper Term Mode, is the Business Day prior
to the related Interest Payment Date; and (z) bearing interest at the Initial
Interest Rate or in the Long Term Rate Mode or Fixed Interest Rate Mode, is 15
days prior to the related Interest Payment Date. If any Interest Payment Date
would otherwise be a day that is not a Business Day, such Interest Payment Date
will be postponed to the next succeeding Business Day, and no interest will
accrue on such payment for the period from and after such Interest Payment Date
to the date of such payment on the next succeeding Business Day. Interest on the
Exchange Notes bearing interest in the Daily or Weekly Interest Rate Mode, the
Commercial Paper Term Mode or at a floating interest rate during a Long Term
Rate Period will be computed on the basis of actual days elapsed over 360;
provided that, if an applicable Interest Rate Basis is the CMT Rate or Treasury
Rate (each as defined below), interest will be computed on the basis of actual
days elapsed over the actual number of days in the year. Interest on the
Exchange Notes bearing interest at a fixed rate in the Long Term Rate Mode or
Fixed Interest Rate Mode will be computed on the basis of a year of 360 days
consisting of twelve 30-day months; and interest on the Exchange Notes at the
Initial Interest Rate will be computed on the basis of (a) actual days elapsed
over 360 if the Initial Interest Rate Period is less than one year or (b) a year
of 360 days consisting of twelve 30-day months if the Initial Interest Rate
Period is one year or more.
As used herein, "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions located in
the State of Michigan or in the state in which the principal corporate trust
office of the Note Trustee is located, are authorized or obligated by or
pursuant to law or executive order to close; provided, however, that with
respect to Exchange Notes in the Long Term Rate Mode as to which LIBOR is an
applicable Interest Rate Basis, such day is also a London Business Day (as
hereinafter defined). "London Business Day" means (i) if the Index Currency (as
hereinafter defined) is other than European Currency Units or any successor
currency (collectively, "ECU"), any day on which dealings in such Index Currency
are transacted in the London interbank market or (ii) if the Index Currency is
ECU, any day that does not appear as an ECU non-settlement day on the display
designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so
designated by the ECU Banking Association) or, if ECU non-settlement days do not
appear on the page (and are not so designated), is not a day on which payments
in ECU cannot be settled in the international interbank market.
Determination of Interest Rates. The interest rate and, in the case of a
floating interest rate, the Spread (if any) and the Spread Multiplier (if any)
for any Exchange Note will be established by the applicable Remarketing Agent in
a remarketing (as described below) or otherwise not later than the first day of
each succeeding Interest Rate Period for such Exchange Note, which must be a
Business Day (each, an "Interest Rate Adjustment Date"), and will be the minimum
rate of interest and, in the case of a floating interest rate, the Spread (if
any) and the Spread Multiplier (if any) necessary in the judgment of such
Remarketing Agent to produce a par bid in the secondary market for such Exchange
Note on the date the interest rate is established. Such rate will be effective
for the next succeeding Interest Rate Period for such Exchange Note commencing
on such Interest Rate Adjustment Date.
With respect to Exchange Notes, in the event that (i) the Remarketing Agent
for such Exchange Notes has been removed or has resigned and no successor has
been appointed, or (ii) the Remarketing Agent for such Exchange Notes has failed
to announce the appropriate interest rate on the Interest Rate Adjustment Date
for any such Exchange Note for whatever reason, or (iii) the appropriate
interest rate or Interest Rate Period cannot be determined for any such Exchange
Note for whatever reason, Consumers shall have the right to purchase such
Exchange Notes at a price equal to 100% of the principal amount thereof. If
Consumers does not exercise its right to purchase the Exchange Notes, all such
Exchange Notes shall be automatically converted to the Commercial Paper Term
Mode with an Interest Rate Period of generally seven days, determined as
provided below under "Interest Rate Modes -- Commercial Paper Term Period," and
the rate of interest thereon shall be equal to the rate per annum announced by
The Chase Manhattan Bank (or such other nationally recognized bank located in
the United States as Consumers may select) as its prime lending rate (such rate
of interest being referred to herein as the "Special Interest Rate").
The interest rate on the Exchange Notes shall not exceed the "Maximum Rate,"
which is defined to mean the rate of interest equal to 15% per annum or such
higher rate as may be established from time to time by the Board of Directors of
Consumers.
The Note Trustee will, upon request of any Beneficial Owner of a Exchange
Note, advise such Beneficial Owner or the applicable Remarketing Agent of the
interest rate and, in the case of a floating interest rate, the Interest Rate
Basis or Bases, Spread (if any) and Spread Multiplier (if any), and in each case
the other terms applicable to such Beneficial Owner's Exchange Notes for the
next Interest
10
<PAGE> 16
Rate Period. Neither the Note Trustee nor Consumers will otherwise be required
to advise Beneficial Owners of the applicable interest rate.
The interest rate announced by the Remarketing Agent, absent manifest error,
is binding and conclusive upon the Beneficial Owners, Consumers and the Note
Trustee.
FLOATING INTEREST RATES
While any Exchange Note bears interest in the Long Term Rate Mode, Consumers
may elect a floating interest rate by providing notice, which will be in or
promptly confirmed in writing (which includes facsimile or appropriate
electronic media), received by the Note Trustee and the Remarketing Agent for
such Exchange Note (the "Floating Interest Rate Notice") not less than ten (10)
days prior to the Interest Rate Adjustment Date for such Long Term Rate Period.
The Floating Interest Rate Notice must identify by CUSIP number or otherwise the
portion of the Exchange Notes to which it relates and state the Long Term Rate
Period therefor to which it relates. Each Floating Interest Rate Notice must
also state the Interest Rate Basis or Bases, the Initial Interest Reset Date,
the Interest Reset Period and Dates, the Interest Payment Period and Dates, the
Index Maturity and the Floating Rate Maximum Interest Rate and/or Floating Rate
Minimum Interest Rate, if any. If one or more of the applicable Interest Rate
Bases is LIBOR or the CMT Rate, the Floating Interest Rate Notice will also
specify the Index Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively, as such terms are
defined below.
If any Exchange Note bears interest at a floating rate in a Long Term Rate
Period, such Exchange Note will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any, in each
case as specified by the Remarketing Agent. Commencing on the Interest Rate
Adjustment Date for such Long Term Rate Period, the rate at which interest on
such Exchange Note will be payable will be reset as of each Interest Reset Date
during such Long Term Rate Period specified in the applicable Floating Interest
Rate Notice.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Long Term Rate
Period for such Exchange Note. The "Spread Multiplier" is the percentage of the
related Interest Rate Basis or Bases applicable to such Long Term Rate Period by
which such Interest Rate Basis or Bases will be multiplied to determine the
applicable interest rate from time to time for such Long Term Rate Period. The
"Index Maturity" is the period to maturity to the instrument or obligation with
respect to which the related Interest Rate Basis or Bases will be calculated.
The applicable floating interest rate on any Exchange Note during any Long
Term Rate Period will be determined by reference to the applicable Interest Rate
Basis or Interest Rate Bases, which may include (i) the CD Rate, (ii) the CMT
Rate, (iii) the Federal Funds Rate, (iv) LIBOR, (v) the Prime Rate, (vi) the
Treasury Rate, or (vii) such other Interest Rate Basis or interest rate formula
as may be specified in the applicable Floating Interest Rate Notice.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Floating Interest Rate Notice, the interest rate in effect on
each day will be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date (as hereinafter defined)
immediately preceding such Interest Reset Date or (ii) if such day is not an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the most recent Interest Reset Date. If
any Interest Reset Date would otherwise be a day that is not a Business Day,
such Interest Reset Date will be postponed to the next succeeding Business Day,
unless LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, in which case such Interest Reset Date will
be the immediately preceding Business Day. In addition, if the Treasury Rate is
an applicable Interest Rate Basis and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date will be
postponed to the next succeeding Business Day.
The applicable Floating Interest Rate Notice will specify whether the rate
of interest will be reset daily, weekly, monthly, quarterly, semiannually or
annually or on such other specified basis (each, an "Interest Reset Period") and
the dates on which such rate of interest will be reset (each, an "Interest Reset
Date"). Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Interest Reset Dates will be, in the case of a floating interest
rate which resets: (i) daily, each Business Day; (ii) weekly, the Wednesday of
each week (unless the Treasury Rate is an applicable Interest Rate Basis, in
which case the Tuesday of each week except as described below); (iii) monthly,
the third Wednesday of each month; (iv) quarterly, the third Wednesday of March,
June, September and December of each year,
11
<PAGE> 17
(v) semiannually, the third Wednesday of the two months specified in the
applicable Floating Interest Rate Notice; and (vi) annually, the third Wednesday
of the month specified in the applicable Floating Interest Rate Notice.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date. The "Interest Determination Date" with respect to
the CD Rate, the CMT Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
and the "Interest Determination Date" with respect to LIBOR will be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. The
"Interest Determination Date" with respect to the Treasury Rate will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination Date"
will be such preceding Friday. If the interest rate of any Exchange Note is a
floating interest rate determined with reference to two or more Interest Rate
Bases specified in the applicable Floating Interest Rate Notice, the "Interest
Determination Date" pertaining to the Exchange Note will be the most recent
Business Day which is at least two Business Days prior to the applicable
Interest Reset Date on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined as of such date, and the applicable
interest rate will take effect on the related Interest Reset Date.
Either or both of the following may also apply to the floating interest rate
on any Exchange Note for a Long Term Rate Period: (i) a Floating Rate Maximum
Interest Rate, or ceiling, that may accrue during any Interest Reset Period and
(ii) a Floating Rate Minimum Interest Rate, or floor, that may accrue during any
Interest Reset Period. In addition to any Floating Rate Maximum Interest Rate
that may apply, the interest rate on any Exchange Note will in no event be
higher than the Maximum Rate established by Consumers or the maximum rate
permitted by Michigan law, as the same may be modified by United States laws of
general application.
Except as provided below or in the applicable Floating Interest Rate Notice,
interest will be payable, in the case of floating interest rates which reset:
(i) daily, weekly or monthly, on the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year, as
specified in the applicable Floating Interest Rate Notice; (ii) quarterly, on
the third Wednesday of March, June, September and December of each year, (iii)
semiannually, on the third Wednesday of the two months of each year specified in
the applicable Floating Interest Rate Notice; and (iv) annually, on the third
Wednesday of the month of each year specified in the applicable Floating
Interest Rate Notice and, in each case, on the Business Day immediately
following the applicable Long Term Rate Period. If any Interest Payment Date for
the payment of interest at a floating rate (other than following the end of the
applicable Long Term Rate Period) would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that if LIBOR is an applicable Interest Rate
Basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day.
All percentages resulting from any calculation of floating interest rates
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation will be rounded, in the case of United
States dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
Accrued floating rate interest will be calculated by multiplying the
principal amount of the applicable Exchange Note by an accrued interest factor.
Such accrued interest factor will be computed by adding the interest factor
calculated for each day in the applicable Interest Reset Period. Unless
otherwise specified in the applicable Floating Interest Rate Notice, the
interest factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, if any applicable Interest Rate Basis is the CD
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number
of days in the year if an applicable Interest Rate Basis is the CMT Rate or the
Treasury Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, if the floating interest rate is calculated with reference to two
or more Interest Rate Bases, the interest factor will be calculated in each
period in the same manner as if only one of the applicable Interest Rate Bases
applied as specified in the applicable Floating Interest Rate Notice.
For any Exchange Note bearing interest at a floating rate, the applicable
Remarketing Agent will determine the interest rate in effect from the Interest
Rate Adjustment Date for such Exchange Note to the initial Interest Reset Date.
The Remarketing Agent will determine
12
<PAGE> 18
the interest rate in effect for each Interest Reset Period thereafter. Upon
request of the Beneficial Owner of a Exchange Note, after any Interest Rate
Adjustment Date, the Remarketing Agent will disclose the interest rate and, in
the case of a floating interest rate, Interest Rate Basis or Bases, Spread (if
any) and Spread Multiplier (if any), and in each case the other terms applicable
to such Exchange Note then in effect and, if determined, the interest rate that
will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Exchange Note. Except as
described herein with respect to a Exchange Note earning interest at floating
rates, no notice of the applicable interest rate, Spread (if any) or Spread
Multiplier (if any) will be sent to the Beneficial Owner of any Exchange Note.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the "Calculation Date," if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Date or Maturity, as the case may be.
CD Rate. If an Interest Rate Basis for any Exchange Note is specified in the
applicable Floating Interest Rate Notice as the CD Rate, the CD Rate will be
determined as of the applicable Interest Determination Date (a "CD Rate Interest
Determination Date") as the Rate on such date for negotiable United States
dollar certificates of deposit having the Index Maturity specified in the
applicable Floating Interest Rate Notice as published by the Board of Governors
for the Federal Reserve System in "Statistical Release H.15(519), Selected
Interest Rates" or any successor publication ("H.15(519)") under the heading
"CDs (Secondary Market)," or, if not published by 3:00 p.m., New York City time,
on the related Calculation Date (as defined above), the Rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Floating Interest Rate
Notice as published by the Federal Reserve Bank of New York in its daily
statistical release "Composite 3:30 P.M. Quotations for United States Government
Securities" or any successor publication ("Composite Quotations") under the
heading "Certificates of Deposit." If such Rate is not yet published in either
H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on the
related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Remarketing Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such CD Rate Interest Determination Date, of three leading nonbank
dealers in negotiable United States dollar certificates of deposit in The City
of New York (which may include the Remarketing Agent or its affiliates) selected
by the Remarketing Agent, after consultation with Consumers, for negotiable
United States dollars certificates of deposit of major United States money
market banks for negotiable certificates of deposit with a remaining maturity
closest to the Index Maturity specified in the applicable Floating Interest Rate
Notice in an amount that is representative for a single transaction in that
market at the time, provided, however, that if the dealers so selected by the
Remarketing Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate in
effect on such CD Rate Interest Determination Date.
CMT Rate. If an Interest Rate Basis for any Exchange Note is specified in
the applicable Floating Interest Rate Notice as the CMT Rate, the CMT Rate will
be determined as of the applicable Interest Determination Date (a "CMT Rate
Interest Determination Date") as the Rate displayed on the Designated CMT
Telerate Page (as defined below) under the caption"...Treasury Constant
Maturities... Federal Reserve Board Release H.15 Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index (as defined below)
for (i) if the Designated CMT Telerate Page is 7055, the Rate on such CMT Rate
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the weekly or monthly average, as specified in the Floating Interest Rate
Notice, for the week or the month, as applicable, ended immediately preceding
the week in which the related CMT Rate Interest Determination Date occurs. If
such Rate is no longer displayed on the relevant page or is not displayed by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity Rate for the Designated CMT Maturity Index as published in
H.15(519). If such Rate is no longer published or is not published by 3:00 p.m.,
New York City time on the related Calculation Date, then the CMT Rate on such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Remarketing Agent determines to be
comparable to the Rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate on the
CMT Rate Interest Determination Date will be calculated by the Remarketing Agent
and will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 p.m., New York City
time, on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may include
the Remarketing Agent or its affiliates) selected by the
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Remarketing Agent, after consultation with Consumers (from five such
Reference Dealers selected by the Remarketing Agent after consultation with
Consumers, and eliminating the highest quotation (or, in the event of equality,
one of the highest) and the lowest quotation (or, in the event of equality, one
of the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Remarketing Agent is unable to obtain three such Treasury Note quotations, the
CMT Rate on such CMT Rate Interest Determination Date will be calculated by the
Remarketing Agent and will be yield to maturity based on the arithmetic mean of
the secondary market offer side prices as of approximately 3:30 p.m., New York
City time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Remarketing Agent, after consultation with Consumers, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least
U.S.$100 million. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Remarketing Agent, after consultation with Consumers,
are quoting as mentioned herein, the CMT Rate determined as of such CMT Rate
Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Remarketing Agent, after
consultation with Consumers, will obtain from five References Dealers quotations
for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Floating Interest Rate Notice
(or any other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Floating Interest Rate Notice, the
Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Floating Interest Rate Notice with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Maturity Index
shall be 2 years.
