<PAGE> 1
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.1
to
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the
Securities Exchange Act of 1934)
THE DETROIT EDISON COMPANY
(Name of Issuer)
THE DETROIT EDISON COMPANY
------------------------------------
(Name of Person(s) Filing Statement)
Depositary Shares Representing a One-Quarter Interest
in a Share of Cumulative Preferred Stock, 7.75% Series
(Title of Class of Securities)
25084775
------------------------------------
(CUSIP Number of Class of Securities)
Susan M. Beale
------------------------------------
Vice President and Corporate Secretary
The Detroit Edison Company
2000 Second Avenue
Detroit, Michigan 48226
(313) 237-8000
Copies to:
Vincent Pagano, Jr., Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications on Behalf
of the Person(s) Filing Statement)
July 17, 1995
------------------------------------
(Date Tender Offer First Published, Sent or Given to
Security Holders)
________________________________________________________________________________
<PAGE> 2
2
Calculation of Filing Fee
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction valuation*: Amount of filing fee:
<S> <C>
$105,000,000 $0
</TABLE>
- --------------------------------------------------------------------------------
* Calculated as of June 16, 1995, pursuant to Rule 0-11(a)(4) under The
Securities Act of 1993, as amended.
X Check box if any part of the fee is offset as
------- provided by Rule 0-11(a)(2) and identify the
filing with which the offsetting fee was previously
paid. Identify the previous filing by registration
statement number, or the form or schedule and the
date of its filing.
Amount Previously Paid: $36,206.90
Form or Registration No.: Form S-4, Registration
No. 33-60333
----------
Filing Party: The Detroit Edison Company
Date Filed: July 14, 1995
<PAGE> 3
3
This Issuer Tender Offer Statement (the "Statement") is being
filed with the Securities and Exchange Commission (the "Commission") by The
Detroit Edison Company (the "Company") in connection with the filing under the
Securities Act of 1933, as amended, of a Registration Statement on Form S-4
(the "Registration Statement") regarding an exchange offer to holders of its
depositary shares (the "Depositary Shares"), each representing a one-quarter
interest in a share of its Cumulative Preferred Stock, 7.75% Series (the
"Preferred Stock"). A copy of the Prospectus dated July 17, 1995 (the
"Prospectus") contained in Post-Effective Amendment No.1 to the Registration
Statement filed with the Commission on July 14, 1995 is attached hereto as
Exhibit (a)(i). Pursuant to General Instruction B to Schedule 13E-4, certain
information contained in the Prospectus is hereby incorporated by reference in
answer to items of this Statement.
References to the Prospectus are identified by the captions
set forth in the Prospectus. Where substantially identical information
required by Schedule 13E-4 is included under more than one caption, reference
is made to only one caption of the Prospectus.
Item 1. Security and Issuer.
(a) The issuer of the securities to which this Statement
relates is The Detroit Edison Company, a Michigan corporation (the "Company").
The principal executive office of the Company is located at 2000 Second Avenue,
Detroit, Michigan 48226.
<PAGE> 4
4
(b) Upon the terms and subject to the conditions set forth in
the Prospectus and in the related Letter of Transmittal (which, together with
the Prospectus, constitute the "Exchange Offer"), the Company is offering to
exchange up to $105,000,000 aggregate principal amount of its 8.50% Quarterly
Income Debt Securities (Junior Subordinated Deferrable Interest Debentures Due
2025) (the "QUIDS") for up to 4,200,000 Depositary Shares.
As of the date of the Prospectus, 6,000,000 Depositary Shares
were outstanding. Any officer, director or affiliate of the Company who is a
holder of Depositary Shares will be eligible to tender such Depositary Shares
upon the terms and subject to the conditions of the Exchange Offer.
Reference is made to "The Exchange Offer" in the Prospectus
which is incorporated herein by reference.
(c) The information set forth in "Market and Trading
Information" in the Prospectus is specifically incorporated herein by
reference.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
(a) Reference is made to "The Exchange Offer -- General" and
"Description of QUIDS -- General" in the Prospectus, which is incorporated
herein by reference.
(b) Not applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
<PAGE> 5
5
The information set forth in "The Exchange Offer -- Purpose of
the Exchange Offer" in the Prospectus is specifically incorporated herein by
reference. Shares of Preferred Stock which are transferred to the Company will
be retired and may not be reissued.
(a) The information set forth in "The Exchange Offer --
Purpose of the Exchange Offer" in the Prospectus is specifically incorporated
herein by reference.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) The information set forth in "The Exchange Offer --
Purpose of the Exchange Offer", "Certain Significant Considerations - - Right
of Company to Defer Payment of Interest", "Certain Significant Considerations
- -- Subordination of QUIDS", "Capitalization", "Description of QUIDS" and
"Description of Preferred Stock" in the Prospectus is specifically incorporated
herein by reference.
(f) Not applicable.
(g) Not applicable.
(h)-(j) Not applicable
Item 4. Interest in Securities of the Issuer.
None of the Company, any of its subsidiaries, or, to the best
knowledge of the Company, any of the directors or executive officers of the
Company, or any associates of the foregoing, has effected any transaction in
the Depositary Shares during the 40 business days prior to the date hereof.
<PAGE> 6
6
Item 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
Except as stated in "The Exchange Offer -- Fees and Expenses;
Transfer Taxes", "The Exchange Offer -- Exchange Agent and Information Agent",
"The Exchange Offer -- Acceptance of Depositary Shares; Delivery of QUIDS" and
"The Exchange Offer -- Dealer Managers" in the Prospectus, which are
incorporated herein by reference, there are no contracts, arrangements,
understandings or relationships relating, directly or indirectly, to the
Exchange Offer (whether or not legally enforceable) between the Company, any of
is executive officers or directors and any person with respect to any
securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies, consents or authorizations).
Item 6. Persons Retained, Employed or to be Compensated.
The information set forth in "The Exchange Offer -- Acceptance
of Depositary Shares; Delivery of QUIDS -- Custodial Arrangement", "The
Exchange Offer -- Dealer Managers", "The Exchange Offer -- Fees and Expenses;
Transfer Taxes" and " The Exchange Offer -- Exchange Agent and Information
Agent" in the Prospectus is specifically incorporated herein by reference.
Item 7. Financial Information.
<PAGE> 7
7
(a) Reference is made to "Selected Historical Consolidated
Financial Data", "Capitalization", "Ratios of Earnings to Combined Fixed
Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividend
Requirements" and "Incorporation of Certain Documents by Reference in the
Prospectus", which is incorporated herein by reference.
(b) Reference is made to "Capitalization" in the Prospectus,
which is incorporated herein by reference.
Item 8. Additional Information.
(a) Not applicable.
(b) The Company has obtained an order from the Michigan
Public Service Commission permitting it to issue approximately $3.5 billion of
securities for the purpose of refinancing debt and preferred and/or preference
stock (issued prior to 1993) prior to maturity and at maturity, and to replace
funds used for those purposes. Apart from the order from the Michigan Public
Service Commission, there are no applicable regulatory requirements which must
be complied with or approvals which must be obtained in connection with the
Exchange Offer other than compliance with the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder including, without limitation, Rule 13e-4 promulgated thereunder,
the Trust Indenture Act of 1939, as amended, and with the requirements of state
securities or "blue sky" laws.
<PAGE> 8
8
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 9. Material to be Filed as Exhibits.
(a)(i) Prospectus, dated July 17, 1995.
(a)(ii) Letter of Transmittal.*
(a)(iii) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
(a)(iv) Letter to Clients.*
(a)(v) Form of Notice of Guaranteed Delivery and Consent.*
(a)(vi) Questions and Answers Sheet to be sent to holders of
Depositary Shares and to be used by Brokers, Dealers,
Commercial Banks, Trust Companies and other nominees
in responding to inquires from their clients.*
(c)(i) Form of Dealer Managers Agreement between the Company
and Goldman, Sachs & Co. and Smith Barney Inc.
(c)(ii) Form of Custodian Agreement.*
(c)(iii) Form of Exchange Agreement.*
(d) Opinion of Simpson Thacher & Bartlett regarding
certain federal income tax matters with respect to
the Exchange Offer.*
_________
* Previously Filed
<PAGE> 9
9
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
THE DETROIT EDISON COMPANY
By: /s/ C.C. ARVANI
---------------------------
Name: C. C. Arvani
Title: Assistant Treasurer
Dated: July 13, 1995
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
99(a)(i) Prospectus, dated July 17, 1995.