Federal Funds Rate. If an Interest Rate Basis for any Exchange Note is
specified in the applicable Floating Interest Rate Notice as the Federal Funds
Rate, the Federal Funds Rate will be determined as of the applicable Interest
Determination Date (a "Federal Funds Rate Interest Determination Date") as the
rate on such date for United States dollar federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or if not published by
3:00 p.m., New York City time, on the Calculation Date, the Rate on such Federal
Funds Rate Interest Determination Date as published in Composite Quotations
under the heading "Federal Funds Effective Rate". If such rate is not published
in either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on
the related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Remarketing Agent and
will be the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of federal
funds transactions in The City of New York (which may include the Remarketing
Agent or its affiliates) selected by the Remarketing Agent after consultation
with Consumers, prior to 9:00 a.m., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Remarketing Agent are not quoting as mentioned in this sentence,
the Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. If an Interest Rate Basis for any Exchange Note is specified in the
applicable Floating Interest Rate Notice as LIBOR. LIBOR will be determined by
the Remarketing Agent as of the applicable Interest Determination Date (a "LIBOR
Interest Determination Date") in accordance with the following provisions:
(i) if (a) "LIBOR Reuters" is specified in the applicable Floating
Interest Rate Notice, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate will be used) for deposits in
the Index Currency having the Index Maturity specified in the applicable
Floating Interest Rate Notice, commencing on the applicable Interest Reset
Date, that appear (or, if only a single Rate is required as aforesaid,
appears) on the Designated LIBOR Page (as defined below) as of 11:00 a.m,
London time, on such LIBOR Interest Determination Date, or (b) "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice, or
if neither "LIBOR Reuters" nor "LIBOR Telerate"
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is specified in the applicable Floating Interest Rate Notice as the method
for calculating LIBOR, the rate for deposits in the Index Currency having
the Index Maturity specified in the applicable Floating Interest Rate
Notice, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 a.m., London time, on such LIBOR Interest
Determination Date. If fewer than two such offered rates appear, or if no
such Rate appears, as applicable. LIBOR on such LIBOR Interest Determination
Date will be determined in accordance with the provisions described in
clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Remarketing
Agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Remarketing Agent, after consultation with Consumers, to provide the
Remarketing Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity specified in the applicable
Floating Interest Rate Notice, commencing on the applicable Interest Reset
Date, to prime banks in the London interbank market at approximately 11:00
a.m., London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in such
Index Currency in such market at such time. If at least two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted at approximately 11:00 a.m., in
the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks in such Principal Financial Center
selected by the Remarketing Agent, after consultation with Consumers, for
loans in the Index Currency to leading European banks, having the Index
Maturity specified in the applicable Floating Interest Rate Notice and in a
principal amount that is representative for a single transaction in such
Index Currency in such market at such time; provided, however, that if the
banks so selected by the Remarketing Agent are not quoting as mentioned in
this sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Floating Interest Rate Notice as to which LIBOR will be calculated.
If no such currency or composite currency is specified in the applicable
Floating Interest Rate Notice, the Index Currency will be United States dollars.
"Principal Financial Center" means the capital city of the country issuing
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center will be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Floating Interest Rate Notice, the display on the Reuter Monitor
Money Rates Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the Index Currency, or (b) if "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Floating Interest Rate Notice as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) for the purpose of
displaying the London interbank rates of major banks for the Index Currency.
Prime Rate. If an Interest Rate Basis for any Exchange Note is specified in
the applicable Floating Interest Rate Notice as the Price Rate, the Prime Rate
will be determined as of the applicable Interest Determination Date (a "Prime
Rate Interest Determination Date") as the Rate on such date as such rate is
published in H.15(519) under the heading "Bank Prime Loan." If such rate is not
published prior to 3:00 p.m., New York City time, on the related Calculation
Date, then the Prime Rate will be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen U.S. PRIME 1
Page (as defined below) as such bank's prime rate or base lending rate as in
effect for such Prime Rate Interest Determination Date. If fewer than four such
rates appear on the Reuters Screen U.S. PRIME 1 Page for such Prime Rate
Interest Determination Date, the Prime Rate will be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year divided
by a 360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks (which may include The Chase
Manhattan Bank) in The City of New York selected by the Remarketing Agent, after
consultation with Consumers. If fewer than four such quotations are so provided,
the Prime Rate will be the arithmetic mean of four prime rates quoted on the
basis of the actual number of days in the year divided by a 360-day year as of
the close of business on such Prime Rate Interest Determination Date as
furnished in The City of New York by the major money center banks, if any, that
have provided such quotations and by as many substitute banks or trust companies
(which may include The Chase Manhattan Bank) as necessary in order to obtain
four such prime rate quotations, provided such substitute banks or trust
companies are organized and doing business under the laws of the United States,
or any State thereof, have total equity capital of at least U.S.$300
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million and are each subject to supervision or examination by Federal or State
authority, selected by the Remarketing Agent, after consultation with Consumers,
to provide such rate or rates; provided, however, that if the banks or trust
companies so selected by the Remarketing Agent are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen U.S. PRIME 1 Page" means the display designated as page
"U.S. PRIME 1" on the Reuter Monitor Money Rates Service (or such other page as
may replace the U.S. PRIME 1 Page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
Treasury Rate. If an Interest Rate Basis for any Exchange Note is specified
in the applicable Floating Interest Rate Notice as the Treasury Rate, the
Treasury Rate will be determined as of the applicable Interest Determination
Date (a "Treasury Rate Interest Determination Date") as the rate from the
auction held on such Treasury Rate Interest Determination Date (the "Auction")
of direct obligations of the United States ("Treasury Bills") having the Index
Maturity specified in the applicable Floating Interest Rate Notice, as such rate
is published in H.15(519) under the heading "Treasury bills-auction average
(investment)" or, if not published by 3:00 p.m., New York City time, on the
related Calculation Date, the auction average rate of such Treasury Bills
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of Treasury. In the event that the results of the Auction of
Treasury Bills having the Index Maturity specified in the applicable Floating
Interest Rate Notice are not reported as provided above by 3:00 p.m., New York
City time, on such Calculation Date, or if no such Auction is held, then the
Treasury Rate will be calculated by the Remarketing Agent and will be a yield to
maturity (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Treasury Rate Interest Determination Date, of three leading primary
United States government securities dealers (which may include the Remarketing
Agent or its affiliates) selected by the Remarketing Agent, after consultation
with Consumers, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Floating Interest Rate
Notice; provided, however, that if the dealers so selected by the Remarketing
Agent are not quoting as mentioned in this sentence, the Treasury Rate
determined as of such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
INTEREST RATE MODES
The times specified below are subject to extension pursuant to standby
remarketing arrangements, if any, as provided herein. See "-- Remarketing --
Interest Rate Adjustment Date; Determination of Interest Rate" below.
Commercial Paper Term Period. The Interest Rate Period for any Exchange Note
in the Commercial Paper Term Mode will be a Commercial Paper Term Period, which
will be a period of not less than one nor more than 364 consecutive calendar
days, as determined by Consumers or, if not so determined, by the Remarketing
Agent for such Exchange Note (in its best judgment in order to obtain the lowest
interest cost for such Exchange Note). Each Commercial Paper Term Period will
commence on the Interest Rate Adjustment Date therefor and end on the day
preceding the date specified by such Remarketing Agent as the first day of the
next Interest Rate Period for such Exchange Note. The interest rate for any
Commercial Paper Term Period relating to a Exchange Note will be determined not
later than 11:00 a.m., New York City time, on the Interest Rate Adjustment Date
for such Exchange Note which is the first day of each Interest Rate Period for
such Exchange Note, provided, however, that if such day is not a Business Day,
the Interest Rate Adjustment Date for any Exchange Note in such Commercial Paper
Term Mode shall be the next succeeding day which is a Business Day.
As used herein, "Commercial Paper Term Mode" means, with respect to any
Exchange Note, the Interest Rate Mode in which the interest rate on such
Exchange Note is reset on a periodic basis which shall not be less than one
calendar day nor more than 364 consecutive calendar days and interest is paid as
provided for such Interest Rate Mode above under "-- Interest -- General."
Daily Interest Rate Period. The Interest Rate Period for any Exchange Note
in the Daily Interest Rate Mode will commence at the beginning of each Business
Day and end at the end of the calendar day preceding the next Business Day. The
interest rate for such Exchange Notes will be determined each Business Day not
later than 9:30 a.m., New York City time, on such day. The Daily Interest Rate
Mode shall occur only so long as the Exchange Notes are maintained in a
book-entry system.
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As used herein, "Daily Interest Rate Mode" means, with respect to any
Exchange Note, the Interest Rate Mode in which the interest rate on such
Exchange Note is reset on a daily basis and interest is paid as provided for
such Interest Rate Mode above under "-- Interest General."
Weekly Interest Rate Period. The Interest Rate Period for any Exchange Note
in the Weekly Interest Rate Mode will be a period approximating one week
commencing on any Business Day, as determined by the Remarketing Agent for such
Exchange Note, and ending on the day preceding the first day of the next
Interest Rate Period for such Exchange Note. The interest rate for any Exchange
Notes in the Weekly Interest Rate Mode will be determined not later than 11:00
a.m., New York City time, on the Interest Rate Adjustment Date for such Exchange
Notes, which is the first day of the Interest Rate Period for such Exchange
Notes.
As used herein, "Weekly Interest Rate Mode" means, with respect to any
Exchange Note, the Interest Rate Mode in which the interest rate on such
Exchange Note is reset on a weekly basis and interest is paid as provided for
such Interest Rate Mode above under "-- Interest General."
Long Term Interest Rate Period. The Interest Rate Period for any Exchange
Note in the Long Term Rate Mode will be established by Consumers as a period of
more than 364 days and less than the Stated Maturity of such Exchange Note;
provided, however, that such Interest Rate Period must end on the day prior to
an Interest Payment Date for such Exchange Note; and provided further that, if
so provided in a Exchange Note in the Long Term Rate Mode and specified at the
time of remarketing into a Long Term Rate Period, Consumers may shorten the
Interest Rate Period and provide for payment of a premium in respect thereof for
any such Exchange Note upon written notice to the Remarketing Agent and the Note
Trustee not less than thirty (30) days prior to the date upon which such
shortened Interest Rate Period shall expire. Promptly upon the receipt of such
notice, such notice to be received by the Note Trustee by 2:00 p.m. New York
City time and, in any case, not later than the close of business on such date,
the Note Trustee will transmit such information to DTC in accordance with DTC's
procedures as in effect from time to time. The interest rate for any Exchange
Notes in the Long Term Rate Mode will be determined not later than 11:00 a.m.,
New York City time, on the Interest Rate Adjustment Date for such Exchange
Notes. The Interest Rate Adjustment Date for the Long Term Rate Mode is the
first day of the Interest Rate Period; provided, however, that if such day is
not a Business Day, the Interest Rate Adjustment Date for any Exchange Note in
such Long Term Rate Mode shall be the next succeeding day which is a Business
Day.
If any Exchange Note is subject to early remarketing as provided above, the
Interest Rate Period may be shortened by Consumers on any date on and after the
Initial Early Remarketing Date, if any, specified in the Exchange Note, upon
prior written notice as provided above. On and after the Initial Early
Remarketing Date, if any, on the Interest Rate Adjustment Date relating to such
shortened Interest Rate Period for such Exchange Note, Consumers will pay a
premium to the tendering Beneficial Owner of the Exchange Note, together with
accrued interest, if any, thereon at the applicable rate payable to such
Interest Rate Adjustment Date. Unless otherwise specified in the Exchange Note,
the premium shall be an amount equal to the Initial Early Remarketing Premium
specified therein (as adjusted by the Annual Early Remarketing Premium
Percentage Reduction, if applicable), multiplied by the principal amount of the
Exchange Note subject to early remarketing. The Initial Early Remarketing
Premium, if any, shall decline at each anniversary of the Initial Early
Remarketing Date by an amount equal to the applicable Annual Early Remarketing
Premium Percentage Reduction, if any, specified in the Exchange Note until the
premium is equal to 0.
As used herein, "Long Term Rate Mode" means, with respect to any Exchange
Note, the Interest Rate Mode in which the interest rate on such Exchange Note is
reset in a Long Term Rate Period and interest is paid as provided for such
Interest Rate Mode above under "-- Interest -- General" or "-- Floating Interest
Rates."
Fixed Interest Rate Period. The Interest Rate Period for any Exchange Note
in the Fixed Interest Rate Mode will commence on the date of conversion to such
Interest Rate Mode and continue to the Stated Maturity or date of redemption of
such Exchange Note. The interest rate for Exchange Notes in the Fixed Interest
Rate Mode will be determined not later than 11:00 a.m., New York City time, on
the Interest Rate Adjustment Date for such Exchange Notes, which is the date of
conversion to the Fixed Interest Rate Mode for such Exchange Notes.
As used herein, "Fixed Interest Rate Mode" means, with respect to any
Exchange Note, the Interest Rate Mode in which the interest rate on such
Exchange Note is determined and in effect until the Stated Maturity or date of
redemption of such Exchange Note and interest is paid as provided for such
Interest Rate Mode above under "-- Interest -- General".
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CONVERSION
Conversion From the Daily or Weekly Interest Rate Mode. Any Exchange Note in
the Daily or Weekly Interest Rate Mode may be converted at the option of
Consumers to any Interest Rate Mode on any Interest Rate Adjustment Date for
such Exchange Note upon receipt by the Note Trustee and the applicable
Remarketing Agent for such Exchange Note of notice, confirmed in writing, from
Consumers (a "Conversion Notice") not less than ten (10) days prior to such
Interest Rate Adjustment Date stating that, on such Interest Rate Adjustment
Date, such Exchange Note will be converted to a different Interest Rate Mode and
will be subject to mandatory tender by the Beneficial Owner thereof, as
described below under "-- Tender of Exchange Notes." Such notice will contain
the new Interest Rate Mode and the date of such conversion (a "Conversion Date")
and will state that such Beneficial Owner will be deemed to have tendered such
Exchange Note as of the Conversion Date and will not be entitled to further
accrual of interest on such Exchange Note after such date. Promptly upon the
receipt of such notice, such notice to be received by the Note Trustee by 2:00
p.m., New York City time, and, in any case, not later than the close of business
on such date, the Note Trustee will transmit such information to DTC in
accordance with DTC's procedures as in effect from time to time.
Conversion from the Commercial Paper Term Mode or Long Term Rate Mode. Any
Exchange Note in the Commercial Paper Term Mode or the Long Term Rate Mode may
be converted at the option of Consumers to the Daily or Weekly Interest Rate
Mode or the Fixed Interest Rate Mode on any Interest Rate Adjustment Date for
such Exchange Note upon receipt by the Note Trustee and the applicable
Remarketing Agent for such Exchange Note of notice, confirmed in writing, from
Consumers not less than five (5) Business Days prior to such Interest Rate
Adjustment Date stating that, on such Interest Rate Adjustment Date, such
Exchange Note will be converted to the Daily or Weekly Interest Rate Mode or the
Fixed Interest Rate Mode, and will be subject to mandatory tender by the
Beneficial Owner thereof, as described below under "Tender of Exchange Notes."
Such notice will contain the new Interest Rate Mode, the Conversion Date, and
will state that such Beneficial Owner will be deemed to have tendered such
Exchange Note as of the Conversion Date and will not be entitled to further
accrual of interest on such Exchange Note after such date. Promptly upon the
receipt of such notice, and, in any case, not later than the close of business
on such date, the Note Trustee will transmit such information to DTC in
accordance with DTC's procedures as in effect from time to time. Consumers will
give a Conversion Notice for conversions within or between the Commercial Paper
Term Mode and the Long Term Rate Mode to the Note Trustee and the applicable
Remarketing Agent not less than ten (10) days prior to the Conversion Date.
Any Exchange Note converted to the Fixed Interest Rate Mode will not be
subject to any further conversions between Interest Rate Modes.
Revocation or Change of Conversion Notice or Floating Interest Rate Notice.
Consumers may, upon written notice received by the Note Trustee and the
applicable Remarketing Agent and DTC, revoke any Conversion Notice or Floating
Interest Rate Notice or change the Interest Rate Mode to which such Conversion
Notice relates or change any Floating Interest Rate Notice up to the close of
business on the Business Day immediately prior to the Conversion Date.
Limitation on Conversion, Change of Conversion Notice or Floating Interest
Rate Notice and Revocation. Notwithstanding the foregoing, Consumers may not,
without the consent of the applicable Remarketing Agent, convert any Exchange
Note or revoke or change any Conversion Notice or Floating Interest Rate Notice
at or after the time at which such Remarketing Agent has determined the interest
rate, or Spread (if any) and Spread Multiplier (if any), for any Exchange Note
being remarketed (i.e., the time at which such Exchange Note has been
successfully remarketed, subject to settlement on the related Interest Rate
Adjustment Date). The Remarketing Agent will advise Consumers of indicative
rates from time to time, or at any time upon the request of Consumers, prior to
making such determination of the interest rate, Spread or Spread Multiplier, as
the case may be.