99(a)(ii) Letter of Transmittal.*
99(a)(iii) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
99(a)(iv) Letter to Clients.*
99(a)(v) Form of Notice of Guaranteed Delivery and Consent.*
99(a)(vi) Questions and Answers Sheet to be sent to holders
of Depositary Shares and to be used by Brokers,
Dealers, Commercial Banks, Trust Companies and
other nominees in responding to inquires from
their clients.*
99(c)(i) Form of Dealer Managers Agreement between the
Company and Goldman, Sachs & Co. and Smith
Barney Inc.
99(c)(ii) Form of Custodian Agreement.*
99(c)(iii) Form of Exchange Agreement.*
99(d) Opinion of Simpson Thacher & Bartlett regarding
certain federal income tax matters with respect to
the Exchange Offer.*
</TABLE>
_________
* Previously Filed
<PAGE> 1
THE DETROIT EDISON COMPANY
OFFER TO EXCHANGE
8.50% QUARTERLY INCOME DEBT SECURITIES (QUIDSSM)
(JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, DUE 2025)
FOR
UP TO 4,200,000 DEPOSITARY SHARES, EACH REPRESENTING A
ONE-QUARTER INTEREST IN A SHARE OF ITS
CUMULATIVE PREFERRED STOCK, 7.75% SERIES
------------------------
THE EXCHANGE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 14, 1995, UNLESS EXTENDED.
The Detroit Edison Company (the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus (the "Prospectus") and in
the accompanying Letter of Transmittal (the "Letter of Transmittal", which
together with the Prospectus, constitute the "Exchange Offer"), to exchange up
to $105,000,000 aggregate principal amount of its 8.50% Quarterly Income Debt
Securities (the "QUIDS") for up to 4,200,000 depositary shares (the "Depositary
Shares"), each representing a one-quarter interest in a share of its Cumulative
Preferred Stock ($100 par value), 7.75% Series (the "Preferred Stock").
The QUIDS are offered in minimum denominations of $25 and integral multiples
thereof, and the Depositary Shares have a liquidation preference of $25 per
share. Consequently, the Exchange Offer will be effected on the basis of $25
principal amount of QUIDS for each Depositary Share validly tendered and
accepted for exchange.
The QUIDS will be issued only in book-entry form through the facilities of
The Depository Trust Company ("DTC"). Accordingly, holders of certificated
Depositary Shares who are not financial institutions that participate in DTC's
book-entry-only system ("DTC Participant") and who wish to participate in the
Exchange Offer must either (i) make arrangements with a DTC Participant to have
such participant (a) tender their Depositary Shares in accordance with the
instructions contained in "The Exchange Offer -- Procedure for Tendering
Depositary Shares" and in the Letter of Transmittal and (b) receive QUIDS issued
in exchange therefor or (ii) tender their Depositary Shares in accordance with
the instructions contained in "The Exchange Offer -- Procedure for Tendering
Depositary Shares" and in the Letter of Transmittal and make use of the
facilities provided by Bankers Trust Company, as Custodian (the "Custodian"), so
that, in either case, such holders may become beneficial owners of QUIDS issued
in the Exchange Offer. See "Acceptance of Depositary Shares; Delivery of QUIDS
- -- Custodial Arrangements". Under the terms of the Exchange Offer, no
certificated QUIDS will be issued in exchange for Depositary Shares.
Pursuant to the terms of the Exchange Offer, the Company will accept for
exchange up to 4,200,000 Depositary Shares validly tendered and not properly
withdrawn prior to 5:00 p.m., New York City time, on August 14, 1995 or if the
Exchange Offer is extended by the Company, in its sole discretion, the latest
time and date to which it is extended (the "Expiration Time"). Tenders of
Depositary Shares pursuant to the Exchange Offer are irrevocable, except that
Depositary Shares tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Time and, unless theretofore accepted for
exchange pursuant to the Exchange Offer, may be withdrawn at any time after 40
business days from the date of this Prospectus. A holder of Depositary Shares
who desires to tender such shares and whose certificates for such shares are not
immediately available, or who cannot comply in a timely manner with the
procedure for book-entry transfer, may tender such Depositary Shares by
following the procedures for guaranteed delivery set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures".
The expenses of soliciting tenders of Depositary Shares will be borne by the
Company. Subject to the receipt of a Letter of Transmittal with the part thereof
entitled "Notice of Solicited Tenders" properly completed and duly executed as
described herein, the Company will pay to any Soliciting Dealer (as hereinafter
defined) a solicitation fee of $0.50 per Depositary Share tendered and accepted
for exchange pursuant to the Exchange Offer. Soliciting Dealers are not entitled
to a solicitation fee for Depositary Shares beneficially owned by such
Soliciting Dealer. See "The Exchange Offer -- Fees and Expenses; Transfer
Taxes". For a description of the other terms of the Exchange Offer, see "The
Exchange Offer".
SEE "PROSPECTUS SUMMARY -- COMPARISON OF QUIDS AND DEPOSITARY SHARES" AND
"CERTAIN SIGNIFICANT CONSIDERATIONS" FOR A DESCRIPTION OF THE PRINCIPAL TERMS OF
AND CERTAIN SIGNIFICANT CONSIDERATIONS RELATING TO THE EXCHANGE OFFER, THE
DEPOSITARY SHARES AND THE QUIDS.
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.
(Cover continued on following page)
- ---------------
SM QUIDS is a service mark of Goldman, Sachs & Co.
------------------------
The Dealer Managers for the Exchange Offer are:
GOLDMAN, SACHS & CO. SMITH BARNEY INC.
------------------------
The date of this Prospectus is July 17, 1995.
<PAGE> 2
The QUIDS will mature on September 30, 2025 and will bear interest at an
annual rate of 8.50% from the first day following the Expiration Time (the
"Issuance Date"). In addition, holders will receive interest on the QUIDS at a
rate of 7.75% per annum from July 15, 1995 (the last regular dividend payment
date with respect to the Depositary Shares) to but excluding the Issuance Date,
payable on the first interest payment date on the QUIDS. Interest will be
payable quarterly in arrears on March 31, June 30, September 30 and December 31,
commencing September 30, 1995; provided that, so long as an Event of Default (as
hereinafter defined) has not occurred and is not continuing with respect to the
QUIDS, the Company will have the right to extend the interest payment period at
any time and from time to time on the QUIDS, provided that the aggregate
interest payment period, as extended, must end on an interest payment date and
must not exceed 20 consecutive quarterly interest payment periods or extend
beyond the maturity of the QUIDS or any date on which any QUIDS are fixed for
redemption. As a consequence, the quarterly interest payments on the QUIDS would
be deferred (but would continue to accrue with interest thereon compounded
quarterly at the rate of interest on the QUIDS) during any such extended
interest payment period (each a "Deferral Period"). In the event that the
Company exercises this right, the Company may not declare or pay dividends on,
or redeem, purchase or acquire, any of its Capital Stock (as hereinafter
defined) during such Deferral Period, other than redemptions of any series of
Capital Stock of the Company pursuant to the terms of any sinking fund
provisions with respect thereto. In addition, during any Deferral Period, the
Company may not make any advance or loan to, or purchase any securities of, or
make any other investment in, any affiliate of the Company, including DTE
Holdings, Inc. ("Holdings"), for the purpose of, or to enable the payment of,
directly or indirectly, dividends on any equity securities of Holdings. See "The
Company -- Formation of Holding Company". The Company has no current intention
of exercising its right to extend an interest payment period. During any such
Deferral Period, the Company may continue to extend the interest payment period,
provided that the aggregate interest payment period, as extended, must end on an
Interest Payment Date (as hereinafter defined) and must not exceed 20
consecutive quarterly interest payment periods or extend beyond the maturity of
the QUIDS or any date on which any QUIDS are fixed for redemption. Upon the
termination of any Deferral Period and the payment of all amounts then due, the
Company may extend the quarterly payment periods anew, subject to the above
requirements. See "Description of QUIDS -- Quarterly Payments" and "-- Payment
Deferrals".
The QUIDS are unsecured obligations of the Company and will be subordinate
to all existing and future Senior Indebtedness (as hereinafter defined) of the
Company, but senior to all Capital Stock of the Company, including the
Depositary Shares. On March 31, 1995, approximately $4.3 billion of such Senior
Indebtedness was outstanding. See "Description of QUIDS -- Subordination", and
"-- Subrogation".
The QUIDS will be redeemable at the option of the Company, in whole or in
part, at any time on or after June 30, 1998, at a redemption price equal to 100%
of the principal amount redeemed plus accrued and unpaid interest to the date
fixed for redemption (which is approximately ten weeks after the date on which
the Depositary Shares are first redeemable at the option of the Company). See
"Description of QUIDS -- Optional Redemption".
For federal income tax purposes, the exchange of Depositary Shares for
QUIDS will be a taxable transaction, and the QUIDS will be treated as having
been issued with original issue discount. The original issue discount rules may
accelerate the timing of a holder's recognition of income. For a discussion of
these and other United States federal income tax considerations relevant to the
Exchange Offer, see "Certain United States Federal Income Tax Consequences".