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable, in whole or in part, at the option of
Consumers, until 60 days prior to the expiration of the Initial Interest Rate
Period at a redemption price equal to the greater of (i) 100% of their principal
amount or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest (not including the portion of any such payments of
interest accrued as of the redemption date) discounted to the redemption date on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Yield plus 20 basis points, plus, in each case, accrued interest
to the date of redemption, such redemption price to be set forth in an Officers'
Certificate (as defined in the Indenture) delivered to the Note Trustee on or
before the redemption date and upon which the Note Trustee may conclusively
rely. The Exchange Notes will then be subject, at any time, to the optional
redemption,
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in whole or in part, by Consumers commencing 60 days after the
Initial Interest Rate Period, subject to certain exceptions. See "-- Purchase
and Redemption of Exchange Notes."
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the seminannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Exchange Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Exchange Notes. "Independent Investment Banker" means Goldman, Sachs &
Co. or, if such firm is unwilling or unable to select the Comparable Treasury
Issue, one of the remaining Reference Treasury Dealers appointed by Consumers.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations for
such redemption date, or (B) if Consumers obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by Consumers, of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case
as a percentage of its principal amount) quoted in writing to Consumers by such
Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such
redemption date.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated and First Chicago Capital Markets, Inc., provided,
however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"),
Consumers shall substitute therefor another Primary Treasury Dealer; and (ii)
any other Primary Treasury Dealer selected by Consumers.
If less than all of the Exchange Notes are to be redeemed, the Note Trustee
shall select, in such manner as it shall deem appropriate and fair, the
particular Exchange Notes or portions thereof to be redeemed. Notice of
redemption shall be given by mail not less than 30 nor more than 60 days prior
to the date fixed for redemption to the Holders of Exchange Notes to be redeemed
(which, as long as the Exchange Notes are held in the book-entry only system,
will be DTC (or its nominee) or a successor depositary (the "Depositary"));
provided, however, that the failure to duly give such notice by mail, or any
defect therein, shall not affect the validity of any proceedings for the
redemption of Exchange Notes as to which there shall have been no such failure
or defect. On and after the date fixed for redemption (unless Consumers shall
default in the payment of the Exchange Notes or portions thereof to be redeemed
at the applicable redemption price, together with interest accrued thereon to
such date), interest on the Exchange Notes or the portions thereof so called for
redemption shall cease to accrue.
No notice of redemption of the Exchange Notes will be mailed during the
continuance of any event of default under the Indenture, except that (i) when
notice of redemption of any Exchange Notes has been mailed, Consumers shall
redeem such Exchange Notes but only if funds sufficient for that purpose have
prior to the occurrence of such event of default been deposited with the Note
Trustee or a paying agent for such purpose, and (ii) notices of redemption of
all outstanding Exchange Notes may be given during the continuance of an event
of default under the Indenture.
Any notice of redemption at the option of Consumers may state that such
redemption will be conditional upon receipt by the Note Trustee, on or prior to
the date fixed for such redemption, of money sufficient to pay the principal of
and premium, if any, and interest, if any, on such Exchange Notes and that if
such money has not been so received, such notice will be of no force and effect
and Consumers will not be required to redeem such Exchange Notes.
The Exchange Notes have no sinking fund provisions.
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TENDER OF EXCHANGE NOTES
Demand Tender Option for Exchange Notes in the Daily or Weekly Interest Rate
Mode. Any Exchange Note in the Daily or Weekly Interest Rate Mode will be
subject to tender and purchase upon demand by the Beneficial Owner thereof on
any Business Day selected by such Beneficial Owner as hereinafter provided, at
the purchase price of par plus accrued interest, upon notice to the applicable
Remarketing Agent and to such Beneficial Owner's DTC Participant on a Business
Day not later than (i) one (1) Business Day prior to the specified purchase
date, in the case of any Exchange Note in the Daily Interest Rate Mode, or (ii)
seven (7) days prior to the specified purchase date, in the case of any Exchange
Note in the Weekly Interest Rate Mode; provided, however, that in either such
case if the date selected for purchase is not a Business Day, the purchase date
shall be the next succeeding Business Day. Such notice shall (A) state the
principal amount (or portion thereof) of such Exchange Note to be purchased, (B)
state the purchase date on which such Exchange Note will be purchased, and (C)
irrevocably request such purchase. Upon giving such notice, the Beneficial Owner
of such Exchange Note will be deemed to have irrevocably tendered such Exchange
Note for remarketing as described below. Beneficial Owners may only tender
Exchange Notes in the minimum amount of $100,000 and increments of $1,000
thereafter, and no Exchange Notes will be purchased in part if such partial
purchase would result in the principal amount of any Exchange Notes of such
Beneficial Owner outstanding being in any denomination of less than $100,000.
Mandatory Tender of Exchange Notes at the Initial Interest Rate or in the
Long Term Rate Mode or Commercial Paper Term Mode. Any Exchange Note bearing
interest at the Initial Interest Rate or in the Long Term Rate Mode or in the
Commercial Paper Term Mode will be automatically tendered for purchase, or
deemed tendered for purchase, on each Interest Rate Adjustment Date relating
thereto. Exchange Notes will be purchased on the Interest Rate Adjustment Date
relating thereto as described below. See "-- Remarketing" below.
REMARKETING
When any Exchange Note is tendered for remarketing, the Remarketing Agent
therefor will use its best efforts to remarket such Exchange Note on behalf of
the Beneficial Owner thereof at a price equal to 100% of the principal amount
thereof (plus accrued interest, if any, in the case of Exchange Notes bearing
interest in a Daily or Weekly Interest Rate Mode). The Remarketing Agent may
purchase tendered Exchange Notes for its own account in a remarketing, but will
not be obligated to do so. Consumers may offer to purchase Exchange Notes in a
remarketing, provided that the interest rate established with respect to
Exchange Notes in such remarketing is not different from the interest rate that
would have been established if Consumers had not purchased such Exchange Notes.
Any Exchange Notes for which Consumers shall have given a notice of redemption
shall not be considered in a remarketing.
Interest Rate Adjustment Date; Determination of Interest Rate. By 11:00
a.m., New York City time (or 9:30 a.m., New York City time, in the case of any
Exchange Note in the Daily Interest Rate Mode), on the Interest Rate Adjustment
Date for any Exchange Note, the Remarketing Agent will determine the interest
rate for such Exchange Note being remarketed to the nearest one
hundred-thousandth (0.00001) of one percent per annum for the next Interest Rate
Period; provided, that between 11:00 a.m., New York City time (or 9:30 a.m., New
York City time, in the case of any Exchange Note in the Daily Interest Rate
Mode) and 11:30 a.m., New York City time, the Remarketing Agent and Standby
Remarketing Agent (if any) shall use their best efforts to determine the
interest rate for any Exchange Notes not successfully remarketed as of the
applicable deadline specified in this paragraph. In determining the applicable
interest rate for such Exchange Note and other terms, the Remarketing Agent
will, after taking into account market conditions as reflected in the prevailing
yields on fixed and variable rate taxable debt securities, (i) consider the
principal amount of all Exchange Notes of such series tendered or to be tendered
on such date and the principal amount of such Exchange Notes prospective
purchasers are or may be willing to purchase and (ii) contact, by telephone or
otherwise, prospective purchasers and ascertain the interest rates therefor at
which they would be willing to hold or purchase such Exchange Notes.
Notification of Results; Settlement. By 12:30 p.m., New York City time, on
the Interest Rate Adjustment Date for any Exchange Notes, the applicable
Remarketing Agent will notify Consumers and the Note Trustee in writing (which
may include facsimile or other electronic transmission), of (i) the interest
rate or, in the case of a floating interest rate, the initial interest rate, the
Spread and Spread Multiplier and the Initial Interest Reset Date, applicable to
such Exchange Notes for the next Interest Rate Period, (ii) the Interest Rate
Adjustment Date, (iii) the Interest Payment Dates, for any Exchange Notes in the
Commercial Paper Term Mode (if other than the Interest Rate Adjustment Date),
the Long Term Rate Mode or the Fixed Interest Rate Mode, (iv) the optional
redemption terms, if any, and early remarketing terms, if any, in the case of a
remarketing into a Long Term Rate Period, (v) the aggregate principal amount of
all tendered Exchange Notes, and (vi) the aggregate principal amount of such
tendered Exchange Notes which the Remarketing Agent and the Standby Remarketing
Agent, if any, were able to remarket, at a price equal to 100% of the principal
amount thereof plus accrued
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interest, if any. Immediately after receiving such notice and, in any case, not
later than 1:30 p.m., New York City time, the Note Trustee will transmit such
information and any other settlement information required by DTC to DTC in
accordance with DTC's procedures as in effect from time to time.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the applicable Remarketing Agent will advise each
purchaser of such Exchange Notes (or the DTC Participant of each such purchaser
who it is expected in turn will advise such purchaser) of the principal amount
of such Exchange Notes that such purchaser is to purchase.
Each purchaser of Exchange Notes in a remarketing will be required to give
instructions to its DTC Participant to pay the purchase price therefor in same
day funds to the applicable Remarketing Agent against delivery of the principal
amount of such Exchange Notes by book entry through DTC by 3:00 p.m., New York
City time, on the Interest Rate Adjustment Date. Any Exchange Notes bearing
interest in the Daily or Weekly Interest Rate Mode for the Interest Rate Period
immediately preceding a remarketing will be settled at a price of 100% of the
principal amount thereof plus accrued interest from the most recent Interest
Payment Date therefor to the date of settlement.
All tendered Exchange Notes will be automatically delivered to the account
of the Note Trustee (or such other account meeting the requirements of DTC's
procedures as in effect from time to time), by book entry through DTC against
payment of the purchase price or redemption price therefor, on the Interest Rate
Adjustment Date relating thereto.
The Remarketing Agent will make, or cause the Note Trustee to make, payment
to the DTC Participant of each tendering Beneficial Owner of Exchange Notes
subject to a remarketing, by book entry through DTC by the close of business on
the Interest Rate Adjustment Date against delivery through DTC of such
Beneficial Owner's tendered Exchange Notes, of: (i) the purchase price for
tendered Exchange Notes that have been sold in the remarketing, and (ii) if any
such Exchange Notes were purchased pursuant to a Special Mandatory Purchase,
subject to receipt of funds from Consumers or the Liquidity Provider (if any),
as the case may be, the Remarketing Agent will make or cause the Note Trustee to
make such payment of the purchase price of such Exchange Notes plus, in each
case, accrued interest, if any, to such date.
The transactions described above for a remarketing of any Exchange Notes
will be executed on the Interest Rate Adjustment Date for such Exchange Notes
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and such Exchange Notes
delivered by book entry as necessary to effect the purchases and sales thereof,
in each case as determined in the related remarketing.
Except as otherwise set forth herein under "-- Failed Remarketing," any
Exchange Notes tendered in a remarketing will be purchased solely out of the
proceeds received from purchasers of such Exchange Notes in such remarketing,
and neither the Note Trustee, the Remarketing Agent for such Exchange Notes nor
any Standby Remarketing Agent, if any, or Consumers will be obligated to provide
funds to make payment upon any Beneficial Owner's tender in a remarketing.
Although tendered Exchange Notes will be subject to purchase by the
Remarketing Agent in remarketing, such Remarketing Agent and any Standby
Remarketing Agent will not be obligated to purchase any such Exchange Notes.
The remarketing procedures set forth above will apply to all Exchange Notes.
The settlement and remarketing procedures described above, including provisions
for payment by purchasers of tendered Exchange Notes or for payment to selling
Beneficial Owners of tendered Exchange Notes, may be modified to the extent
required by DTC. In addition, the Remarketing Agent may, in accordance with the
terms of the Indenture, modify the settlement and remarketing procedures set
forth above in order to facilitate the settlement and remarketing process.
As long as DTC's nominee holds the certificates representing any Exchange
Notes in the book entry system of DTC, no certificates for such Exchange Notes
will be delivered by any selling Beneficial Owner to reflect any transfer of
such Exchange Notes effected in any remarketing.
Failed Remarketing. Exchange Notes not successfully remarketed will be
subject to Special Mandatory Purchase. The obligation of Consumers to effect a
Special Mandatory Purchase of the Exchange Notes (the "Special Mandatory
Purchase Right") can be satisfied either directly by Consumers or through a
Liquidity Provider (as hereinafter defined). By 12:00 o'clock noon, New York
City time, on
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any Interest Rate Adjustment Date, the applicable Remarketing Agent for such
Exchange Notes will notify the Liquidity Provider, if any, the Note Trustee and
Consumers by telephone or facsimile, confirmed in writing, of the principal
amount of Exchange Notes that such Remarketing Agent and the applicable Standby
Remarketing Agent, if any, were unable to remarket on such date. In the event
that Consumers has entered into a Standby Note Purchase Agreement (as
hereinafter defined) which is in effect on such date, such notice will
constitute a demand for the benefit of Consumers to the Liquidity Provider to
purchase such unremarketed Exchange Notes at a price equal to the outstanding
principal amount thereof pursuant to the terms of such Standby Note Purchase
Agreement. If a Standby Note Purchase Agreement is not in effect on such date,
or if the Liquidity Provider fails to advance funds under the Standby Note
Purchase Agreement, Consumers will be required to purchase such unremarketed
Exchange Notes. In each case Consumers will pay all accrued and unpaid interest,
if any, on unremarketed Exchange Notes to such Interest Rate Adjustment Date.
Payment of the principal amount of unremarketed Exchange Notes by Consumers or
the Liquidity Provider, as the case may be, and payment of accrued and unpaid
interest, if any, by Consumers, shall be made by deposit of same-day funds with
the Note Trustee (or such other account meeting the requirements of DTC's
procedures as in effect from time to time) irrevocably in trust for the benefit
of the Beneficial Owners of Exchange Notes subject to Special Mandatory
Purchase, by 3:00 p.m., New York City time, on such Interest Rate Adjustment
Date. See "-- Purchase and Redemption of Exchange Notes -- Special Mandatory
Purchase" below.
The Remarketing Agent. Consumers and the Remarketing Agent for Exchange
Notes will enter into a Remarketing Agreement. The summaries below are summaries
of certain provisions of the form of Remarketing Agreement and do not purport to
be complete and are subject to, and qualified in their entirety by, the
provisions of the Remarketing Agreement.
For its services in determining the interest rate and remarketing Exchange
Notes, the Remarketing Agent will receive from Consumers a fee to be determined
at the time of execution of the Remarketing Agreement. The Remarketing Agent may
pay to selected broker-dealers, including any Standby Remarketing Agent, a
portion of any fees it receives from Consumers for its services as Remarketing
Agent reflecting Exchange Notes sold through such broker-dealers to purchasers
in remarketings.
Consumers will agree to take such reasonable additional actions, if any,
necessary in order to register the Exchange Notes under, and to otherwise comply
with, each of the Securities Act and the Exchange Act upon remarketing of the
Exchange Notes. In addition, Consumers will agree to negotiate and execute an
underwriting agreement with terms substantially similar to the Purchase
Agreement (as defined below) upon any remarketing of the Exchange Notes after
the Initial Interest Rate Period in accordance with standard business practice
and relevant law applicable to such agreements at such time.
In addition, Consumers will agree to indemnify the Remarketing Agent against
certain liabilities, including liabilities under the Securities Act, arising out
of or in connection with its duties under the Remarketing Agreement.
The Remarketing Agreement will provide that Consumers may in its absolute
discretion replace the Remarketing Agent by giving 30 days prior notice to the
Remarketing Agent and the Note Trustee, such replacement to be effective upon
Consumers' appointment of a successor to perform the services of the Remarketing
Agent under the Remarketing Agreement.
The Remarketing Agreement will also provide that the Remarketing Agent may
resign at any time as Remarketing Agent, such resignation to be effective 30
days after the delivery to Consumers and the Note Trustee of notice of such
resignation. In such case, it shall be the sole obligation of Consumers to
appoint a successor Remarketing Agent.
PURCHASE AND REDEMPTION OF EXCHANGE NOTES
Special Mandatory Purchase. Exchange Notes which have not been remarketed by
12 o'clock noon, New York City time, on an Interest Rate Adjustment Date for
such Exchange Notes will be purchased by Consumers directly or through a
Liquidity Provider pursuant to the Special Mandatory Purchase Right. In such
event, either Consumers or, subject to the terms and conditions of a Standby
Note Purchase Agreement, if any, which may be in effect on such date, the
Liquidity Provider will deposit same-day funds in the account of the Note
Trustee (or such other account meeting the requirements of DTC's procedures as
in effect from time to time) irrevocably in trust for the benefit of the
Beneficial Owners of the Exchange Notes subject to Special Mandatory Purchase by
3:00 p.m., New York City time, on such Interest Rate Adjustment Date. Such funds
shall be in an amount sufficient to pay the aggregate purchase price of such
unremarketed Exchange Notes, equal to 100% of the principal amount thereof. In
the event a Standby Note Purchase Agreement is in effect but the Liquidity
Provider shall fail to advance funds for whatever reason thereunder, Consumers
will be obligated to purchase such unremarketed Exchange Notes on such Interest
Rate Adjustment Date. Consumers will be responsible for paying the accrued
interest,
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if any, on such Exchange Notes by depositing sufficient same-day funds
therefor with the Note Trustee (or such other account meeting the requirements
of DTC's procedures as in effect from time to time) by 3:00 p.m., New York City
time, on such Interest Rate Adjustment Date. See "-- The Standby Note Purchase
Agreement."
Exchange Notes purchased by the Liquidity Provider ("Purchased Exchange
Notes") shall bear interest at the rates and be payable on the dates as may be
agreed upon by Consumers and the Liquidity Provider, but in no event shall such
rate be more than the Maximum Rate. Upon purchase of any Exchange Note by the
Liquidity Provider, all interest accruing thereon from the last date for which
interest was paid shall accrue for the benefit of and be payable to the
Liquidity Provider. Unless an event of default under the Standby Note Purchase
Agreement occurs, the Remarketing Agent for such Exchange Notes shall, subject
to compliance with applicable securities laws, continue its remarketing efforts
with respect to Purchased Exchange Notes until the earlier to occur of a
successful remarketing of such Purchased Exchange Notes or the expiration of the
Standby Note Purchase Agreement. All Purchased Exchange Notes that have been
remarketed will be subject to Special Mandatory Purchase Rights when held by
subsequent purchasers. In the event the Liquidity Provider holds Purchased
Exchange Notes on the date the Standby Note Purchase Agreement expires,
Consumers will be required to purchase such Exchange Notes on such date at a
purchase price equal to the principal amount thereof plus accrued interest
thereon to the purchase date. Such Exchange Notes will remain outstanding and
enjoy the benefits of the Indenture until such time as Consumers delivers
certificates for the Exchange Notes to the Note Trustee for cancellation.
Optional Redemption While Exchange Notes are in the Daily or Weekly Interest
Rate Mode or Commercial Paper Term Mode. Any Exchange Notes in the Daily or
Weekly Interest Rate Mode or in the Commercial Paper Term Mode are subject to
redemption at the option of Consumers in whole or in part on any Interest Rate
Adjustment Date relating thereto, upon 30 days notice to the holders thereof at
a redemption price equal to the aggregate principal amount of such Exchange
Notes to be redeemed plus accrued interest thereon to the redemption date.
Redemption While Exchange Notes are in the Long Term Rate Mode. Any Exchange
Notes in the Long Term Rate Mode are subject to redemption at the option of
Consumers at the times and upon the terms specified at the time of conversion to
or within such Long Term Rate Mode and as set forth in the Exchange Note
relating thereto.
Redemption While Exchange Notes are in the Fixed Interest Rate Mode. Any
Exchange Notes in the Fixed Interest Rate Mode will be subject to redemption at
the option of Consumers or pursuant to a sinking fund at the times and upon the
terms specified at the time of conversion to such Fixed Interest Rate Mode.
Allocation. Except in the case of a Special Mandatory Purchase, if the
Exchange Notes are to be redeemed in part, DTC, after receiving notice of
redemption specifying the aggregate principal amount of Exchange Notes to be so
redeemed, will determine by lot (or otherwise in accordance with the procedures
of DTC) the principal amount of such Exchange Notes to be redeemed from the
account of each DTC Participant. After making its determination as described
above, DTC will give notice of such determination to each DTC Participant from
whose account such Exchange Notes are to be redeemed. Each such DTC Participant,
upon receipt of such notice, will in turn determine the principal amount of
Exchange Notes to be redeemed from the accounts of the Beneficial Owners of such
Exchange Notes for which it serves as DTC Participant, and give notice of such
determination to the Remarketing Agent.
THE STANDBY NOTE PURCHASE AGREEMENT
In order to fulfill its obligations under the Special Mandatory Purchase
Right, Consumers may from time to time, at its option, enter into a Standby Note
Purchase Agreement (the "Standby Note Purchase Agreement") with one or more
banks or other credit providers (referred to individually and collectively
herein as the "Liquidity Provider"), each of which has (i) obligations such as
those under the Standby Note Purchase Agreement that are exempt from
registration under the Securities Act, (ii) long term senior debt ratings by
Standard & Poor's Corporation and Moody's Investors Service, Inc. at least equal
to those of the highest rated senior debt ratings of Consumers as of the date of
the Standby Note Purchase Agreement and (iii) minimum combined capital and
surplus of at least $50,000,000.
Consumers will retain the right to replace or add Liquidity Providers at any
time. Purchasers of the Exchange Notes should not rely upon the presence of
Liquidity Providers in making an investment decision regarding the Exchange
Notes.
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Beneficial Owners of the Exchange Notes will receive amounts advanced by the
Liquidity Provider to the Remarketing Agent pursuant to any Standby Note
Purchase Agreement in payment of the purchase price for Exchange Notes subject
to a Special Mandatory Purchase. See "-- Purchase and Redemption of Exchange
Notes -- Special Mandatory Purchase." Pursuant to the Standby Note Purchase
Agreement, if any, the Liquidity Provider will be obligated, upon receipt of an
appropriate demand for payment from the Remarketing Agent and so long as
Consumers is in compliance with the terms and conditions thereof, to purchase
unremarketed Exchange Notes in any Special Mandatory Purchase at a price equal
to 100% of the outstanding principal amount thereof. Any such purchase will be
effected upon the Liquidity Provider's receipt of notification of a failed
remarketing not later than 12:00 noon, New York City time, on the date of the
Special Mandatory Purchase by the deposit of same-day funds by the Liquidity
Provider with the Remarketing Agent not later than 3:00 p.m., New York City time
on such date. See "-- Purchase and Redemption of Exchange Notes."
Notwithstanding the existence of the Standby Note Purchase Agreement, if any,
Consumers will be responsible for paying the accrued interest, if any, on any
unremarketed Exchange Notes by depositing sufficient same-day funds therefor
with the Remarketing Agent not later than 3:00 p.m., New York City time, on the
applicable date of Special Mandatory Purchase.
The Liquidity Provider's obligation to advance funds will be subject to
conditions specified in the Standby Note Purchase Agreement. Such conditions
include: receipt by the Liquidity Provider of various documents, certificates
and opinions from Consumers; the continued accuracy of representations and
warranties (other than with respect to material adverse change and litigation)
made by Consumers in the Standby Note Purchase Agreement; that no event has
occurred and is continuing which would constitute an Event of Default under the
Standby Note Purchase Agreement (such events include failure by Consumers to pay
amounts owing under the Standby Note Purchase Agreement, inaccuracy of
representations and warranties when made, failure to perform covenants under the
Standby Note Purchase Agreement, failure to pay any debt owing by Consumers in
excess of $10,000,000, certain events of bankruptcy or insolvency of Consumers,
an Event of Default under the Indenture or failure to maintain the security
interest thereunder and the non-enforceability of certain related documents);
and receipt by the Liquidity Provider of a properly completed notice of a failed
remarketing and a borrowing request from the Remarketing Agent.
Consumers may indemnify a Liquidity Provider against certain liabilities
arising out of or in connection with its duties under the Standby Note Purchase
Agreement. The summaries of certain provisions of any Standby Note Purchase
Agreement do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of such Standby Note Purchase
Agreement.
REGISTRATION, TRANSFER AND EXCHANGE
The Exchange Notes will initially be issued in the form of one or more
Global Exchange Notes, in registered form, without coupons, in denominations of
$1,000 or an integral multiple thereof as described under "Book-Entry; Delivery;
Form and Transfer." The Global Exchange Notes will be registered in the name of
a nominee of DTC. Each Global Exchange Note (and any Global Exchange Note issued
in exchange therefor) will be subject to certain restrictions on transfer set
forth therein as described under "Book-Entry; Delivery; Form and Transfer --
Transfers of Interests in Global Exchange Notes for Certificated Exchange
Notes." Except as set forth herein under "Book- Entry; Delivery; Form and
Transfer -- Transfers of Interests in Global Exchange Notes for Certificated
Exchange Notes," owners of beneficial interests in a Global Exchange Note will
not be entitled to have Exchange Notes registered in their names, will not
receive or be entitled to receive physical delivery of any such Exchange 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)
PAYMENT AND PAYING AGENTS
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Payments of principal of and interest and premium, if any, on Exchange Notes
issued in the form of Global Exchange Notes shall be made by wire transfer of
immediately available funds to the account specified by the registered holder of
such Global Exchange Note, which shall initially be a nominee of DTC. Interest
on Exchange Notes (other than interest at maturity) that are in the form of
certificated notes ("Certificated Exchange 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 Exchange 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 Exchange Notes in the form of Certificated
Exchange 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)
If and to the extent that Consumers fails to make timely payment of interest
on any Exchange Note, that interest shall cease to be payable to the persons who
were the holders of such Exchange Notes at the applicable Regular Record Date,
and shall instead become payable to the holder of such Exchange 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 or premium, if any, on any Exchange 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 Exchange 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 Exchange Note or the date fixed for redemption of any Exchange
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 Exchange 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 Exchange 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 Exchange 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
Exchange 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 Exchange Notes will bear
interest at the same rate as is borne by the Exchange Notes. Any payment by
Consumers to the Trustee of principal of, premium, if any, and interest on, a
series of Senior Note Mortgage Bonds will be applied by the Trustee to satisfy
Consumers' obligations with respect to principal of, premium, if any, and
interest 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 EXCHANGE NOTES) OF THE OCCURRENCE OF THE RELEASE
DATE. AS A RESULT, ON THE RELEASE DATE, THE SENIOR NOTE MORTGAGE BONDS SHALL
CEASE TO SECURE THE SENIOR NOTES (INCLUDING THE EXCHANGE NOTES), AND THE SENIoR
NOTES (INCLUDING THE EXCHANGE 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 Consumers for cancellation an equal
principal amount of the related series of Senior Note Mortgage Bonds. Consumers
shall not
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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 Exchange
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 and (f) default in the payment of the Put Price with respect to the
Exchange Notes. (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)
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
premium, if any, and interest, 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, or
premium, if any, or interest 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)
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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, or any premium or interest 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, 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)
Notwithstanding the provisions of Sections 13.01 and 13.02 of the Indenture,
Consumers has agreed that it shall not enter into any modification or amendment
of the Indenture, the Mortgage, the Exchange Notes or the Senior Note Mortgage
Bonds which would have a material adverse effect on the Callholder, without the
consent of such Callholder.
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) Consumers has agreed not to cause the discharge of
the Exchange Notes as contemplated above prior to the Final Maturity Date
without the prior consent of the Callholder (which consent shall not be
unreasonably withheld).
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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 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 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
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 "Limitations 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).
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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).
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 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 generally accepted accounting principles 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.
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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 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; and
(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; and
(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 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
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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; DELIVERY; FORM AND TRANSFER
The Exchange Notes will be issued initially in the form of one or more
registered global Exchange Notes without interest coupons (collectively, the
"Global Exchange Notes"). Upon issuance, the Global Exchange Notes will be
deposited with the Trustee, as custodian for DTC, and registered in the name of
DTC or its nominee, in each case for credit to the accounts of DTC's Direct and
Indirect Participants (as defined below).
The Global Exchange Notes may be transferred, in whole and not in part, only
to another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Exchange Notes may be
exchanged for Exchange Notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Exchange Notes for
Certificated Exchange Notes."
Depositary Procedures
DTC has advised Consumers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities that clear through or maintain
a direct or indirect, custodial relationship with a Direct Participant
(collectively, the "Indirect Participants"). DTC may hold securities
beneficially owned by other persons only through the Direct Participants or
Indirect Participants, and such other persons' ownership interest and transfer
of ownership interest will be recorded only on the records of the appropriate
Direct Participant and/or Indirect Participant, and not on the records
maintained by DTC.
DTC has also advised Consumers that, pursuant to DTC's procedures, (i) upon
deposit of the Global Exchange Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Exchange Notes allocated by the Initial Purchasers to such
Direct Participants, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Exchange Notes and the
transfer of ownership interests by and between Direct Participants. DTC will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, Indirect Participants or other owners of beneficial
interests in the Global Exchange Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Exchange Notes.
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The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Exchange Note
to such persons. Because DTC can act only on behalf of Direct Participants,
which in turn act on behalf of Indirect Participants and others, the ability of
a person having a beneficial interest in a Global Exchange Note to pledge such
interest to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Exchange Notes see "--Transfers of
Interests in Global Exchange Notes for Certificated Exchange Notes."
EXCEPT AS DESCRIBED IN " - TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES
FOR CERTIFICATED EXCHANGE NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
EXCHANGE NOTES WILL NOT HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE
CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY
PURPOSE.
Under the terms of the Indenture, Consumers and the Trustee will treat the
persons in whose names the Exchange Notes are registered (including Exchange
Notes represented by Global Exchange Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium and interest on Global Exchange
Notes registered in the name of DTC or its nominee will be payable by the
Trustee to DTC or its nominee as the registered holder under the Senior Debt
Indenture. Consequently, neither Consumers, the Trustee nor any agent of
Consumers or the Trustee has or will have any responsibility or liability for
(i) any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Exchange Notes or for maintaining, supervising
or reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Exchange Note or (ii) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised Consumers that its current payment practice (for payments of
principal, interest and the like) with respect to securities such as the
Exchange Notes is to credit the accounts of the relevant Direct Participants
with such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed by
standing instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee or Consumers. Neither Consumers nor the
Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Exchange
Notes, and Consumers and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Exchange Notes for all purposes.
The Global Exchange Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants who hold an interest
through a Direct Participant will be effected in accordance with the procedures
of such Direct Participant but generally will settle in immediately available
funds.
DTC has advised Consumers that it will take any action permitted to be taken
by a holder of Exchange Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default with
respect to the Exchange Notes, DTC reserves the right to exchange Global
Exchange Notes (without the direction of one or more of its Direct Participants)
for legended Exchange Notes in certificated form, and to distribute such
certificated forms of Exchange Notes to its Direct Participants. See
"--Transfers of Interests in Global Exchange Notes for Certificated Exchange
Notes."
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Exchange Notes among Direct Participants, it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of Consumers or the Trustee
will have any responsibility for the performance by DTC, or its respective
Direct and Indirect Participants of their respective obligations under the rules
and procedures governing any of their operations.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that Consumers believes to be reliable, but
Consumers takes no responsibility for the accuracy thereof.
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Transfers of Interests in Global Exchange Notes for Certificated Exchange Notes
An entire Global Exchange Note may be exchanged for Certificated Exchange
Notes if (i) (x) DTC notifies Consumers that it is unwilling or unable to
continue as Depositary for the Global Exchange Notes or Consumers determines
that DTC is unable to act as such Depositary and Consumers thereupon fails to
appoint a successor depositary within 90 days or (y) DTC has ceased to be a
clearing agency registered under the Exchange Act, (ii) Consumers, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Certificated Exchange Notes or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Exchange Notes. In any such
case, Consumers will notify the Trustee in writing that, upon surrender by the
Direct and Indirect Participants of their interest in such Global Exchange Note,
Certificated Exchange Notes will be issued to each person that such Direct and
Indirect Participants and the DTC identify as being the beneficial owner of the
related Exchange Notes.
Beneficial interests in Global Exchange Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Exchange Notes upon request to
DTC, by such Direct Participant (for itself or on behalf of an Indirect
Participant), to the Trustee in accordance with customary DTC procedures.
Certificated Exchange Notes delivered in exchange for any beneficial interest in
any Global Exchange Note will be registered in the names, and issued in any
approved denominations, requested by DTC on behalf of such Direct or Indirect
Participants (in accordance with DTC's customary procedures).
Neither Consumers nor the Trustee will be liable for any delay by the holder
of the Global Exchange Notes or DTC in identifying the beneficial owners of
Exchange Notes, and Consumers and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the holder of the Global Exchange
Note or DTC for all purposes.
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DESCRIPTION OF FIRST MORTGAGE BONDS
GENERAL
The Senior Note Mortgage Bonds were 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 further supplemented by a Supplemental Indenture dated as of
June 15, 1998 providing for the series of Senior Note Mortgage Bonds relating to
the Exchange 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 August 31, 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. 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 Exchange Notes ("Senior Note
Exchange Mortgage Bonds") were issued as security for Consumers' obligations
under the Indenture and were delivered to and registered in the name of the
Trustee. The Senior Note Exchange Mortgage Bonds were issued as security for the
Notes and will secure the Exchange Notes until the Release Date. For purposes of
the Indenture, the Senior Note Exchange Mortgage Bonds shall be deemed to be the
"related series" of Senior Note Mortgage Bonds in respect of the Exchange 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 Exchange Notes -- Voting of Senior Note Mortgage Bonds Held by
Trustee."