The Depositary Shares (of which there are 6,000,000 outstanding) are listed
and principally traded on the New York Stock Exchange (the "NYSE"). On April 12,
1995, the last full day of trading prior to the initial public announcement of
the Exchange Offer, the closing sales price of the Depositary Shares on the
NYSE, as reported on the Composite Tape, was $24.00 per share. On July 14, 1995,
the last full day of trading prior to the commencement of the Exchange Offer,
the closing sales price of the Depositary Shares on the NYSE as reported on the
Composite Tape was
2
<PAGE> 3
$ per share. Holders of Depositary Shares are urged to obtain current
market quotations therefor.
The QUIDS constitute a new issue of debt securities with no established
trading market. While the Company intends to list the QUIDS on the NYSE, there
can be no assurance that an active market for the QUIDS will develop or be
sustained in the future on the NYSE. Moreover, to the extent that Depositary
Shares are tendered and accepted in the Exchange Offer, a holder's ability to
sell Depositary Shares not tendered for exchange could be adversely affected.
Goldman, Sachs & Co. and Smith Barney Inc. (the "Dealer Managers") are
acting as Dealer Managers for the Exchange Offer. The Dealer Managers have
agreed to use their best efforts to solicit the exchange of Depositary Shares
pursuant to the Exchange Offer. Bankers Trust Company (the "Exchange Agent") is
acting as Exchange Agent in connection with the Exchange Offer and Georgeson &
Company Inc. (the "Information Agent") is acting as Information Agent in
connection with the Exchange Offer.
Questions and requests for assistance may be directed to the Dealer
Managers or the Information Agent, as set forth on the back cover of this
Prospectus. Requests for or additional copies of this Prospectus, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Information Agent.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THE COMPANY IS NOT AWARE OF ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE
OFFER IS NOT IN COMPLIANCE WITH APPLICABLE LAW. IF THE COMPANY BECOMES AWARE OF
ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER WOULD NOT BE IN
COMPLIANCE WITH APPLICABLE LAW, THE COMPANY WILL MAKE A GOOD FAITH EFFORT TO
COMPLY WITH SUCH LAW. IF, AFTER SUCH GOOD FAITH EFFORT, THE COMPANY CANNOT
COMPLY WITH ANY SUCH LAW, THE EXCHANGE OFFER WILL NOT BE MADE TO (NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS RESIDING IN SUCH
JURISDICTIONS. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS
REQUIRE THE EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
EXCHANGE OFFER WILL BE DEEMED TO BE MADE ON BEHALF OF THE COMPANY BY THE DEALER
MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement", which term shall encompass all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the QUIDS being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, and
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files
3
<PAGE> 4
periodic reports and other information with the Commission. The Registration
Statement, as well as such reports and other information filed by the Company
with the Commission, may be inspected at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and should also be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain of
the securities of the Company are listed on the NYSE. Reports and other
information concerning the Company can also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company or Holdings with
the Commission pursuant to the Exchange Act, are hereby incorporated by
reference in this Prospectus:
1. the Company's Annual Report on Form 10-K for the year ended
December 31, 1994;
2. the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
3. the Proxy Statement of the Company/Prospectus of Holdings dated
March 9, 1995; and
4. the Company's Current Reports on Form 8-K filed January 27, 1995
and March 1, 1995.
Each document filed by the Company pursuant to Section 13, 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the Exchange Offer pursuant hereto shall be deemed to be
incorporated by reference in this Prospectus and to be a part of this Prospectus
from the date of filing of such document. Any statement contained in this
Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of the Registration Statement and this Prospectus to the extent that a
statement contained in this Prospectus, or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this Prospectus,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Susan M. Beale, Vice President and Corporate Secretary, The Detroit
Edison Company, 2000 Second Avenue, Detroit, Michigan 48226; (313) 237-8000.
4
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................................................... 3
Incorporation of Certain Documents by Reference..................................... 4
Summary............................................................................. 6
Comparison of QUIDS and Depositary Shares......................................... 12
Certain Significant Considerations.................................................. 14
The Company......................................................................... 16
Selected Historical Consolidated Financial Data..................................... 16
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred and Preference Stock Dividend Requirements.............................. 16
Capitalization...................................................................... 17
The Exchange Offer.................................................................. 17
Market and Trading Information...................................................... 29
Description of QUIDS................................................................ 31
DTC Book-Entry-Only System.......................................................... 36
Description of Preferred Stock...................................................... 38
Certain United States Federal Income Tax Consequences............................... 41
Legal Opinions...................................................................... 44
Experts............................................................................. 44
</TABLE>
5
<PAGE> 6
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the detailed information appearing elsewhere in this Prospectus
or by documents incorporated by reference into the Prospectus. Capitalized terms
used herein have the respective meanings ascribed to them elsewhere in this
Prospectus.
THE COMPANY
The Company is a Michigan corporation and a regulated public utility
engaged in the generation, purchase, transmission, distribution and sale of
electric energy in a 7,600 square mile service area in southeastern Michigan
which includes about 13% of Michigan's total land area and about half of its
population, electric energy consumption and industrial capacity. At the
Company's April 1995 Annual Meeting of Common Stock Shareholders, such holders
approved the formation of a holding company. See "The Company -- Formation of
Holding Company".
CERTAIN INVESTOR CONSIDERATIONS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus prior to making a decision regarding the Exchange
Offer and should particularly consider the following matters:
POTENTIAL BENEFITS TO EXCHANGING HOLDERS
- The annual interest rate on the QUIDS will be 8.50%, as compared with the
indicated annual dividend rate of 7.75% on the Depositary Shares (of
which there are currently 6,000,000 shares outstanding). See "Comparison
of QUIDS and Depositary Shares" below.
- The QUIDS will rank senior to the Depositary Shares as to payment in
respect thereof and as to the distribution of assets upon liquidation.
However, the QUIDS are unsecured obligations of the Company and will be,
and the Depositary Shares are, subordinate in right to payment to all
existing and future Senior Indebtedness of the Company and effectively
subordinated to all obligations of the Company's subsidiaries. See
"Certain Significant Considerations -- Subordination of QUIDS".
- While dividends on the Depositary Shares may be deferred indefinitely,
the interest payment period on the QUIDS can only be extended for a
maximum of 20 consecutive quarterly interest payment periods. In each
case, however, the Company has no current intention of exercising its
right to defer such payments. See "Certain Significant Considerations --
Right of Company to Defer Payment of Interest".
- In order to benefit from the higher annual interest rate on the QUIDS,
holders of Depositary Shares need not pay any additional cash. Holders of
Depositary Shares wishing to participate in the Exchange Offer must
tender their Depositary Shares in accordance with the instructions
contained in "The Exchange Offer -- Procedure for Tendering Depositary
Shares" and in the Letter of Transmittal prior to the Expiration Time.
POTENTIAL RISKS TO EXCHANGING HOLDERS
- Participation in the Exchange Offer will be a taxable event. See "Certain
Significant Considerations -- Exchange Offer as Taxable Event" and
"Certain United States Federal Income Tax Consequences".
- While dividends on the Depositary Shares are eligible for the dividends
received deduction for corporate holders, interest on the QUIDS will not
be eligible for the dividends received deduction for corporate holders.
The dividends received deduction is not applicable for
6
<PAGE> 7
individual, non-corporate holders. See "Comparison of QUIDS and Depositary
Shares" below.
- There has not been any public market for the QUIDS. While the Company
intends to list the QUIDS on the NYSE, there can be no assurance that an
active market for the QUIDS will develop or be sustained in the future on
such exchange. See "Certain Significant Considerations -- Listing and
Trading of QUIDS and Depositary Shares".
OTHER CONSIDERATIONS
- The liquidity and trading market for Depositary Shares could be adversely
affected to the extent Depositary Shares are tendered and accepted in the
Exchange Offer. See "Certain Significant Considerations -- Listing and
Trading of QUIDS and Depositary Shares".
- While the Depositary Shares were issued in fully registered form, the
QUIDS will be issued only in book-entry form through the facilities of
DTC. Accordingly, in order to participate in the Exchange Offer holders
of certificated Depositary Shares who are not DTC Participants must
either (i) make arrangements with a DTC Participant to have such
participant tender their Depositary Shares in accordance with the terms
of the Exchange Offer and to receive QUIDS issued in exchange therefor or
(ii) tender their Depositary Shares in accordance with the instructions
contained in "The Exchange Offer -- Procedure for Tendering Depositary
Shares" and in the Letter of Transmittal and make use of the facilities
provided by the Custodian, so that, in either case, such holders may
become beneficial owners of QUIDS issued in exchange therefor. Under the
terms of the Exchange Offer, no certificated QUIDS will be issued in
exchange for Depositary Shares. See "The Exchange Offer -- Procedure for
Tendering Depositary Shares" and "-- Acceptance of Depositary Shares;
Delivery of QUIDS -- Custodial Arrangements" and "DTC Book-Entry-Only
System".
- Tendering holders will not be obligated to pay brokerage commissions or
fees to the Dealer Managers, the Exchange Agent, the Custodian, the
Information Agent or the Company or, subject to the instructions in the
Letter of Transmittal with respect to special issuance instructions,
transfer taxes with respect to the exchange of Depositary Shares pursuant
to the Exchange Offer.
- The Company will pay all reasonable charges and expenses in connection
with the Exchange Offer, other than any applicable income taxes or any
charges that individual brokerage firms charge their clients for other
services rendered in connection with tendering their shares. Holders of
Depositary Shares may be obligated to pay fees charged by DTC
Participants in order for such participants to tender such holder's
Depositary Shares and to receive QUIDS in exchange therefor on behalf of
such holder. Holders of certificated Depositary Shares who are not DTC
Participants will not be obligated to pay fees charged by the Custodian
related to the establishment and maintenance of accounts opened by such
holder to receive QUIDS issued in exchange for Depositary Shares accepted
in accordance with the terms of the Exchange Offer. See "The Exchange
Offer -- Acceptance of Depositary Shares; Delivery of QUIDS -- Custodial
Arrangements".
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing Depositary Shares with QUIDS. The potential
cash flow benefit to the Company arises because interest payable on the QUIDS
will be deductible by the Company (as it accrues) for United States federal
income tax purposes, while dividends payable with respect to the Depositary
Shares are not deductible. See "The Exchange Offer -- Purpose of the Exchange
Offer".
7
<PAGE> 8
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer, the
Company is offering to exchange up to $105,000,000 aggregate principal amount of
its QUIDS for up to 4,200,000 Depositary Shares, each representing a one-quarter
interest in a share of its Preferred Stock. Exchanges will be made on the basis
of $25 principal amount of QUIDS for each Depositary Share validly tendered and
accepted for exchange. See "The Exchange Offer -- General". As of the date of
this Prospectus, there are 6,000,000 Depositary Shares outstanding.
Pursuant to the terms of the Exchange Offer, the Company will accept for
exchange up to 4,200,000 Depositary Shares validly tendered and not properly
withdrawn prior to the Expiration Time. Depositary Shares not accepted for
exchange because of proration will be returned. See "Proration" below.
SECURITIES OFFERED
The QUIDS will mature on September 30, 2025 and will bear interest at an
annual rate of 8.50% from the Issuance Date. In addition, holders will receive
interest on the QUIDS at a rate of 7.75% per annum from July 15, 1995 (the last
regular dividend payment date with respect to the Depositary Shares) to but
excluding the Issuance Date, payable on the first interest payment date on the
QUIDS. Interest will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31, commencing September 30, 1995; provided that, so
long as an Event of Default has not occurred and is not continuing with respect
to the QUIDS, the Company will have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time, to extend the
interest payment period at any time and from time to time on the QUIDS, provided
that the aggregate interest payment period, as extended, must end on an interest
payment date and must not exceed 20 consecutive quarterly interest payment
periods or extend beyond the maturity of the QUIDS or any date on which any
QUIDS are fixed for redemption. As a consequence, quarterly interest payments on
the QUIDS would be deferred (but would continue to accrue with interest thereon
compounded quarterly at the rate of interest on the QUIDS) during any Deferral
Period. In the event that the Company exercises this right, the Company may not
declare or pay dividends on, or redeem, purchase or acquire, any of its Capital
Stock during such Deferral Period, other than redemptions of any series of
Capital Stock of the Company pursuant to the terms of any sinking fund
provisions with respect thereto. In addition, during any Deferral Period, the
Company may not make any advance or loan to, or purchase any securities of, or
make any other investment in, any affiliate of the Company, including Holdings,
for the purpose of, or to enable the payment of, directly or indirectly,
dividends on any equity securities of Holdings. See "The Company -- Formation of
Holding Company". The Company has no current intention of exercising its right
to extend an interest payment period. However, should the Company determine to
exercise such right in the future, the market price of the QUIDS is likely to be
adversely affected. During any such Deferral Period, the Company may continue to
extend the interest payment period, provided that the aggregate interest payment
period, as extended, must end on an Interest Payment Date and must not exceed 20
consecutive quarterly interest payment periods or extend beyond the maturity of
the QUIDS or any date on which any QUIDS are fixed for redemption. Upon the
termination of any Deferral Period and the payment of all amounts then due, the
Company may extend the quarterly interest payment periods anew, subject to the
above requirements. See "Description of QUIDS -- Quarterly Payments" and
"-- Payment Deferrals".
The QUIDS are unsecured obligations of the Company and will be subordinate
to all existing and future Senior Indebtedness of the Company, but senior to all
Capital Stock (as defined herein) of the Company, including the Depositary
Shares. On March 31, 1995, approximately $4.3 billion of such Senior
Indebtedness was outstanding. As the QUIDS will be issued by the Company, the
QUIDS effectively will be subordinate to all obligations of the Company's
subsidiaries. See "Description of QUIDS -- Subordination". The QUIDS will be
redeemable at the option of the Company, in whole or in part, at any time on or
after June 30, 1998, at a redemption price equal to
8
<PAGE> 9
100% of the principal amount redeemed plus accrued and unpaid interest to the
date fixed for redemption (which is approximately ten weeks after the date on
which the Depositary Shares are first redeemable at the option of the Company).
See "Description of QUIDS -- Optional Redemption".
For federal income tax purposes, the exchange of Depositary Shares for
QUIDS will be a taxable transaction, and the QUIDS will be treated as having
been issued with original issue discount. The original issue discount rules may
accelerate the timing of a holder's recognition of income. For a discussion of
these and other United States federal income tax considerations relevant to the
Exchange Offer, see "Certain United States Federal Income Tax Consequences".
EXPIRATION; EXTENSION; AMENDMENTS; TERMINATION; AND WITHDRAWAL RIGHTS
The Exchange Offer will expire at 5:00 p.m., New York City time on August
14, 1995, unless the Company shall have extended the period during which the
Exchange Offer is open, in which event the Exchange Offer will expire at the
latest time and date as so extended by the Company. See "The Exchange
Offer -- Expiration; Extension; Termination; Amendment". Tenders of Depositary
Shares pursuant to the Exchange Offer are irrevocable, except that Depositary
Shares tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Time and, unless theretofore accepted for exchange
pursuant to the Exchange Offer, may also be withdrawn at any time after 40
business days from the date of this Prospectus. See "The Exchange Offer --
Withdrawal Rights".
The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any Preferred Stock upon the failure
of any of the conditions specified in "The Exchange Offer -- Conditions of the
Exchange Offer" herein. See "The Exchange Offer -- Expiration; Extension;
Termination; Amendment".
PROCEDURES FOR TENDERING
THE QUIDS WILL BE ISSUED ONLY IN BOOK-ENTRY FORM THROUGH THE FACILITIES OF
DTC. ACCORDINGLY, IN ORDER TO PARTICIPATE IN THE EXCHANGE OFFER, HOLDERS OF
DEPOSITARY SHARES WHO ARE NOT DTC PARTICIPANTS MUST EITHER (I) MAKE ARRANGEMENTS
WITH A DTC PARTICIPANT TO HAVE SUCH PARTICIPANT VALIDLY TENDER SUCH DEPOSITARY
SHARES IN ACCORDANCE WITH THE TERMS OF THE EXCHANGE OFFER AND TO RECEIVE QUIDS
ISSUED IN EXCHANGE THEREFOR OR (II) VALIDLY TENDER SUCH DEPOSITARY SHARES IN
ACCORDANCE WITH THE TERMS OF THE EXCHANGE OFFER AND MAKE USE OF THE FACILITIES
PROVIDED BY THE CUSTODIAN, SO THAT, IN EITHER CASE, SUCH HOLDERS MAY BECOME
BENEFICIAL OWNERS OF QUIDS ISSUED IN THE EXCHANGE OFFER. UNDER THE TERMS OF THE
EXCHANGE OFFER, NO CERTIFICATED QUIDS WILL BE ISSUED IN EXCHANGE FOR DEPOSITARY
SHARES.