The Senior Note Exchange Mortgage Bonds will correspond to the Exchange
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 Exchange Notes, Senior Note Exchange Mortgage Bonds in a
principal amount equal to the principal amount of such Exchange 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 Note Exchange Mortgage Bonds has been discharged unless
it has received a written notice from the Trustee stating that timely payment on
the Exchange Notes has not been made.
REDEMPTION PROVISIONS
The Senior Note Exchange 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 Exchange Notes, the Senior Note Exchange 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 Exchange Notes -- Events of Default."
PRIORITY AND SECURITY
The Senior Note 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
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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 Note Exchange 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 Note Exchange Mortgage Bonds does not incorporate Section 7.07 of the
Mortgage.
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 Note Exchange Mortgage Bonds were 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 Note Exchange 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.
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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 Note
Exchange Mortgage Bonds) or by the holder of any 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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THE EXCHANGE OFFER
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Notes were sold by Consumers on June 24, 1998 pursuant to the Purchase
Agreement dated June 18, 1998 (the "Purchase Agreement") by and among Consumers
and the Initial Purchasers and were subsequently offered by the Initial
Purchasers to qualified institutional buyers pursuant to Rule 144A that are
accredited investors in a manner exempt from registration under the Securities
Act as well as to purchasers pursuant to Regulation S under the Securities Act.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement which has been filed as an
exhibit to the Exchange Offer Registration Statement and a copy of which is
available as set forth in "Available Information."
Consumers and the Initial Purchasers entered into the Registration Rights
Agreement dated as of June 24, 1998. Pursuant to the Registration Rights
Agreement, Consumers agreed to file with the Commission a registration statement
(the "Exchange Offer Registration Statement") on the appropriate form under the
Securities Act with respect to the offer to exchange the Notes for a new series
of notes of Consumers (the "Senior Remarketed Secured Notes, Series B, Due 2018"
or "Exchange Notes") registered under the Securities Act with terms
substantially identical to those of the Notes (the "Exchange Offer") (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions or for provision of additional interest during the continuation of
a Registration Default (as defined below)). Upon the effectiveness of the
Exchange Offer Registration Statement, Consumers will offer Exchange Notes
pursuant to the Exchange Offer in exchange for Transfer Restricted Securities
(as defined herein) to the Holders of Transfer Restricted Securities who are
able to make certain representations. If (i) Consumers is not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
Consumers that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) it may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) it is a
broker-dealer and owns Notes acquired directly from Consumers or an affiliate of
Consumers, Consumers will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of the Notes by
the Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. Consumers will
use its best efforts to cause the applicable registration statement to be
declared effective by the Commission on or prior to 180 days after such filing
obligation arises. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until (i) the date on which such Note has been
exchanged by a person other than a broker-dealer for an Exchange Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of an Note for an Exchange Note, the date on which such an Exchange Note
is sold to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement, or (iv) the date on which such Note is eligible to be
distributed to the public pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement will provide that (i) Consumers will file
an Exchange Offer Registration Statement with the Commission on or prior to 150
days after the closing date, (ii) Consumers will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 180 days after the closing date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, Consumers will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Exchange Notes in exchange for all
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, Consumers will file the Shelf Registration
Statement with the Commission on or prior to 150 days after such filing
obligation arises and to use its best efforts to cause the Shelf Registration to
be declared effective by the Commission on or prior to 180 days after the date
on which Consumers becomes obligated to file such Shelf Registration Statement.
Except as provided in the next paragraph, if (a) Consumers fails to file any of
the Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c)
Consumers fails to consummate the Exchange Offer within 30 business days after
the Exchange Offer Registration Statement is first declared effective or (d) the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses
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(a) through (d) above being a "Registration Default"), then Consumers will
pay additional interest to each Holder of Notes at a rate of .25% per annum
until all such Registration Defaults are cured. All accrued additional interest
will be paid by Consumers on each interest payment date to the Depositary by
wire transfer of immediately available funds or by federal funds check and to
Holders of certificated securities by mailing checks to their registered
addresses. Following the cure of all Registration Defaults, the accrual of
additional interest will cease.
Holders of Notes will be required to make certain representations to
Consumers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
additional interest set forth above.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean , 1998, unless Consumers,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
To extend the Expiration Date, Consumers will notify the Exchange Agent of
any extension by oral or written notice and will notify the holders of the Notes
by means of a press release or other public announcement prior to 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that Consumers is extending the
Exchange Offer for a specified period of time.
Consumers reserves the right (i) to delay acceptance of any Notes, to extend
the Exchange Offer or to terminate the Exchange Offer and not permit acceptance
of Notes not previously accepted if any of the conditions set forth herein under
"- Conditions" shall have occurred and shall not have been waived by Consumers,
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by Consumers to constitute a
material change, Consumers will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of the Notes of such amendment.
Without limiting the manner in which Consumers may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, Consumers shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will accrue interest at the rate of 6 50% per annum from
the last date on which interest was paid on the Notes, or, if no interest has
been paid on such Notes, from June 24, 1998, the date of issuance of the Notes
for which the Exchange Offer is being made until June 15, 2005 (the "Initial
Interest Rate Period"). Interest on the Exchange Notes during the Initial
Interest Rate Period will be payable semiannually on June 15 and December 15,
commencing December 15, 1998. Thereafter, each Exchange Note will bear interest
at Consumers' option in either the Daily Interest Rate Mode, the Weekly Interest
Rate Mode, the Commercial Paper Rate Mode, the Long Term Rate Mode or the Fixed
Interest Rate Mode (all such terms as defined herein). Each Exchange Note may
have the same or a different interest rate, Interest Rate Mode, Interest Rate
Adjustment Date or Interest Rate Period (all such terms as defined herein) from
each other Exchange Note. After June 15, 2005, interest rates will be
periodically established by one or more Remarketing Agents (as defined herein)
selected by Consumers.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration
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Date. In addition, either (i) a timely confirmation of a book-entry transfer
(a "Book-Entry Confirmation") of such Notes into the Exchange Agent's account at
The Depositary (the "Book-Entry Transfer Facility") pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date or (ii) the holder must comply with the guaranteed
delivery procedures described below. THE METHOD OF DELIVERY OF LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR OTHER
REQUIRED DOCUMENTS SHOULD BE SENT TO CONSUMERS. Delivery of all documents must
be made to the Exchange Agent at its address set forth below. Holders may also
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect such tender for such holders.
The tender by a holder of Notes will constitute an agreement between such
holder and Consumers in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal. Any beneficial owner whose
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should contact such registered
holder promptly and instruct such registered holder to tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be medallion guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor' institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Notes
tendered pursuant thereto are tendered for the account of an Eligible
Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations, or
others acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by Consumers, evidence satisfactory to
Consumers of their authority to so act must be submitted with the Letter of
Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Notes will be determined by Consumers,
in its sole discretion, which determination will be final and binding. Consumers
reserves the absolute right to reject any and all Notes not properly tendered or
any Notes which, if accepted, would, in the opinion of counsel for Consumers, be
unlawful. Consumers also reserves the absolute right to waive any irregularities
or conditions of tender as to particular Notes. Consumers' interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as Consumers shall determine. Neither Consumers, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of Notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost to such holder by the Exchange Agent,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, Consumers reserves the right, in its sole discretion, subject
to the provisions of the Senior Debt Indenture, to purchase or make offers for
any Notes that remain outstanding subsequent to the Expiration Date or, as set
forth under "- Conditions," to terminate the Exchange Offer in accordance with
the terms of the Registration Agreement, and to the extent permitted by
applicable law, purchase Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Notes properly tendered will be accepted promptly after the Expiration Date,
and the Exchange Notes will be issued promptly after acceptance of the Notes.
See "- Conditions." For purposes of the Exchange Offer, Notes shall be deemed to
have been accepted as validly tendered for exchange when, as and if Consumers
has given oral or written notice thereof to the Exchange Agent.
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In all cases, issuance of Exchange Notes for Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a Book-Entry Confirmation of such Notes into the
Exchange Agent's account at the Book- Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer, such unaccepted or such
nonexchanged Notes will be credited to an account maintained with such
Book-Entry Transfer Facility as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Notes by causing the Book-Entry Transfer
Facility to transfer such Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, the Letter of Transmittal (or
facsimile) thereof with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth under "- Exchange Agent" on or prior to
the Expiration Date or the guaranteed delivery procedures described below must
be complied with.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by Consumers (by facsimile transmission, mail
or hand delivery), setting forth the name and address of the holder of Notes and
the amount of Notes tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange, Inc. ("NYSE"') trading
days after the date of execution of the Notice of Guaranteed Delivery, a
Book-Entry Confirmation and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) a Book-Entry Confirmation and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at one of the addresses set forth under "- Exchange Agent." Any
such notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility from which the Notes were tendered, identify the
principal amount of the Notes to be withdrawn, and specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Notes and otherwise comply with the procedures of such Book-Entry
Transfer Facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notice will be determined by Consumers,
whose determination shall be final and binding on all parties. Any Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Notes which have been tendered for exchange
but which are not exchanged for any reason will be credited to an account
maintained with such Book-Entry Transfer Facility for the Notes as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Notes may be retendered by following one of the
procedures described under "- Procedures for Tendering" and "- Book-Entry
Transfer" at any time on or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Notes will not be
required to be accepted for exchange, nor will Exchange Notes be issued in
exchange for any Notes, and Consumers may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Notes, if, because of any
change in law, or applicable interpretations thereof by the Commission,
Consumers determines that it is not permitted to effect the Exchange Offer.
Consumers has no obligation to, and will not knowingly, permit acceptance of
tenders of Notes from affiliates of Consumers or from any other holder or
holders who are not eligible to participate in the
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<PAGE> 46
Exchange Offer under applicable law or interpretations thereof by the Staff
of the Commission, or if the Exchange Notes to be received by such holder or
holders of Notes in the Exchange Offer, upon receipt, will not be tradable by
such holder without restriction under the Securities Act and the Exchange Act
and without material restrictions under the "blue sky" or securities laws of
substantially all of the states of the United States.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Mail (Certified, Registered, Overnight or First Class) or Hand Delivery:
The Chase Manhattan Bank
55 Water Street. Room 234
North Building
New York, New York 10041
By Facsimile
(For Eligible Institutions Only)
(212)638-7380
Telephone Number
(212) 638-0828
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by Consumers. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of Consumers.
Consumers will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Consumers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith.
The expenses to be incurred in connection with the Exchange Offer will be
paid by Consumers, including fees and expenses of the Exchange Agent and the
Trustee, and accounting, legal, printing and related fees and expenses.
Consumers will pay all transfer taxes, if any, applicable to the exchange of
Notes pursuant to the Exchange Offer. If, however, Exchange Notes or Notes for
principal amounts not tendered or accepted for exchange are to be registered or
issued in the name of any person other than the registered holder of the Notes
tendered, or if tendered Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, Consumers believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any owner of such Exchange Notes
(other than any such owner which is an "affiliate" of Consumers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such owner's
business and such owner does not intend to
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<PAGE> 47
participate, and has no arrangement or understanding with any person to
participate, in the distribution of such Exchange Notes. Any owner of Notes who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes may not rely
on the position of the staff of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13,1988, as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993) and Morgan Stanley & Co.,
Incorporated (available June 5, 1991), Warnaco, Inc.(available June 5, 1991),
and Epic Properties, Inc. (available October 21, 1991) or similar no-action
letters (collectively the "No-Action Letters") but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K of the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
By tendering in the Exchange Offer, each Holder (or DTC participant, in the
case of tenders of interests in the Global Notes held by DTC) will represent to
Consumers (which representation may be contained the Letter of Transmittal) to
the effect that (A) it is not an affiliate of Consumers, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes to be
issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its
ordinary course of business. Each Holder will acknowledge and agree that any
broker-dealer and any such Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes acquired in the Exchange Offer (1) could not
under Commission policy as in effect on the date of the Registration Rights
Agreement rely on the position of the Commission enunciated in the No-Action
Letters, and (2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if the
resales are of Exchange Notes obtained by such Holder in exchange for Notes
acquired by such Holder directly from Consumers or an affiliate thereof.
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or to register the Exchange Notes prior to
offering or selling such Exchange Notes. Consumers has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to cooperate with selling Holders or underwriters in connection with
the registration and qualification of the Exchange Notes for offer or sale under
the securities or "blue sky" laws of such jurisdictions as may be necessary to
permit the holders of Exchange Notes to trade the Exchange Notes without any
restrictions or limitations under the securities laws of the several states of
the United States.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes pursuant
to the Exchange Offer will continue to be subject to the restrictions on
transfer of such Notes as set forth in the legend thereon as a consequence of
the issuance of the Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Notes may not be registered under the
Securities Act, except pursuant a transaction not subject to, the Securities Act
and applicable state securities laws. Consumers does not currently anticipate
that it will register the Notes under the Securities Act. To the extent that
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Notes could be adversely affected.
DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item appears (i) under "Nominees for
Election as Directors" on pages 2 through 5 of CMS Energy Corporation's
definitive Proxy Statement, dated April 20, 1998, relating to its 1998 Annual
Meeting of Shareholders (the "1998 Proxy Statement"); (ii) under "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 6 of the 1998 Proxy
Statement; and (iii) under "CMS Energy and Consumers Executive Officers" on
pages 21 through 23 of CMS Energy and Consumers Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, all of which information is
incorporated by reference.
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EXECUTIVE COMPENSATION
The information required by this item appears under (i) "Executive
Compensation" on pages 10 through 12 of the 1998 Proxy Statement; (ii)
"Executive Compensation" on pages 3 and 4 of Consumers Energy Company's
definitive Proxy Statement, dated April 20, 1998, relating to its 1998 Annual
Meeting of Shareholders; and (iii) "Organization and Compensation Committee
Report" on pages 13 through 14 of the 1998 Proxy Statement all of which
information is incorporated by reference.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF NOTES
FOR EXCHANGE NOTES
The following summary describes the principal United States federal income
tax consequences to holders who exchange Notes for Exchange Notes pursuant to
the Exchange Offer. This summary is intended to address the beneficial owners of
Notes that are citizens or residents of the United States, corporations,
partnerships or other entities created or organized in or under the laws of the
United States or any State or the District of Columbia, or estates or trusts
that are not foreign estates or trusts for United States federal income tax
purposes, in each case, that hold the Notes as capital assets.
The exchange of Notes for Exchange Notes pursuant to the Exchange Offer will
not constitute a taxable exchange for United States federal income tax purposes.
As a result, a holder of a Note whose Note is accepted in the Exchange Offer
will not recognize gain or loss on the exchange. A tendering holder's tax basis
in the Exchange Notes received pursuant to the Exchange Offer will be the same
as such holder's tax basis in the Notes surrendered therefor. A tendering
holder's holding period for the Exchange Notes received pursuant to the Exchange
Offer-will include its holding period for the Notes surrendered therefor.
ALL HOLDERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE EXCHANGE OF
NOTES FOR EXCHANGE NOTES, AND OF THE OWNERSHIP AND DISPOSITION OF EXCHANGE NOTES
RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE
EXCHANGE NOTES
The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes or the
Exchange Notes by a United States Holder (as defined below). This summary deals
only with the United States Holders that will hold the Notes or the Exchange
Notes as capital assets. The discussion does not cover-all aspects of federal
taxation that may be relevant to, or the actual tax effect that any of the
matters described herein will have on, the acquisition, ownership or disposition
of the Notes or the Exchange Notes by particular investors, and does not address
state, local, foreign or other tax laws. In particular, this summary does not
discuss all of the tax considerations that may be relevant to certain types of
investors subject to special treatment under the federal income tax laws (such
as banks, insurance companies, investors liable for the alternative minimum tax,
individual retirement accounts and other tax-deferred accounts, tax-exempt
organizations, dealers in securities or currencies, investors that will hold the
Notes or the Exchange Notes as part of straddles, hedging transactions or
conversion transactions for federal tax purposes or investors whose functional
currency is not United States Dollars). Furthermore, the discussion below is
based on provisions of the Internal Revenue Code of 1986, as amended, and
regulations, rulings, and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
U.S. federal income tax consequences different from those discussed below.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF EXCHANGE
NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME
TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR INTERNATIONAL TAXING
JURISDICTION.