In order for Depositary Shares to be validly tendered pursuant to the
Exchange Offer, (i) the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) properly completed and duly executed in accordance
with the instructions contained herein and therein, together with any required
signature guarantees, or an Agent's Message (as hereinafter defined) in
connection with a book-entry transfer of Depositary Shares, must be received by
the Exchange Agent, at either of its addresses set forth on the back cover page
of this Prospectus and either (a) certificates for the Depositary Shares must be
received by the Exchange Agent at either address or (b) such Depositary Shares
must be transferred pursuant to the procedures for book-entry transfer described
herein and a confirmation of such book-entry transfer must be received by the
Exchange Agent, in each case prior to the Expiration Time or (ii) the guaranteed
delivery procedures described herein must be complied with. See "The Exchange
Offer -- General" and "-- Procedure for Tendering Depositary Shares".
By complying with the procedures set forth above, holders of Depositary
Shares will effect a tender of the underlying Preferred Stock by tendering such
Depositary Shares to the Exchange
9
<PAGE> 10
Agent who, as agent for tendering holders, will withdraw such underlying
Preferred Stock and tender it in the Exchange Offer.
NO LETTERS OF TRANSMITTAL AND NO CERTIFICATES REPRESENTING DEPOSITARY
SHARES SHOULD BE SENT TO THE COMPANY, THE DEALER MANAGERS OR THE INFORMATION
AGENT. SUCH DOCUMENTS SHOULD ONLY BE SENT TO THE EXCHANGE AGENT.
SPECIAL PROCEDURE FOR BENEFICIAL OWNERS
Any beneficial owner whose Depositary Shares 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 such beneficial owner's behalf. See "The Exchange
Offer -- Procedures for Tendering Depositary Shares".
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Depositary Shares to reach the Exchange Agent before
the Expiration Time or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected in accordance with the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures".
PRORATION
If more than 4,200,000 Depositary Shares are validly tendered and not
properly withdrawn prior to the Expiration Time, the Company will, upon the
terms and subject to the conditions of the Exchange Offer, accept for exchange
4,200,000 Depositary Shares so tendered and not properly withdrawn on a pro rata
basis, according to the number of Depositary Shares validly tendered by each
holder and not properly withdrawn prior to the Expiration Time (calculated in
all cases based on the number of shares tendered), subject to adjustment to
avoid the acceptance for exchange of fractional Depositary Shares. If 4,200,000
or fewer Depositary Shares are validly tendered and not properly withdrawn prior
to the Expiration Time, the Company will, upon the terms and subject to the
conditions of the Exchange Offer, accept for exchange all such Depositary Shares
so tendered and not properly withdrawn. See "The Exchange Offer -- Proration".
ACCRUED DIVIDENDS
Holders of Depositary Shares accepted for exchange pursuant to the Exchange
Offer will not receive dividends from July 15, 1995 (the last regular dividend
payment date with respect to the Depositary Shares). Holders whose Depositary
Shares are accepted for exchange will receive interest on the QUIDS accruing
initially at a rate of 7.75% per annum (equal to the indicated dividend rate on
the Depositary Shares) from July 15, 1995 to but excluding the Issuance Date,
and thereafter at an annual rate of 8.50%, all payable on the first interest
payment on the QUIDS as described in "Description of QUIDS -- Quarterly
Payments". For United States federal income tax purposes, interest accruing from
July 15, 1995 to but excluding the Issuance Date will be treated as part of the
amount received upon the exchange. See "Certain United States Federal Income Tax
Consequences".
Dividends on Depositary Shares not exchanged in the Exchange Offer will
continue to accrue and be payable when, as and if declared in accordance with
the terms of the underlying Preferred Stock.
ACCEPTANCE OF SHARES AND DELIVERY OF QUIDS
Subject to the terms and conditions of the Exchange Offer, including the
reservation by the Company of the right to withdraw, amend or terminate the
Exchange Offer and certain other rights,
10
<PAGE> 11
the Company will accept for exchange Depositary Shares that are properly
tendered in the Exchange Offer and not withdrawn prior to the Expiration Time.
Subject to such terms and conditions, the QUIDS issued pursuant to the Exchange
Offer will be issued as of the Issuance Date and will be delivered as promptly
as practicable following the Expiration Time. See "The Exchange
Offer -- General", "-- Expiration; Extension; Termination; Amendment" and "--
Conditions of the Exchange Offer".
The QUIDS will be issued only in book-entry form through the facilities of
DTC. Accordingly, holders of Depositary Shares accepted for exchange in the
Exchange Offer must make arrangements with a DTC Participant in order to receive
the QUIDS issued in the Exchange Offer or make use of the facilities provided by
the Custodian, so that, in either case, such holders may become beneficial
owners of QUIDS issued in exchange for Depositary Shares accepted pursuant to
the Exchange Offer. See "Acceptance of Depositary Shares; Delivery of QUIDS --
Custodial Arrangements".
If proration for tendered Depositary Shares is required, because of the
difficulty of determining the aggregate number of Depositary Shares validly
tendered and not properly withdrawn (including shares tendered by the guaranteed
delivery procedures), the Company may not be able to announce the final results
of such proration until at least approximately seven NYSE trading days after the
Expiration Time. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Time. Holders of
Depositary Shares may obtain such preliminary information from the Information
Agent and may be able to obtain such information from their brokers. THE COMPANY
WILL NOT ISSUE ANY QUIDS IN EXCHANGE FOR ANY DEPOSITARY SHARES ACCEPTED FOR
EXCHANGE PURSUANT TO THE EXCHANGE OFFER OR RETURN DEPOSITARY SHARES DELIVERED TO
THE EXCHANGE AGENT BUT NOT TENDERED OR RETURN DEPOSITARY SHARES TENDERED BUT NOT
ACCEPTED FOR EXCHANGE BECAUSE OF PRORATION UNTIL THE FINAL PRORATION FACTORS ARE
KNOWN.
EXCHANGE AGENT AND INFORMATION AGENT
Bankers Trust Company has been appointed as Exchange Agent in connection
with the Exchange Offer. Georgeson & Company Inc. has been appointed as
Information Agent in connection with the Exchange Offer. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Information Agent. The addresses and telephone numbers of the
Exchange Agent and the Information Agent are set forth on the back cover page of
this Prospectus.
DEALER MANAGERS
Goldman, Sachs & Co. and Smith Barney Inc. have been retained as Dealer
Managers to solicit exchanges of Preferred Stock for QUIDS. Questions with
respect to the Exchange Offer may be directed to Goldman, Sachs & Co. at (800)
828-3182 or Smith Barney Inc. at (800) 813-3754.
FEES AND EXPENSES
The expense of soliciting tenders of Depositary Shares will be borne by the
Company. Subject to the receipt of a Letter of Transmittal with the part thereof
entitled "Notice of Solicited Tenders" properly completed and duly executed as
described herein, the Company will pay to any Soliciting Dealer (as hereinafter
defined) a solicitation fee of $0.50 per Depositary Share tendered and accepted
for exchange pursuant to the Exchange Offer. Soliciting Dealers are not entitled
to a solicitation fee for Depositary Shares beneficially owned by such
Soliciting Dealers. The Company will pay all transfer taxes, if any, applicable
to the exchange of Depositary Shares pursuant to the Exchange Offer. See "The
Exchange Offer -- Fees and Expenses; Transfer Taxes".
11
<PAGE> 12
COMPARISON OF QUIDS AND DEPOSITARY SHARES
The following is a brief summary comparison of certain of the principal
terms of the QUIDS and the Depositary Shares.
<TABLE>
<CAPTION>
QUIDS DEPOSITARY SHARES
---------------------------------- ----------------------------------
<S> <C> <C>
Interest/Dividend 8.50% annual interest payable 7.75% annual dividend, payable
Rate............... quarterly in arrears on March 31, quarterly out of funds legally
June 30, September 30 and December available therefor on January 15,
31 of each year, commencing April 15, July 15 and October 15
September 30, 1995, subject to the of each year, when, as and if
Company's right to defer the declared by the Company's Board of
interest payment period at any Directors.
time and from time to time;
provided that the aggregate
interest payment period, as
extended, must end on an Interest
Payment Date and must not exceed
20 consecutive quarterly interest
payment periods or extend beyond
the maturity of the QUIDS or any
date on which the QUIDS are fixed
for redemption as described
herein. At the end of each
Deferral Period, the Company shall
pay all interest then accrued and
unpaid (compounded quarterly at
the rate of interest on the
QUIDS). During any Deferral Period
the Company may not declare or pay
any dividend on, or redeem,
purchase or acquire, any of its
Capital Stock, other than
redemptions of any series of
Capital Stock of the Company
pursuant to the terms of any
sinking fund provisions with
respect thereto. In addition,
during any Deferral Period, the
Company may not make any advance
or loan to, or purchase any
securities of, or make any other
investment in, any affiliate of
the Company, including Holdings,
for the purpose of, or to enable
the payment of, directly or
indirectly, dividends on any
equity securities of Holdings.
Therefore, the Company believes
that the extension of a quarterly
interest payment period on the
QUIDS is unlikely.
Maturity............. September 30, 2025 Not applicable. There is no
mandatory redemption or sinking
fund for the Depositary Shares.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
QUIDS DEPOSITARY SHARES
---------------------------------- ----------------------------------
<S> <C> <C>
Optional Redeemable at the option of the Redeemable at the option of the
Redemption......... Company at any time on or after Company at any time on or after
June 30, 1998, in whole or in April 15, 1998, in whole or in
part, at a redemption price equal part, at a redemption price equal
to 100% of the principal amount to $100 per share of Preferred
redeemed plus accrued and unpaid Stock (equivalent to $25 per
interest to the date fixed for Depositary Share) plus accrued and
redemption. accumulated but unpaid dividends
to the date fixed for redemption.
Subordination........ Unsecured obligations of the Subordinate to claims of
Company and subordinated to all creditors, including holders of
existing and future Senior the Company's outstanding debt
Indebtedness of the Company, but securities, including the QUIDS,
senior to all Capital Stock of the but senior to the Common Stock of
Company, including the Depositary the Company. Effectively
Shares. Effectively subordinate to subordinated to all obligations of
all obligations of the Company's the Company's subsidiaries.
subsidiaries.
Voting Rights........ None. Non-voting, except that if
dividends are in arrears on any
series of preferred stock of the
Company for four quarters, the
holders of all series of the
Company's preferred stock, voting
separately as a class, are
entitled to elect two additional
members of the Board of Directors
of the Company.
New York Stock Application will be made to list The Depositary Shares are listed
Exchange Listing... the QUIDS on the NYSE. on the NYSE.
Form of Security..... The QUIDS will be issued only in The Depositary Shares are in fully
book-entry form through the registered form, if elected.
facilities of DTC.
Dividends Received Interest will not be eligible for Dividends are eligible for the
Deduction.......... the dividends received deduction dividends received deduction for
for corporate holders. The corporate holders. The dividends
dividends received deduction is received deduction is not
not applicable for individual, applicable for individual,
non-corporate holders. non-corporate holders.
Original Issue The QUIDS will be treated as The Depositary Shares were not is-
Discount........... having been issued with original sued with original issue discount.
issue discount.
</TABLE>
13
<PAGE> 14
CERTAIN SIGNIFICANT CONSIDERATIONS
Prospective exchanging holders of Depositary Shares should carefully
consider, in addition to the other information set forth elsewhere in this
Prospectus, the following:
EXCHANGE OFFER AS TAXABLE EVENT
All holders of Depositary Shares are advised to consult their own tax
advisors regarding the federal, state, local and foreign tax consequences of the
exchange of Depositary Shares. For federal income tax purposes, the exchange of
Depositary Shares for QUIDS will be a taxable transaction, and the QUIDS will be
treated as having been issued with original issue discount. The original issue
discount rules may accelerate the timing of a holder's recognition of income.
For a discussion of these and other United States federal income tax
considerations relevant to the Exchange Offer, see "Certain United States
Federal Income Tax Consequences".
RIGHT OF COMPANY TO DEFER PAYMENT OF INTEREST
So long as no Event of Default with respect to the QUIDS has occurred and
is continuing, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time, to extend the
interest payment period at any time and from time to time on the QUIDS, provided
that the aggregate interest payment period, as extended, must end on an interest
payment date and must not exceed 20 consecutive quarterly interest payment
periods or extend beyond the maturity of the QUIDS or any date on which any
QUIDS are fixed for redemption. No interest shall be due and payable during a
Deferral Period, but on the interest payment date occurring at the end of each
Deferral Period the Company shall pay to the holders of record on the record
date for such interest payment date (regardless of who the holders of record may
have been on other dates during the Deferral Period) all accrued and unpaid
interest on the QUIDS, together with interest thereon compounded quarterly at
the rate of interest on the QUIDS. In the event that the Company exercises its
right to extend, the Company may not declare or pay dividends on, or redeem,
purchase or acquire, any shares of its Capital Stock until deferred interest on
the QUIDS is paid in full, other than redemptions of any series of Capital Stock
of the Company pursuant to the terms of any sinking fund provisions with respect
thereto. In addition, during any Deferral Period, the Company may not make any
advance or loan to, or purchase any securities of, or make any other investment
in, any affiliate of the Company, including Holdings, for the purpose of, or to
enable the payment of, directly or indirectly, dividends on any equity
securities of Holdings. See "The Company -- Formation of Holding Company". The
Company has no current intention of exercising its right to extend an interest
payment period.
Upon the termination of any Deferral Period and the payment of all interest
then due, the Company may commence a new Deferral Period. Consequently, there
could be multiple Deferral Periods of varying lengths throughout the term of the
QUIDS. See "Description of QUIDS -- Payment Deferral".
In the event a Deferral Period occurs, holders of the QUIDS would continue,
under the original issue discount rules, to accrue income on the QUIDS for
United States federal income tax purposes. As a result, a holder ordinarily
would include such amounts in gross income in advance of the receipt of cash. A
holder that disposes of its QUIDS prior to the record date for payment of
interest at the end of a Deferral Period will not receive cash from the Company
related to such interest because such interest will be paid to the holder of
record on such record date, regardless of who the holders of record may have
been on other dates during the Deferral Period. The extent to which such a
holder will receive a return on the QUIDS for the period it held such QUIDS will
depend on the market for the QUIDS at the time of such disposition. See "Certain
United States Federal Income Tax Consequences -- United States Holders".
The Company has no current intention of exercising its right to extend an
interest payment period.
POTENTIAL MARKET VOLATILITY DURING DEFERRAL PERIOD
As described above, the Company has the right to extend an interest payment
period from time to time, provided that the aggregate interest payment period,
as extended, must end on an interest payment date and must not exceed 20
consecutive quarterly interest payment periods or extend
14
<PAGE> 15
beyond the maturity of the QUIDS or any date on which any QUIDS are fixed for
redemption. In the event the Company determines to extend an interest payment
period, or in the event the Company thereafter extends a Deferral Period, the
market price of the QUIDS is likely to be adversely affected. In addition, as a
result of such rights, the market price of the QUIDS may be more volatile than
other debt instruments that do not have such rights. A holder that disposes of
its QUIDS during a Deferral Period, therefore, may not receive the same return
on its investment as a holder that continues to hold its QUIDS.
SUBORDINATION OF QUIDS
The QUIDS are unsecured obligations of the Company and will be subordinate
to all existing and future Senior Indebtedness (as hereinafter defined) of the
Company, but senior to all Capital Stock of the Company, including the
Depositary Shares. On March 31, 1995, approximately $4.3 billion of such Senior
Indebtedness was outstanding. There are no terms in the QUIDS that limit the
Company's ability to incur additional indebtedness, including indebtedness that
would rank senior to the QUIDS. With respect to the QUIDS, the Indenture (as
hereinafter defined) does not contain any cross-defaults to any other
indebtedness of the Company, and therefore, a default with respect to, or the
acceleration of, any such indebtedness will not constitute an "Event of Default"
with respect to the QUIDS. As the QUIDS will be issued by the Company, the QUIDS
effectively will be subordinate to all obligations of the Company's
subsidiaries. See "Description of QUIDS -- Subordination" and "-- Subrogation".
LISTING AND TRADING OF QUIDS AND DEPOSITARY SHARES
The exchange of Depositary Shares pursuant to the Exchange Offer will
reduce the number of Depositary Shares that might otherwise trade publicly and
the number of holders of such shares, and depending on the number of Depositary
Shares exchanged, could adversely affect the liquidity and market value of
remaining Depositary Shares held by the public.
There has not been any public market for the QUIDS. While the Company
intends to list the QUIDS on the NYSE, there can be no assurance that an active
market for the QUIDS will develop or be sustained in the future on such
exchange. Listing will depend upon the satisfaction of the NYSE's listing
requirements with respect to the QUIDS, including requirements as to the
principal amount and distribution of the QUIDS. Although the Dealer Managers
have indicated to the Company that they intend to make a market in the QUIDS as
permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any such market-making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or trading for,
the QUIDS.
CERTAIN FACTORS AFFECTING THE COMPANY
The Company, in common with other public utilities having industrialized
service areas, is experiencing increased competition and pressure to reduce
rates in order to retain industrial customers. In addition, the Company, in
common with other public utilities, is subject to extensive environmental
regulation. Additional costs may result as the effects of various chemicals on
the environment (including nuclear waste) are studied and governmental
regulations are developed and implemented. The costs of future nuclear
decommissioning activities are the subject of increased regulatory attention;
however, the Company expects that substantially all of the costs of
environmental compliance will be recovered through the ratemaking process.