As used herein, the term "United States Holder" means a beneficial owner of
the Notes or the Exchange Notes that is (i) a citizen or resident of the United
States for United States federal income tax purposes, (ii) a corporation created
or organized under the laws of the United States or any State thereof, (iii) a
person or entity that is otherwise subject to United States federal income tax
on a net income
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<PAGE> 49
basis in respect of income derived from the Notes or the Exchange Notes, or
(iv) a partnership to the extent the interest therein is owned by a person who
is described in clause (i), (ii) or (iii) of this paragraph.
INTEREST
Interest paid on an Existing Note or an Exchange Note will be taxable to a
United States Holder as ordinary income at the time it is received or accrued,
depending on the holder's method of accounting for tax purposes.
PURCHASE, SALE, EXCHANGE, RETIREMENT AND REDEMPTION OF THE EXCHANGE NOTES
In general (with certain exceptions described below) a United States
Holder's tax basis in an Exchange Note will equal the price paid for the Notes
for which such Exchange Note was exchanged pursuant to the Exchange Offer. A
United States Holder generally will recognize gain or loss on the sale,
exchange, retirement, redemption or other disposition of an Note or an Exchange
Note (or portion thereof) equal to the difference between the amount realized on
such disposition and the United States Holder's tax basis in the Note or the
Exchange Note (or portion thereof). Except to the extent attributable to accrued
but unpaid interest, gain or loss recognized on such disposition of an Note or a
Exchange Note will be capital gain or loss. Under the "Taxpayer Relief Act of
1997" (the "Taxpayer Act") the maximum rate applicable to long-term capital
gains of individuals has been reduced to 20%. However, the Taxpayer Act also
extends the holding period for long-term capital gains to 18 months for capital
assets disposed of after July 28, 1997. Gain on capital assets held between 12
months and 18 months are subject to tax at a maximum rate of 28%. Any such gain
will generally be United States source gain.
BOND PREMIUM
If a United States Holder acquires an Exchange Note or has acquired a Note,
in each ease, for an amount more than its redemption price, the Holder may elect
to amortize such bond premium on a yield to maturity basis. Once made, such an
election applies to all bonds (other than bonds the interest on which is
excludable from gross income) held by the United States Holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the United States Holder, unless the IRS consents to a revocation of the
election. The basis of an Exchange Note will be reduced by any amortizable bond
premium taken as a deduction,
MARKET DISCOUNT
The purchase of an Exchange Note or the purchase of a Note other than at
original issue may be affected by the market discount provisions of the Code.
These rules generally provide that, subject to a statutorily defined de minimis
exception, if a United States Holder purchases an Exchange Note (or purchased a
Note) at a "market discount," as defined below, and thereafter recognizes gain
upon a disposition of the Exchange Note (including dispositions by gift or
redemption), the lesser of such gain (or appreciation, in the case of a gift) or
the portion of the market discount that has accrued ("accrued market discount")
while the Exchange Note (and its predecessor Note, if any) was held by such
United States Holder will be treated as ordinary interest income at the time of
disposition rather than as capital gain. For an Exchange Note or a Note, "market
discount" is the excess of the stated redemption price at maturity over the tax
basis immediately after its acquisition by a United States Holder. Market
discount generally will accrue ratably during the period from the date of
acquisition to the maturity date of the Exchange Note, unless the United States
Holder elects to accrue such discount on the basis of the constant yield method.
Such an election applies only to the Exchange Note with respect to which it is
made and is irrevocable.
In lieu of including the accrued market discount income at the time of
disposition, a United States Holder of an Exchange Note acquired at a market
discount (or acquired in exchange for a Note acquired at a market discount) may
elect to include the accrued market discount in income currently either ratably
or using the constant yield method. Once made, such an election applies to all
other obligations that the United States Holder purchases at a market discount
during the taxable year for which the election is made and in all subsequent
taxable years of the United States Holder, unless the Internal Revenue Service
consents to a revocation of the election. If an election is made to include
accrued market discount in income currently, the basis of a Exchange Note (or,
where applicable, a predecessor Note) in the hands of the United States Holder
will be increased by the accrued market discount thereon as it is includible in
income. A United States Holder of a market discount Exchange Note who does not
elect to include market discount in income currently generally will be required
to defer deductions for interest on borrowings allocable to such Exchange Note,
if any, in an amount not exceeding the accrued market discount on such Exchange
Note until the maturity or disposition of such Exchange Note.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest and principal on, and the proceeds of sale or other
disposition of the Notes or the Exchange Notes payable to a United States
Holder, may be subject to information reporting requirements and backup
withholding at a rate of 31% will apply to such payments if the United States
Holder fails to provide an accurate taxpayer identification number or to report
all interest and dividends required to be shown on its federal income tax
returns. Certain United States Holders (including, among others, corporations)
are not subject to backup withholding. United States Holders should consult
their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connections with resales of the Exchange Notes received in exchange for the
Notes where such Notes were acquired as a result of market-making activities or
other trading activities. Consumers has agreed that, starting on the Expiration
Date and ending on the close of business on the first anniversary of the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
Consumers will not receive any proceeds from any sale of the Exchange Notes
by broker-dealers. The Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the counter market, in negotiated transaction,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, Consumers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. Consumers has agreed to pay all expenses incident to the
Exchange Offer and will indemnify the holders of the Exchange Notes against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Opinions as to the legality of the Exchange Notes will be rendered for
Consumers by Michael D. Van Hemert, Assistant General Counsel for CMS Energy,
Consumers' parent. Certain United States Federal income taxation matters will be
passed upon for Consumers by Theodore J. Vogel, tax counsel for CMS Energy,
Consumers' parent.
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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 Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
With respect to the unaudited interim consolidated financial information for
the periods ended March 31, 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 the registration statement prepared
or certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
Future consolidated financial statements of Consumers and the reports
thereon of Arthur Andersen LLP also will be incorporated by reference in this
Prospectus in reliance upon the authority of that firm as experts in giving
those reports to the extend that said firm has audited said consolidated
financial statements and consented to the use of their reports thereon.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CONSUMERS,
THE INITIAL PURCHASERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE EXCHANGE NOTES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, 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 CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ---------------
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
FIX THIS
PAGE
<S> <C>
Available Information ......................................... 1
Incorporation of Certain Documents by
Reference.................................................... 1
Prospectus Summary............................................. 2
Consumers Energy Company....................................... 7
Selected Consolidated Financial Data........................... 8
Use of Proceeds................................................ 8
Ratio of Earnings to Fixed Charges............................. 8
Description of Exchange Notes.................................. 9
Description of First Mortgage Bonds............................ 34
The Exchange Offer............................................. 37
Directors and Executive Officers............................... 42
Executive Compensation......................................... 43
Certain United States Federal Income
Tax Consequences............................................. 43
Plan of Distribution........................................... 45
Legal Matters.................................................. 45
Experts........................................................ 46
</TABLE>
================================================================================
================================================================================
================================================================================
================================================================================
OFFER TO EXCHANGE
SENIOR REMARKETED SECURED NOTES,
SERIES B, DUE 2018
FOR ANY AND ALL OF THE OUTSTANDING
SENIOR REMARKETED SECURED NOTES,
SERIES A, DUE 2018
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED
CONSUMERS ENERGY LOGO
================================================================================
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<PAGE> 53
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following resolution was adopted by the Board of Directors of Consumers on
May 6, 1987:
RESOLVED: That effective March 1, 1987 the Company shall indemnify to
the full extent permitted by law every person (including the estate, heirs
and legal representatives of such person in the event of the decease,
incompetency, insolvency or bankruptcy of such person) who is or was a
director, officer, partner, trustee, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer,
partner, trustee, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against all liability, costs,
expenses, including attorneys' fees, judgments, penalties, fines and amounts
paid in settlement, incurred by or imposed upon the person in connection
with or resulting from any claim or any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative,
investigative or of whatever nature, arising from the person's service or
capacity as, or by reason of the fact that the person is or was, a director,
officer, partner, trustee, employee or agent of the Company or is or was
serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Such right of indemnification shall not
be deemed exclusive of any other rights to which the person may be entitled
under statute, bylaw, agreement, vote of shareholders or otherwise.
Article XIII, Section 1 of Consumers Bylaws provides:
The Company may purchase and maintain liability insurance, to the full
extent permitted by law, on behalf of any person who is or was a director,
officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity.
Article V of Consumers Restated Articles of Incorporation, as amended
reads:
A director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty as a director except
(i) for a breach of the director's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for a violation
of Section 551(1) of the Michigan Business Corporation Act, and (iv) any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article V, and no modification to its
provisions by law, shall apply to, or have any effect upon, the liability or
alleged liability of any director of the Company for or with respect to any
acts or omissions of such director occurring prior to such amendment, repeal
or modification.
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.
II-1
<PAGE> 54
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
Exhibit No. DESCRIPTION
- ----------- -----------
<S> <C>
*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) - 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 Reg. No. 33-31866 (4)(d)
68th 06/15/93 Reg. No. 33-41126 (4)(d)
69th 09/15/93 Form 8-K dated September 21, 1993,
File No. 1-5611 (4)
</TABLE>
II-2
<PAGE> 55
<TABLE>
<S> <C> <C>
70th 02/01/98 Form 10-K for year ended
December 31, 1997, File No. 1-5611 (4)
71st 03/01/98 Form 10-K for year ended
December 31, 1997, File No. 1-5611 (4)
72nd 05/01/98 Form 10-Q for
period ended March 31,
1998, File No. 1-5611 (4)(b)
73rd 06/15/98 Reg. No. 333-58943 (4)(d)
</TABLE>
<TABLE>
<S> <C>
*4(e) - Form of Exchange Note. (Designated in Consumers Energy's Form 10-K for the year ended December 31, 1997,
File No. 1-5611, as Exhibit (4)(c).)
4(f) - Registration Rights Agreement dated as of June 24, 1998 by and among Consumers Energy Company and
Goldman, Sachs & Co., Morgan Stanley Dean Witter and First Chicago Capital Markets, Inc.
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.
8 - Opinion of Theodore J. Vogel, Tax Counsel for CMS Energy, regarding tax matters.
*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(b) - Consent of Theodore J. Vogel, Tax Counsel for CMS Energy (included in Exhibit 8 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 (Designated in Consumers Energy Company's Registration Statement on Form S-4 dated July 13, 1998,
File No. 333-58943, as Exhibit 24).
*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).
99(a) - Form of Letter of Transmittal for the Senior Remarketed Secured Notes, Series B, Due 2018.
</TABLE>
II-3
<PAGE> 56
<TABLE>
<S> <C>
99(b) - Certification of Taxpayer Identification Number on Substitute Form W-9.
99(c) - Form of Notice of Guaranteed Delivery.
</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 22. 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 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) To respond to requests for information that is incorporated by reference
in to the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-4
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, there unto duly authorized, in the City of Jackson, and State of
Michigan, on the 29th day of September, 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
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
(i) Principal executive officer
<S> <C> <C>
/s/ Victor J. Fryling President September 29, 1998
-----------------------------------
Victor J. Fryling
(ii) Principal financial officer:
/s/ AM Wright Senior Vice President and
----------------------------------- Chief Financial Officer September 29, 1998
Alan M. Wright
(iii) Controller or principal accounting officer
/s/ Dennis DaPra Vice President and Controller September 29, 1998
---------------------------------
Dennis DaPra
*
-----------------------------------
(William T. McCormick, Jr.) Director September 29, 1998
</TABLE>
II-5
<PAGE> 58
<TABLE>
<S> <C> <C>
*
-----------------------------------
(John M. Deutch) Director September 29, 1998
*
-----------------------------------
(James J. Duderstadt) Director September 29, 1998
*
-----------------------------------
(Kathleen R. Flaherty) Director September 29,1998
*
-----------------------------------
(Victor J. Fryling) Director September 29, 1998
*
-----------------------------------
(Earl D. Holton) Director September 29, 1998
*
-----------------------------------
(William U. Parfet) Director September 29, 1998
*
-----------------------------------
(Percy A. Pierre) Director September 29, 1998
*
-----------------------------------
(Kenneth Whipple) Director September 29, 1998
*
-----------------------------------
(John B. Yasinsky) Director September 29, 1998
*By: /s/ AM Wright
------------------------------------
Alan M. Wright
Attorney in-fact
</TABLE>
II-6
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. DESCRIPTION
- ----------- -----------
<S> <C>
*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) - 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 Reg. No. 33-31866 (4)(d)
68th 06/15/93 Reg. No. 33-41126 (4)(d)
69th 09/15/93 Form 8-K dated September 21, 1993,
File No. 1-5611 (4)
70th 02/01/98 Form 10-K for year ended
December 31, 1997, File No. 1-5611 (4)
71st 03/01/98 Form 10-K for year ended
December 31, 1997, File No. 1-5611 (4)
72nd 05/01/98 Form 10-Q for period ended
March 31, 1998, File No. 1-5611 (4)(b)
73rd 06/15/98 Reg. No. 333-58943 (4)(d)
*4(e) - Form of Exchange Note. (Designated in Consumers Energy's Form 10-K for the year ended December 31, 1997,
File No. 1-5611, as Exhibit (4)(c).)
</TABLE>
II-7
<PAGE> 60
<TABLE>
<S> <C>
4(f) - Registration Rights Agreement dated as of June 24, 1998 by and among Consumers Energy Company and
Goldman, Sachs & Co., Morgan Stanley Dean Witter and First Chicago Capital Markets, Inc.
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.
8 - Opinion of Theodore J. Vogel, Tax Counsel for CMS Energy, regarding tax matters.
*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(b) - Consent of Theodore J. Vogel, Tax Counsel for CMS Energy (included in Exhibit 8 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 (Designated in Consumers Energy Company's Registration Statement on Form S-4 dated July 13, 1998,
File No. 333-58943, as Exhibit 24).
*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).
99(a) - Form of Letter of Transmittal for the Senior Remarketed Secured Notes, Series B, Due 2018.
99(b) - Certification of Taxpayer Identification Number on Substitute Form W-9.
99(c) - Form of Notice of Guaranteed Delivery.
</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.
II-8
<PAGE> 1
================================================================================
Exhibit 4(f)
REGISTRATION RIGHTS AGREEMENT
Dated as of June 24, 1998
by and among
Consumers Energy Company
and
Goldman, Sachs & Co.
Morgan Stanley Dean Witter
First Chicago Capital Markets, Inc.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 24, 1998, by and among Consumers Energy Company, a
Michigan corporation (the "Company"), and Goldman, Sachs & Co. ("Goldman
Sachs"), Morgan Stanley Dean Witter ("Morgan Stanley"), and First Chicago
Capital Markets, Inc. ("First Chicago") (each an "Initial Purchaser" and,
collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated June
18, 1998 (the "Purchase Agreement"), by and among the Company and the Initial
Purchasers, which provides for the sale by the Company to the Initial Purchasers
of an aggregate of $200,000,000 principal amount of the Company's Senior
Remarketed Secured Notes, Series A, Due 2018 (the "Series A Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchasers set forth in Section 10 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Commission thereunder.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the primary corporate trust office of the
Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes that are
acquired by a Broker- Dealer in the Exchange Offer in exchange for Series A
Notes that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Certificated Notes: Notes under the Indenture that are not in Global
Note form.
Closing Date: June 24, 1998, or such other date as may be agreed upon
for the sale and purchase of the Series A Notes pursuant to the Purchase
Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Trustee under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant
-1-
<PAGE> 3
to the Exchange Offer.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and to persons permitted to
purchase the Series A Notes in offshore transactions in reliance upon Regulation
S under the Act.
First Mortgage: The Indenture, dated as of September 1, 1945, between
the Company and The Chase Manhattan Bank, as successor trustee to City Bank
Farmers Trust Company, as supplemented and amended.
Global Noteholder: As defined in the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of February 1, 1998, as previously
supplemented and as further supplemented by the Second Supplemental Indenture
thereto dated as of June 15, 1998, between the Company and The Chase Manhattan
Bank, as Trustee (the "Trustee"), pursuant to which the Notes are to be issued.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in any Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
-2-
<PAGE> 4
Record Holder: With respect to any Interest Payment Date, each Person
who is a Holder of Notes on the record date for such Interest Payment Date.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference or deemed to
be incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Series B Notes: The Company's Senior Remarketed Secured Notes, Series
B, Due 2018 containing terms identical (including identical call options,
mandatory puts and provision for security by the Company's First Mortgage Bonds,
Senior Remarketed Secured Notes, Series A, Due 2018 ("First Mortgage Bonds")) to
the Series A Notes (except that such Series B Notes shall not bear a legend
restricting the transfer thereof and such Series B Notes need not bear
"additional interest" upon a Registration Default as contemplated in Section 5)
to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon
the request of any Holders of Series A Notes covered by a Shelf Registration
Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. HOLDERS
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<PAGE> 5
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 150 days
after the Closing Date, the Exchange Offer Registration Statement, (ii) use its
best efforts to cause such Exchange Offer Registration Statement to become
effective at the earliest possible time, but in no event later than 180 days
after the Closing Date, (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause such Exchange Offer Registration Statement to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to be effective continuously, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter. The
Company shall inform the Initial Purchasers of the names and addresses of Series
A Notes to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Transfer Restricted Securities in the Exchange Offer.
(c) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Series A Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to
-4-
<PAGE> 6
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated.
The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Restricted Broker-Dealers promptly upon
request, and in no event later than one day after such request, at any time
during such one-year period in order to facilitate such sales.
The exchange of Series A Notes for Series B Notes pursuant to this
Agreement shall not be deemed to be payment, satisfaction or discharge of the
Series A Notes for purposes of Article V of the Indenture.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement with respect to the Series B Notes
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a)(i) below have been
complied with) or (ii) if any Holder of Transfer Restricted Securities shall
notify the Company following the Consummation of the Exchange Offer that (A)
such Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Series A Notes acquired directly from the Company or one
of its affiliates, then the Company shall (x) cause to be filed on or prior to
150 days after the date on which the Company determines that it is not required
to file the Exchange Offer Registration Statement pursuant to clause (i) above
or 150 days after the date on which the Company receives the notice specified in
clause (ii) above a shelf registration statement pursuant to Rule 415 under the
Act (which may be an amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement")), relating to all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof, and shall (y) use its best efforts to
cause such Shelf Registration Statement to become effective on or prior to 180
days after the date on which the Company becomes obligated to file such Shelf
Registration Statement. If, after the Company has filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above. Such
an event shall have no effect on the requirements of clause (y) above. The
Company shall use its best efforts to keep the Shelf Registration Statement
discussed in this Section 4(a) continuously effective, supplemented and amended
as required by and subject to the provisions of Sections 6(b) and (c) hereof to
the extent necessary to ensure that it is available for sales of Transfer
Restricted Securities by the Holders thereof entitled to the benefit of this
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<PAGE> 7
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf Registration
Statement first becomes effective under the Act.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in item 507 of Regulation S-K under the Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to liquidated damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such information.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded within fifteen business days by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within five business days (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Company agrees
to pay liquidated damages in the form of additional interest on the transfer
Restricted Securities to each Holder of Transfer Restricted Securities, during
the continuation of any Registration Default, at a rate of .25% per annum until
all Registration Defaults are cured. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (i)
above, (2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All additional interest shall be paid on each Interest Payment Date
to the Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Record Holders of Certificated Notes by mailing
checks on each Interest Payment Date to such Record Holders at their addresses
registered on the books of the Company or the Trustee for such payment. All
obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time
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<PAGE> 8
as all such obligations with respect to such security shall have been satisfied
in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and to
permit the sale of Broker-Dealer Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof, there has been
published a change in Commission policy with respect to exchange offers
such as the Exchange Offer, such that in the reasonable opinion of counsel
to the Company there is a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the Commission
allowing the Company to Consummate an Exchange Offer for such Series A
Notes. The Company hereby agrees to pursue the issuance of such a decision
to the Commission staff level. In connection with the foregoing, the
Company hereby agrees to take all such other actions as are reasonably
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company, prior
to the Consummation of the Exchange Offer, a written representation to the
Company (which may be contained in the letter of transmittal contemplated
by the Exchange Offer Registration Statement) to the effect that (A) it is
not an affiliate of the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Series B Notes to be issued
in the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. Each Holder hereby acknowledges and agrees
that any Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991), Mary Kay Cosmetics,
Inc. (available June 5, 1991), Warnaco, Inc. (available June 5, 1991), Epic
Properties, Inc. (available October 21, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter obtained pursuant
to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired by such Holder directly from the
Company or an affiliate thereof.
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<PAGE> 9
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter to
the Commission (A) stating that the Company is registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
Co., Inc. (available June 5, 1991), Mary Kay Cosmetics, Inc. (available
June 5, 1991), Warnaco, Inc. (available June 5, 1991), and Epic Properties,
Inc. (available October 21, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation that
the Company has not entered into any arrangement or understanding with any
Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of clauses (A) and (B), use
its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will terminate when all Transfer Restricted Securities covered by
such Registration
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<PAGE> 10
Statement have been sold; cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Act, and to comply fully with Rules 424, 430A and 462, as applicable, under
the Act in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of the receipt of any comments from the
Commission, (C) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (D) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (E) if at any time the
representations and warranties of the Company contained in any agreement
contemplated by paragraph (x) below in connection with the disposition of
Transfer Restricted Securities by Holders thereof cease to be true and
correct, (F) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated therein by reference therein untrue, or that requires
the making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in a Registration Statement or
related Prospectus so that such documents will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (G) of
the Company's determination that a post-effective amendment to a
Registration Statement would be appropriate. If at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to the Initial Purchaser(s), each selling
Holder named in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders and underwriter(s) in
connection with such sale, if any, for a period of at least five Business
Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents which, upon filing,
would be incorporated by reference therein and amendments to such
documents) to which the selling Holders of the Transfer Restricted
Securities covered by such
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<PAGE> 11
Registration Statement or the underwriter(s) in connection with such sale,
if any, shall reasonably object within five Business Days after the receipt
thereof;
(v) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders and to
the underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by
the selling Holders, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such underwriter(s),
all financial and other records, material corporate documents and
properties of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent
to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as the Company has received
notification of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement or Statements, as first filed
with the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference), at the earliest practicable time under
the circumstances after the filing of such documents with the Commission;
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus or
Prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each of the selling Holders and each
of the underwriter(s), if any, in connection with the offering and the sale
of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement) and make
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<PAGE> 12
such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Registration Statement contemplated by this
Agreement, and in such connection, whether or not an underwriting agreement
is entered into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) furnish (or in the case of paragraphs (2) and
(3), use its best efforts to furnish) to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf Registration
Statement and to each Restricted Broker-Dealer upon Consummation of the
Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, signed on behalf of
the Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company, confirming,
as of the date thereof, the matters set forth in Sections 8 and 9 of
the Purchase Agreement and such other similar matters as the Holders,
underwriter(s) and/or Restricted Broker Dealers may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in Exhibit A of the
Purchase Agreement and such other matters as the Holders, underwriters
and/or Restricted Broker Dealers may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the independent public accountants for
the Company and have considered the matters required to be stated
therein and the statements contained therein, although such counsel has
not independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis of
the foregoing, no facts came to such counsel's attention that caused
such counsel to believe that the applicable Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the Exchange
Offer, 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 not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue statement of
a material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and
schedules and other financial data included in any Registration
Statement contemplated by this Agreement or the related Prospectus; and
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<PAGE> 13
(3) a customary comfort letter, dated as of
the date of effectiveness of the Shelf Registration Statement or the
date of Consummation of the Exchange Offer, as the case may be, from
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 10 of the Purchase Agreement, without exception.
(B) set forth in full or incorporate by reference
in the underwriting agreement, if any, in connection with any sale or
resale pursuant to any Shelf Registration Statement, the
indemnification provisions and procedures of Section 8 hereof with
respect to all parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates
as may be reasonably requested by the selling Holders, the
underwriter(s), if any, and Restricted Broker Dealers, if any, to
evidence compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of the Company contemplated in
(A)(1) above cease to be true and correct, the Company shall so advise the
underwriter(s), if any, the selling Holders and each Restricted
Broker-Dealer promptly and, if requested by such Persons, shall confirm
such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as any selling Holders or
underwriter(s), if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that the Company shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xii) issue, upon the request of any Holder of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such Series
B Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Series A
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates
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<PAGE> 14
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xiv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xv) if any fact or event contemplated by Section
6(c)(iii)(C), (D), (E), (F) or (G) above shall exist or have occurred, as
promptly as practical thereafter, prepare and file with the Commission a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xvii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the rules
and regulations of the NASD, and use its best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xix) cause each of the Indenture and the First Mortgage
to be qualified under the TIA not later than the effective date of the
first Registration Statement required by this Agreement and, in connection
therewith, cooperate with the Trustee and the Holders of Notes to effect
such changes to the Indenture and the First Mortgage, if any, as may be
required for such Indenture or First Mortgage to be so qualified in
accordance with the terms of the TIA; and execute and use its best efforts
to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed
with the Commission to enable such
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<PAGE> 15
Indenture and First Mortgage to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 6(c)(iii)(C), (D),
(E), (F) or (G) hereof, such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (the "Advice"). If so directed by the Company,
each Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of either such notice. In the event the Company shall give any
such notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(C), (D), (E), (F) or (G)
hereof to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and (other than in connection with the Exchange Offer) the Holders
of Transfer Restricted Securities; (v) all application and filing fees in
connection with listing the Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities registered
pursuant to the Shelf Registration Statement, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit the Shelf Registration Statement is being prepared in consultation
with the Company.
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<PAGE> 16
SECTION 8. INDEMNIFICATION AND CONTRIBUTION
(a) Indemnification. (i) The Company agrees, to the extent
permitted by law, to indemnify and hold harmless each Holder and each person, if
any, who controls any Holder 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 Holders 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 any Registration
Statement, or, if any Registration Statement shall be amended or supplemented,
in the Registration Statement as so amended or supplemented, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any such untrue statement or alleged
untrue statement or omission or alleged omission which was made in the
Registration Statement or in the Registration Statement as so amended or
supplemented, in reliance upon and in conformity with information furnished in
writing to the Company by, any Holder expressly for use therein.
(ii) 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 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) (i) Each Holder agrees, severally and not jointly, to the
extent permitted by law, to indemnify, hold harmless and reimburse the Company
and each person, if any, who controls the Company 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 or in the Registration Statement, as amended or
supplemented, (if applicable) in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.
(ii) The indemnity agreement on the part of each Holder
contained in this Section 8(b) shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any
other person, and the indemnity agreement contained in this Section 8(b)
shall survive any termination of this Agreement.
(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
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<PAGE> 17
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 a
majority in principal amount of the Holders 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 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 so found liable 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 Holders
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 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 Holders 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
-16-
<PAGE> 18
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.
(d) Contribution. If the indemnification provided for in this Section 8
above is unavailable to or insufficient to hold harmless an Indemnified Person
under this Section 8 above 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 this Section 8 above 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 sale of the Transfer
Restricted Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each Indemnifying
Person shall contribute to such amount paid or payable by such Indemnified
Person in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of each Indemnifying Person, if any, on the
one hand and the Indemnified Person on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions, suits or proceedings (including governmental
investigations) in respect thereof), as well as any other relevant equitable
considerations. The relative 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 Holders 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 Holders agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation (even if the
Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 8. The amount paid or payable by an Indemnified Person
as a result of the losses, claims, damages or liabilities (or actions, suits or
proceedings (including governmental proceedings) in respect thereof) referred to
above in this Section 8 shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Person in connection with investigating
or defending any such 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 8, no
Holder shall be required to contribute any amount greater than the excess of the
amount by which the total received by such Holder with respect to the sale of
its Transfer Restricted Securities pursuant to a Registration Statement exceeds
the sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder 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
-17-
<PAGE> 19
guilty of such fraudulent misrepresentation. The Holders' obligations in this
Section 8 to contribute are several in proportion to their respective
underwriting obligations and not joint.
The agreement with respect to contribution contained in this Section 8
hereof shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any Holder, and shall survive any
termination of this Agreement.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Securities Exchange Act, to
make available, upon request of any Holder of Transfer Restricted Securities, to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. The Holders of Transfer Restricted
Securities included in any such Underwritten Offering shall be responsible for
paying all underwriting or placement fees charged, or costs or expenses
incurred, by such investment bankers and managers in connection with such
Underwritten Offering. Such investment bankers and managers are referred to
herein as the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the First Mortgage, the Notes, the
First Mortgage Bonds, and the Purchase Agreement or granted by law, including
recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by them of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not, on or after
the date of this
-18-
<PAGE> 20
Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Notes. The Company will not take any
action, or voluntarily permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the Registrar
under the Indenture; and
(ii) if to the Company:
212 West Michigan Avenue
Jackson, Michigan 49201
Telecopier No.: (517) 788-2186
Attention: Alan M. Wright
With a copy to:
Michael D. VanHemert, Esq.
Telecopier No.: (313) 436-9225
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely
-19-
<PAGE> 21
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CONSUMERS ENERGY COMPANY
By: /s/ ALAN M. WRIGHT
--------------------------------
Name: Alan M. Wright
Title: Senior Vice President
and Chief Financial Officer
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ GOLDMAN, SACHS & CO.
----------------------------------
(Goldman, Sachs & Co.)
-21-
<PAGE> 1
Exhibit 5
September 29, 1998
Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Ladies and Gentlemen:
I am the Assistant General Counsel of CMS Energy Corporation, a Michigan
corporation, and have acted as special counsel to Consumers Energy Company
("Consumers") in connection with the Registration Statement on Form S-4 (the
"Registration Statement") being filed by Consumers with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the registration of $200 million of
Senior Remarketed Secured Notes, Series B, Due 2018 (the "Exchange Notes") to be
issued under the Indenture dated as of February 1, 1998 between Consumers and
The Chase Manhattan Bank, as trustee (the "Trustee"), as supplemented
(collectively, the "Indenture"). The Exchange Notes are being exchanged for all
of the outstanding Senior Remarketed Secured Notes, Series A, Due 2018 (the
"Notes") pursuant to an Exchange Offer. Capitalized terms not otherwise defined
herein have the respective meanings specified in the Registration Statement.
In rendering this opinion, I have examined and relied upon a copy of the
Registration Statement. I have also examined, or have arranged for the
examination by an attorney or attorneys under my general supervision, originals,
or copies of originals certified to my satisfaction, of such agreements,
documents, certificates and other statements of governmental officials and other
instruments, and have examined such questions of law and have satisfied myself
as to such matters of fact, as I have considered relevant and necessary as a
basis for this opinion. I have assumed the authenticity of all documents
submitted to me as originals, the genuineness of all signatures, the legal
capacity of all natural persons and the conformity with the original documents
of any copies thereof submitted to me for examination.
Based on the foregoing it is my opinion that:
1. Consumers is duly incorporated and validly existing under the laws of
the State of Michigan.
2. Consumers has the corporate power and authority to authorize and deliver
the Exchange
<PAGE> 2
Notes pursuant to the Indenture.
3. The Exchange Notes will be legally issued and binding obligations of
Consumers (except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of
equity, regardless of whether enforceability is considered in a
proceeding in equity or at law) when (i) the Registration Statement, as
finally amended (including any necessary post-effective amendments)
shall have become effective under the Securities Act, and the Indenture
shall have been qualified under the Trust Indenture Act; (ii) an
appropriate prospectus with respect to the Exchange Notes shall have
been filed with the Commission pursuant to Rule 424 under the Securities
Act; and (iii) the Exchange Notes shall be duly authenticated by the
Trustee and the Exchange Notes shall have been delivered to those
holders of Notes in exchange for such Notes pursuant to the Exchange
Offer.
For purposes of this opinion, I have assumed that there will be no
changes in the laws currently applicable to Consumers and that such laws will be
the only laws applicable to Consumers.
I do not find it necessary for the purposes of this opinion to cover,
and accordingly I express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the Exchange Notes.
I am a member of the bar of the State of Michigan and I express no
opinion as to the laws of any jurisdiction other than the State of Michigan and
the federal law of the United States of America.
I hereby consent to the filing of this opinion as an exhibit to
Consumers's Registration Statement relating to the Exchange Notes and to all
references to me included in or made apart of the Registration Statement.
Very truly yours,
/s/ Michael D. Van Hemert
<PAGE> 1
Exhibit 8
September 28, 1998
Consumers Energy Company
212 West Michigan Avenue
Jackson, Michigan 49201
Ladies and Gentleman
Reference is made to the prospectus, (the "Prospectus"), which
constitutes part of the registration statement on Form S-4 (the "Registration
Statement"), to be filed by Consumers Energy Company ("Consumers") with the
Securities and Exchange Commission on or about the date hereof pursuant to the
Securities Act of 1933, as amended, for the registration of Senior Remarketed
Secured Notes, Series B, Due 2018 of Consumers (the"Exchange Notes").