Substantially all of the Company's properties are subject to the lien of a
Mortgage and Deed of Trust, under which approximately $3.5 billion of General
and Refunding Mortgage Bonds were outstanding as of March 31, 1995. For a
complete description of the Company's capitalization, refer to "The Company --
Capitalization" herein.
Ownership of Fermi 2, a nuclear generating unit comprising 28% of the
Company's total assets and 11% of the Company's summer net rated capability,
subjects the Company to additional significant risks. Nuclear plants are highly
regulated by a number of governmental agencies concerned with public health and
safety and, consequently, are subject to greater risks and scrutiny.
15
<PAGE> 16
THE COMPANY
GENERAL
The Company is a Michigan corporation and a regulated public utility
engaged in the generation, purchase, transmission, distribution and sale of
electric energy in a 7,600 square mile service area in southeastern Michigan
which includes about 13% of Michigan's total land area and about half of its
population, electric energy consumption and industrial capacity.
FORMATION OF A HOLDING COMPANY
On December 5, 1994, the Company's Board of Directors approved the
formation of a holding company, currently named DTE Holdings, Inc., referred to
earlier as "Holdings". The Company's shareholders approved this organizational
structure at the Company's April 1995 Annual Meeting of Common Shareholders.
This organizational structure will be subject to receipt of a number of
regulatory approvals. The holding-company structure could be in place before the
end of 1995.
A holding-company structure will provide the Company with greater financial
flexibility to develop and operate new non-utility businesses. It also will
offer a mechanism for better defining and separating the Company's regulated and
unregulated businesses, and for protecting the Company's utility business and
customers from any risks that may be involved in non-utility ventures.
When all approvals are in place, the Company's Common Stock will be
exchanged share-for-share for the common stock of Holdings. The Company will
become a subsidiary of Holdings with Holdings owning all of the Company's Common
Stock. The Company's Preferred Stock, Preference Stock (none of which is
outstanding), General and Refunding Mortgage Bonds, and other debt securities
will be unchanged and will continue to be securities and obligations of the
Company. All series of the Company's Preferred Stock, Preference Stock, Common
Stock and any other equity securities of the Company are referred to herein as
"Capital Stock".
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
TWELVE MONTHS ENDED --------------------------------------------------------------
MARCH 31, 1995(A) 1994 1993 1992 1991 1990
--------------------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Income Summary:
Operating Revenues.... $3,500,026 $3,519,341 $3,555,211 $3,558,143 $3,591,537 $3,576,281
Operating Income...... 724,239 719,395 843,947 953,156 943,898 890,655
Net Income............ 420,529 419,909 521,903 588,047 568,037 514,459
Earnings per Common
Share............... $ 2.68 $ 2.67 $ 3.34 $ 3.79 $ 3.64 $ 3.26
</TABLE>
- -------------------------
(a) Financial results for this interim period are not necessarily indicative of
results that may be expected for any other interim period or for the fiscal
year.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
The Company's ratios of earnings to fixed charges* were as follows for the
respective periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
TWELVE MONTHS ENDED --------------------------------------------------------
MARCH 31, 1995 1994 1993 1992 1991 1990
---------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.17 3.13 3.25 3.09 2.74 2.42
</TABLE>
16
<PAGE> 17
The Company's ratios of earnings to combined fixed charges* and preferred
and preference stock dividend requirements were as follows for the respective
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
TWELVE MONTHS ENDED -------------------------------------------------
MARCH 31, 1995 1994 1993 1992 1991 1990
------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
2.76 2.73 2.88 2.79 2.50 2.21
</TABLE>
- ---------------
* For the purposes of computing these ratios, earnings represent net income
(including allowance for both borrowed and other funds used during
construction, "AFUDC", accretion income and deferred Fermi 2 depreciation,
amortization and return) before deducting income taxes and fixed charges.
Fixed charges represent total interest charges, interest factor of rents and
amortization of debt discount, premium and expense.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1994 and as adjusted to give effect to the Exchange
Offer (assuming that 4,200,000 of the outstanding Depositary Shares are
exchanged). The financial data at December 31, 1994 in the following table are
derived from the Company's audited financial statements for the year ended
December 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------------
ACTUAL AS ADJUSTED
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-Term Debt................................... $3,825,296 50.8% $3,825,296 50.8%
Quarterly Income Debt Securities................. -- -- 105,000 1.4
---------- ----- ---------- -----
3,825,296 50.8 3,930,296 52.2
Cumulative Preferred Stock Redeemable Solely at
the Option of the Company...................... 380,283 5.0 278,701 3.7
Common Stockholders' Equity...................... 3,326,080 44.2 3,322,662 44.1
---------- ----- ---------- -----
$7,531,659 100.0% $7,531,659 100.0%
========== ===== ========== =====
</TABLE>
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $105,000,000 aggregate principal amount of its QUIDS for up to
4,200,000 Depositary Shares, each representing a one-quarter interest in a share
of its Preferred Stock. Pursuant to the terms of the Exchange Offer, the Company
will accept for exchange up to 4,200,000 Depositary Shares validly tendered and
not properly withdrawn prior to the Expiration Time. As of the date of this
Prospectus, there are 6,000,000 Depositary Shares outstanding. Depositary Shares
not accepted for exchange because of proration will be returned. See "Proration"
below.
Tendering holders will not be obligated to pay brokerage commissions or
fees to the Dealer Managers, the Exchange Agent, the Custodian, the Information
Agent or the Company or, subject to the instructions in the Letter of
Transmittal with respect to special issuance instructions, transfer taxes with
respect to the exchange of Depositary Shares pursuant to the Exchange Offer. The
Company will pay all reasonable charges and expenses in connection with the
Exchange Offer, other than any applicable income taxes or any charges that
individual brokerage firms charge their clients for other services rendered in
connection with tendering their shares. Holders of Depositary Shares may be
obligated to pay fees charged by DTC Participants in order for such participants
to tender such holder's Depositary Shares and to receive QUIDS in exchange
therefor on behalf of such holder. Holders of certificated Depositary Shares who
are not DTC Participants will not be
17
<PAGE> 18
obligated to pay fees charged by the Custodian related to the establishment or
maintenance of accounts opened by such holders to receive QUIDS issued in
exchange for Depositary Shares accepted in accordance with the terms of the
Exchange Offer. See "The Exchange Offer -- Acceptance of Depositary Shares;
Delivery of QUIDS -- Custodial Arrangements".
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing Depositary Shares with QUIDS. The potential
cash flow benefit to the Company arises because interest payable on the QUIDS
will be deductible by the Company (as it accrues) for United States federal
income tax purposes, while dividends payable on the Depositary Shares are not
deductible.
Except in connection with the Exchange Offer, the Company has no present
plans or intention to make any acquisition of or offers for Depositary Shares.
However, after the expiration of the Exchange Offer, the Company will continue
to monitor the market for the Depositary Shares and reserves the right, in its
sole discretion, to acquire and to make offers for Depositary Shares subsequent
to the Expiration Time for cash or in exchange for other securities, by optional
redemption of the Preferred Stock underlying the Depositary Shares or otherwise.
The terms of any such acquisitions or offers may differ from the terms of the
Exchange Offer. Such acquisitions or offers, if any, would depend upon, among
other things, the price and availability of such shares and the Company's tax
position.
EXPIRATION; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at the Expiration Time, unless the Company
shall have extended the period during which the Exchange Offer is open, in which
case the term "Expiration Time" means the latest time and date at which the
Exchange Offer, as so extended by the Company, shall expire.
The Company expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving oral or written notice of such extension to the
Exchange Agent and making a public announcement thereof. There can be no
assurance that the Company will exercise its right to extend the Exchange Offer.
During any extension of the Exchange Offer, all Depositary Shares previously
tendered pursuant thereto and not exchanged or withdrawn will remain subject to
the Exchange Offer and may be accepted for exchange by the Company at the
expiration of the Exchange Offer subject to the right of a tendering holder to
withdraw its Depositary Shares. See "Withdrawal Rights" below.
The Company also expressly reserves the right, subject to applicable law,
(i) to delay acceptance for exchange of any Depositary Shares or terminate the
Exchange Offer and not accept for exchange any Depositary Shares and promptly
return all such shares to the tendering holders thereof, upon the failure of any
of the conditions specified in "Conditions of the Exchange Offer" below to be
satisfied or waived by the Company or to comply in whole or in part with any
applicable law, by giving oral or written notice of such delay or termination to
the Exchange Agent, (ii) to waive any condition to the Exchange Offer and accept
all Depositary Shares previously tendered pursuant thereto, (iii) to extend the
Expiration Time and retain all Depositary Shares tendered pursuant thereto until
the expiration of the Exchange Offer, (iv) to amend the Exchange Offer in any
respect or (v) to modify the form or amount of the consideration to be paid
pursuant to the Exchange Offer. If the Exchange Offer is so amended, the term
"Exchange Offer" shall mean the Exchange Offer as so amended. The reservation by
the Company of the right to delay acceptance for exchange of Depositary Shares
is subject to the provisions of Rule 14e-1(c) under the Exchange Act, which
requires that the Company pay the consideration offered or return the Depositary
Shares deposited by or on behalf of holders thereof promptly after the
termination or withdrawal of the Exchange Offer.