I am of the opinion that the statements set forth under the caption
"Certain United States Federal Income Tax Consequences" in the Prospectus
constitute an accurate description, in general terms, of certain United States
federal income tax consideration that may be relevant to the prospective holders
of the Exchange Notes.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/Theodore J. Vogel
<PAGE> 1
Exhibit (15)
To Consumers Energy Company:
We are aware that Consumers Energy Company has incorporated by
reference in this registration statement its Form 10-Q for the quarter ended
March 31, 1998 and its Form 10-Q for the quarter ended June 30, 1998, which
include our reports dated May 11, 1998 and August 11, 1998, respectively,
covering the unaudited interim financial information contained therein. Pursuant
to Regulation C of the Securities Act of 1933, this report is not considered a
part of the registration statement prepared or certified by our Firm or report
prepared or certified by our Firm within the meaning of Sections 7 and 11 of the
Act.
Arthur Andersen, LLP
Detroit, Michigan,
September 25, 1998.
<PAGE> 1
Exhibit (23)(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
January 26, 1998 included or incorporated by reference in Consumers Energy
Company's Form 10-K for the year ended December 31, 1997 and to all references
to our Firm included in this registration statement.
Arthur Andersen, LLP
Detroit, Michigan,
September 25, 1998.
<PAGE> 1
EXHIBIT 99(A)
LETTER OF TRANSMITTAL
CONSUMERS ENERGY COMPANY
OFFER TO EXCHANGE
SENIOR REMARKETED SECURED NOTES, SERIES B, DUE 2018
FOR ANY AND ALL OF THE OUTSTANDING
SENIOR REMARKETED SECURED NOTES, SERIES A, DUE 2018
THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON , 1998
UNLESS THE OFFER IS EXTENDED
THE CHASE MANHATTAN BANK
(THE "EXCHANGE AGENT")
By Mail, (Certified, Registered, Overnight or First Class) or Hand Delivery:
The Chase Manhattan Bank
55 Water Street, Room 234
North Building
New York, New York 10041
By Facsimile:
(For Eligible Institutions Only)
(212) 638-7380
Telephone Number
(212) 638-0828
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
<PAGE> 2
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Consumers Energy Company (the
"Company") and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its Senior Remarketed Secured Notes, Series B, Due 2018 (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for each $1,000 principal amount of its outstanding Senior Remarketed
Secured Notes, Series A, Due 2018 (the "Notes"), respectively. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on ,
1998 unless the Company, in its reasonable judgment, extends the Exchange Offer,
in which case the term shall mean the latest date and time to which the Exchange
Offer is extended. Capitalized terms used but not defined herein have the
meaning given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List on the next page the Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate of Registration
Numbers and Principal Amounts should be listed on a separately signed schedule
affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED HEREBY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED OWNER(S)
(PLEASE FILL IN)
- -----------------------------------------------------------------------------------------------------------------------------
CERTIFICATE AGGREGATE
OR PRINCIPAL AMOUNT PRINCIPAL
REGISTRATION REPRESENTED AMOUNT
NUMBER(S)* BY NOTES TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the
Full Aggregate Principal Amount represented by such Notes. All Tenders must
be in integral multiples of $1,000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Letter of Transmittal is to be used (i) if certificates of Notes are
to be forwarded herewith, (ii) if delivery of Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company (the "Depository"), pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering Notes" in the Prospectus or (iii) if
tender of the Notes is to be made according to the guaranteed delivery
procedures described in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer. Holders who wish to tender their Notes must complete this letter in its
entirety.
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
-----------------------------------------------
[ ] The Depository Trust Company
Account Number
--------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
-----------------------
If delivery by book-entry transfer:
Account Number
--------------------------------------------------------------
Transaction Code Number
-------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
------------------------------------------------------------------------
Address
---------------------------------------------------------------------
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (A) it is not an affiliate
of the Company, (B) it is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it
is acquiring the Exchange Notes in its ordinary course of business. If the
undersigned or the person receiving the Exchange Notes covered hereby is a
broker-dealer that is receiving the Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned and any such other person
acknowledges that, if they are participating in the Exchange Offer for the
purpose of distributing the Exchange Notes, (i) they cannot rely on the position
of the staff of the Securities and Exchange Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988) as interpreted in the
Securities and Exchange Commission's letter to Shearman & Sterling dated July 2,
1993. Morgan Stanley & Co., Inc. (available June 5, 1991), Warnaco, Inc.
(available June 5, 1991), and Epic Properties, Inc. (available October 21, 1991)
or similar no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with the resale transaction and (ii) failure to
comply with such requirements in such instance could result in the undersigned
or any such other person incurring liability under the Securities Act for which
such persons are not indemnified by the Company. If the undersigned or the
person receiving the Exchange Notes covered by this letter is an affiliate (as
defined under Rule 405 of the Securities Act) of the Company, the undersigned
represents to the Company that the undesigned understands and acknowledges that
such Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry facility. The undersigned further agrees that
acceptance of any tendered Notes by the Company and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Company
of its obligations under the Registration Rights Agreement and that the Company
shall have no further obligations or liabilities thereunder for the registration
of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Notes tendered hereby
and, in such event, the Notes not exchanged will be returned to the undersigned
at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date.
4
<PAGE> 5
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be Medallion Guaranteed by an
Eligible Institution (defined in Instruction 2).
<TABLE>
<S> <C>
- ------------------------------------------------------- -------------------------------------------------------
SPECIAL REGISTRATION SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
To be completed ONLY if the Exchange Notes To be completed ONLY if the Exchange Notes
are to be issued in the name of someone other than are to be sent to someone other than the
the undersigned. undersigned, or to the undersigned at an address
other than that shown under "Description of Notes
Name: Tendered Hereby."
---------------------------------------------
Name:
Address: ---------------------------------------------
------------------------------------------
Address:
-------------------------------------------------- ------------------------------------------
Book-Entry Transfer Facility Account: --------------------------------------------------
------------- (PLEASE PRINT OR TYPE)
--------------------------------------------------
Employee Identification or Social Security Number:
--------------------------------------------------
(PLEASE PRINT OR TYPE)
- ------------------------------------------------------- -------------------------------------------------------
</TABLE>
5
<PAGE> 6
(REGISTERED HOLDER(S) OF NOTES SIGN HERE)
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information.
(Please print or type):
Name and Capacity (full title):
--------------------------------------------------
Address (including zip code):
---------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Taxpayer Identification or Social Security No.:
---------------------------------
Dated:
------------------------------------
MEDALLION GUARANTEE
(IF REQUIRED -- SEE INSTRUCTION 4)
Authorized Signature:
-----------------------------------------------------------
(SIGNATURE OF REPRESENTATIVE OF MEDALLION GUARANTOR)
Name and Title:
-----------------------------------------------------------------
Name of Plan:
-------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
(PLEASE PRINT OR TYPE)
Dated:
------------------------------------
6
<PAGE> 7
<TABLE>
<S><C>
- ---------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: THE CHASE MANHATTAN BANK
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Please provide your TIN in the box at
FORM W-9 right and certify by signing and dating below. ------------------------------------------
Social Security Number
or
------------------------------------------
Employer Identification Number
(If awaiting TIN write "Applied For")
-------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines for
INTERNAL REVENUE SERVICE Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
instructed therein.
-------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a
Taxpayer Identification Number has not been issued to me) and either (a) I have mailed
PAYER'S REQUEST FOR or delivered an application to receive a Taxpayer Identification Number to the
TAXPAYER IDENTIFICATION appropriate Internal Revenue Service ("IRS") or Social Security Administration office
NUMBER (TIN) or (b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a Taxpayer Identification Number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a number,
and
(2) I am not subject to backup withholding either because (a) I am exempt from backup
withholding, (b) I have not been notified by the IRS that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified
by the IRS that you are subject to backup withholding because of underreporting interest
or dividends on your tax return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2). (Also see instructions
in the enclosed Guidelines.)
Signature ----------------------------------------------- Date-------------------, 1998
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates. All physically
delivered Notes or confirmations of any book-entry transfer to the Exchange
Agent's account at a book-entry transfer facility of Notes tendered by
book-entry transfer, as well as a properly completed and duly executed copy of
this Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at the address set forth herein on or prior to the Expiration Date (as defined
in the Prospectus). The method of delivery of this Letter of Transmittal, the
Notes and any other required documents is at the election and risk of the
Holder, and except as otherwise provided below, the delivery will be deemed made
only when actually received by the Exchange Agent. If such delivery is by mail,
it is suggested that registered mail with return receipt requested, properly
insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Notes,
but whose Notes are not immediately available and thus cannot deliver their
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent (or comply with the procedures for book-entry transfer) on or prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Notes and the principal amount of Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof), together with the Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Depository) and any other documents required by the Letter
of Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Depository) and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the Expiration
Date.
Any Holder who wishes to tender Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery relating to such Notes prior to the Expiration
Date. Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedures.
3. Partial Tenders; Withdrawals. If less than the entire principal amount
of Notes evidenced by a submitted certificate is tendered, the tendering Holder
should fill in the principal amount tendered in the column entitled "Principal
Amount Tendered" of the box entitled "Description of Notes Tendered Hereby." A
newly issued Note for the principal amount of Notes submitted but not tendered
will be sent to such Holder as soon as practicable after the Expiration Date.
All Notes delivered to the Exchange Agent will be deemed to have been tendered
in full unless otherwise indicated.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written telegraphic or facsimile transmission notice of
8
<PAGE> 9
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at the Depository to be credited), (iii) be signed by the Holder in the
same manner as the original signature on this Letter of Transmittal (including
any required Medallion Guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Notes register the transfer
of such Notes into the name of the person withdrawing the tender and (iv)
specify the name in which any such Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Notes so withdrawn are validly retendered. Any Notes which have been
tendered but which are not accepted for exchange, will be returned to the Holder
thereof without cost to such Holder, or will be credited to an account
maintained with the Depository, as soon as practicable after withdrawal,
rejection of tender or termination of Exchange Offer.
4. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Medallion Guarantee. If this Letter of Transmittal is signed by
the registered Holder(s) of the Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Depository, the signature must
correspond with the name as it appears on the security position listing as the
owner of the Notes.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names is tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or on a notice of withdrawal, as
the case may be, must be Medallion Guaranteed by an Eligible Institution unless
the Notes tendered hereby are tendered (i) by a registered Holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in the Depository whose name appears on a security listing as the
owner of the Notes) listed and tendered hereby, no endorsements of the tendered
Notes or separate written instruments of transfer or exchange are required. In
any other case, the registered Holder (or acting Holder) must either properly
endorse the Notes or transmit properly completed bond powers with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
Holder(s) appear(s) on the Notes, and, with respect to a participant in the
Depository whose name appears on a security position listing as the owner of
Notes, exactly as the name of the participant appears on such security position
listing), with the signature on the Notes or bond power guaranteed by an
Eligible Institution (except where the Notes are tendered for the account of an
Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
5. Special Registration and Delivery Instructions. Tendering Holders
should indicate, in the applicable box, the name and address (or account at the
Depository) in which the Exchange Notes or substitute Notes for principal
amounts not tendered or not accepted for exchange are to be issued (or
deposited), if different from the names and addresses or accounts of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification number or social security number of the person named
must also be indicated and the tendering Holder should complete the applicable
box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at the Depository.
9
<PAGE> 10
6. Transfer Taxes. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Notes to it or its order pursuant to
the Exchange Offer. If a transfer tax is imposed for any other reason other than
the transfer and exchange of Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be collected from the
tendering Holder by the Exchange Agent.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.
7. Waiver of Conditions. The Company reserves the right, in its reasonable
judgment, to waive, in whole or in part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
8. Mutilated, Lost, Stolen or Destroyed Notes. Any Holder whose Notes have
been mutilated, lost, stolen or destroyed should contact the Exchange Agent at
the address indicated above for further instructions.
9. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth above. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to
Consumers Energy Company, 212 West Michigan Avenue, Jackson, Michigan 40201,
Attention: Chief Financial Officer, telephone: (517) 788-0550.
10. Validity and Form. All questions as to the validity, form, eligibility
(including time of receipt), acceptance of tendered Notes and withdrawal of
tendered Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Notes not properly tendered or any Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right, in its reasonable judgment, to
waive any defects, irregularities or conditions of tender as to particular
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Company
shall determine. Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering Holder as soon as practicable following the
Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9
above. If such Holder is an individual, the TIN is the Holder's social security
number. The Certificate of Awaiting Taxpayer Identification Number should be
completed if the tendering Holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future. If the Exchange
Agent is not provided with the correct TIN, the Holder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that are
made to such Holder with respect to tendered Notes may be subject to backup
withholding of 31%.
Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. In order for a foreign individual
to qualify as an exempt recipient, such individual must submit a statement,
signed under penalties of perjury, attesting to such individual's exempt status.
Forms of such statements can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding
10
<PAGE> 11
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder with
respect to Notes tendered for exchange, the Holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such Holder that he or she is
no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering Holder has not been issued a TIN and has applied for a number
or intends to apply for a number in the near future, the stockholder should
write "Applied For" in the space provided for in the TIN in Part I, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% of all payments of the purchase price to such stockholder until a
TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
11
<PAGE> 1
EXHIBIT 99(b)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ------------------------------------------------------------
GIVE THE SOCIAL GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- ------------------------------------------------------------ ------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner(3)
2. Two or more individuals (joint The actual owner of 7. A valid trust, estate, or pension The legal entity(4)
account) the account or, if trust
combined funds, the 8. Corporate The corporation
first individual on 9. Association, club, religious, The organization
the account(1) charitable, educational, or other
3. Custodian account of a minor The minor(2) tax-exempt organization account
(Uniform Gift to Minors Act) 10. Partnership The partnership
4. a. The usual revocable savings The grantor- 11. A broker or registered nominee The broker or
trust account (grantor is also trustee(1) nominee
trustee) 12. Account with the Department of The public entity
b. So-called trust account that is The actual owner(1) Agriculture in the name of a
not a legal or valid trust public entity (such as a State or
under State law local government, school district,
or prison) that receives
5. Sole proprietorship The owner(3) agricultural program payments
- ------------------------------------------------------------ ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter you business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), an individual
retirement plan or a custodial account under section 403(b)(7) if the
account satisfies the requirements of section 401(f)(2).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government or any political subdivision, agency or instrumentality
thereof.
- An international organization or any agency or instrumentality thereof.
- A dealer in securities or commodities registered in the U.S. or a possession
of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one non-resident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the number whether or not recipients are required
to file tax returns. Beginning January 1, 1993, payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer. Certain penalties
may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is a clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false state with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
EXHIBIT 99(c)
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
SENIOR REMARKETED SECURED NOTES, SERIES A, DUE 2018
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
CONSUMERS ENERGY COMPANY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Consumers Energy Company (the "Company") made pursuant to the
Prospectus, dated , 1998 (the "Prospectus"), if certificates for the
outstanding Senior Remarketed Secured Notes, Series A, Due 2018 of the Company
(the "Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Exchange Agent prior to 5:00 p.m., New York
time, on the Expiration Date of the Exchange Offer. Such form may be delivered
or transmitted by telegram, telex, facsimile transmission, mail or hand delivery
to The Chase Manhattan Bank (the "Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) as well as all tendered Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Depository Trust Company) and all other
documents required by the Letter of Transmittal must also be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
THE CHASE MANHATTAN BANK, EXCHANGE AGENT
By Mail, (Certified, Registered, Overnight or First Class) or Hand Delivery:
The Chase Manhattan Bank
55 Water Street, Room 234
North Building
New York, New York 10041
By Facsimile:
(For Eligible Institutions Only)
(212) 638-7380
Telephone Number
(212) 638-0828
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Notes Tendered: (1)
$
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(1) Must be in denominations of principal amount of $1,000 and any integral
multiple thereof
Certificate Nos. (if available):
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Total Principal Amount Represented by Certificate(s):
$
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All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
x
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------------------------------------------------ ---------------------------
DATE
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY
Area Code and Telephone Number:
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- --------------------------------------------------------------------------------
2
<PAGE> 3
Must be signed by the holder(s) of Notes as their name(s) appear(s) on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
Please print name(s) and address(es)
Name(s) ---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
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Capacity: ---------------------------------------------------------
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Address(es): ---------------------------------------------------------
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Account Number: ---------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Notes being tendered hereby or confirmation of book-entry
transfer of such Notes into the Exchange Agent's account at The Depository Trust
Company, in proper form for transfer, together with any other documents required
by the Letter of Transmittal within three New York Stock Exchange trading days
after the Expiration Date.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
---------------------------------------- ---------------------------------
Address
--------------------------------------------- Name
-------------------------------------------------
(PLEASE TYPE OR PRINT)
- ---------------------------------------------------- Title
------------------------------------------------
Area Code & Date
Telephone No. ---------------------------------------------------
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</TABLE>
NOTE: DO NOT SEND CERTIFICATES OF NOTES WITH THIS FORM. CERTIFICATES OF NOTES
SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
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