18
<PAGE> 19
Any extension, delay, termination or amendment of the Exchange Offer will
be followed as promptly as practicable by a public announcement thereof. Without
limiting the manner in which the Company may choose to make a public
announcement of any extension, delay, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to the
Dow Jones News Service, except in the case of an announcement of an extension of
the Exchange Offer, in which case the Company shall have no obligation to
publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled expiration
date of the Exchange Offer.
If the Company shall decide, in its sole discretion, to increase or
decrease the number of Depositary Shares being sought in the Exchange Offer or
to increase or decrease the consideration offered to holders of Depositary
Shares to be paid in the Exchange Offer and if, at the time that notice of such
increase or decrease is first published, sent or given to holders of Depositary
Shares in the manner specified above, the Exchange Offer is scheduled to expire
at any time earlier than the expiration of a period ending on the tenth business
day from and including the date that such notice is first so published, sent or
given, the Exchange Offer will be extended until the expiration of such period
of ten business days. As used in this paragraph, "business day" has the meaning
set forth in Rule 14d-1 (and applicable to Regulation 14E) under the Exchange
Act.
If the Company makes a material change in the terms of the Exchange Offer
or the information concerning the Exchange Offer, or waives any condition of the
Exchange Offer that results in a material change to the circumstances of the
Exchange Offer, the Company will disseminate additional exchange offer materials
to the extent required under the Exchange Act, and will extend the Exchange
Offer to the extent required in order to permit holders of Depositary Shares
adequate time to consider such materials. The minimum period during which the
Exchange Offer must remain open following material changes in the terms of the
Exchange Offer or information concerning the Exchange Offer, other than a change
in price or percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information.
PROCEDURE FOR TENDERING DEPOSITARY SHARES
The acceptance by a holder of Depositary Shares of the Exchange Offer
pursuant to one of the procedures set forth below will constitute an agreement
between the holder of such shares and the Company in accordance with the terms
and subject to the conditions set forth in this Prospectus and in the Letter of
Transmittal.
THE QUIDS WILL BE ISSUED ONLY IN BOOK-ENTRY FORM THROUGH THE FACILITIES OF
DTC. ACCORDINGLY, IN ORDER TO PARTICIPATE IN THE EXCHANGE OFFER, HOLDERS OF
DEPOSITARY SHARES WHO ARE NOT DTC PARTICIPANTS MUST EITHER (I) MAKE ARRANGEMENTS
WITH A DTC PARTICIPANT TO HAVE SUCH PARTICIPANT VALIDLY TENDER SUCH DEPOSITARY
SHARES IN ACCORDANCE WITH THE TERMS OF THE EXCHANGE OFFER AND TO RECEIVE QUIDS
ISSUED IN EXCHANGE THEREFOR OR (II) VALIDLY TENDER SUCH DEPOSITARY SHARES IN
ACCORDANCE WITH THE TERMS OF THE EXCHANGE OFFER AND MAKE USE OF THE FACILITIES
PROVIDED BY THE CUSTODIAN, SO THAT, IN EITHER CASE, SUCH HOLDERS MAY BECOME
BENEFICIAL OWNERS OF QUIDS ISSUED IN THE EXCHANGE OFFER. UNDER THE TERMS OF THE
EXCHANGE OFFER, NO CERTIFICATED QUIDS WILL BE ISSUED IN EXCHANGE FOR DEPOSITARY
SHARES.
For Depositary Shares to be validly tendered pursuant to the Exchange
Offer, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message (as
hereinafter defined) in connection with a book-entry transfer of Depositary
Shares, and any other required documents, must be received by the Exchange Agent
at one of its addresses set forth on the back cover page of this Prospectus
prior to the Expiration Time. In addition, either (i) the certificates
representing tendered Depositary Shares must be received by the Exchange Agent
or such Depositary Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a confirmation of receipt of such
19
<PAGE> 20
tendered Depositary Shares must be received by the Exchange Agent, in each case
prior to the Expiration Time, or (ii) the tendering holder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF DEPOSITARY SHARES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER TENDERING SUCH SHARES AND, EXCEPT AS OTHERWISE PROVIDED HEREIN,
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF SENT BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE MAILING BE MADE
SUFFICIENTLY IN ADVANCE OF THE EXPIRATION TIME TO PERMIT DELIVERY TO THE
EXCHANGE AGENT ON OR BEFORE THE EXPIRATION TIME.
If a holder desires to tender Depositary Shares pursuant to the Exchange
Offer but is unable to locate the certificates representing such shares to be
tendered, such holder should write to or telephone Chemical Bank, as Depositary
(the "Depositary"), Chemical Bank, J.A.F. Building, P.O. Box 2862, New York, NY
10116-2862, Attention: Lost Securities Department, telephone number (800)
851-9677, about procedures for obtaining a replacement certificate for
Depositary Shares and arranging for indemnification.
NO LETTERS OF TRANSMITTAL AND NO CERTIFICATES REPRESENTING DEPOSITARY
SHARES SHOULD BE SENT TO THE COMPANY, THE DEALER MANAGERS OR THE INFORMATION
AGENT. SUCH DOCUMENTS SHOULD ONLY BE SENT TO THE EXCHANGE AGENT.
Any beneficial owner whose Depositary Shares 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 such beneficial owner's behalf.
Book-Entry Transfer. The Exchange Agent will make a request promptly after
the date of this Prospectus to establish accounts with respect to the Depositary
Shares at DTC for the purpose of facilitating the Exchange Offer, and, subject
to the establishment thereof, any financial institution that is a participant in
DTC's system may make book-entry delivery of Depositary Shares by causing DTC to
transfer such shares into the Exchange Agent's account with respect to the
Depositary Shares in accordance with DTC's procedures for such transfer.
Although delivery of Depositary Shares may be effected through book-entry
transfer into the Exchange Agent's accounts at DTC pursuant to DTC's Automated
Tender Offer Program ("ATOP") procedures, a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
other required documents, must in each case be received by the Exchange Agent at
one of its addresses set forth on the back cover page of this Prospectus prior
to the Expiration Time, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Agent's Message" means a message, transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Depositary Shares which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may enforce
such agreement against such participant.
Signature Guarantees. All signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution, unless the Depositary Shares which are
the subject of such Letter of Transmittal are tendered or executed,
respectively, (i) by a registered holder (which term, for the purposes described
above, shall include any participant in DTC whose name appears on a security
position listing as the owner of Depositary Shares) of such shares who has not
completed the box entitled
20
<PAGE> 21
"Special Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal or (ii) for the account of an Eligible Institution. If Depositary
Shares are registered in the name of a person other than the signer of a Letter
of Transmittal or if certificates for QUIDS and/or certificates for untendered
or unexchanged Depositary Shares are to be issued or returned to a person other
than the registered holder, then the Depositary Shares must be endorsed by the
registered holder or be accompanied by a stock power in form satisfactory to the
Company duly executed by the registered holder with such signatures guaranteed
by an Eligible Institution. If signatures on a Letter of Transmittal are
required to be guaranteed, such guarantees must be by a member firm of a
registered national securities exchange, a member of the NASD or by a commercial
bank or trust company having an office in the United States that is a
participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program (each of the foregoing being referred to as an
"Eligible Institution").
Miscellaneous. Issuance of QUIDS in exchange for Depositary Shares will be
made only against deposit of the tendered Depositary Shares. If less than the
total number of Depositary Shares evidenced by a submitted certificates for
Depositary Shares is tendered, the tendering holder of Depositary Shares should
fill in the number of shares tendered in the appropriate boxes on the Letter of
Transmittal. The Exchange Agent will then reissue and return to the tendering
holder (unless otherwise requested by the holder under "Special Issuance
Instructions" and "Special Delivery Instructions" in the Letter of Transmittal),
as promptly as practicable following the Expiration Time, Depositary Shares
equal to the number of such delivered Depositary Shares not tendered, together
with any tendered Depositary Shares that were not accepted for exchange for any
reason. The total number of Depositary Shares deposited with the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
All questions as to the form of all documents and the validity (including
the time of receipt), eligibility, acceptance and withdrawal of tendered
Depositary Shares will be determined by the Company, in its sole discretion,
which determination shall be final and binding. The Company expressly reserves
the absolute right to reject any and all tenders not in proper form and to
determine whether the acceptance of or exchange by it for such tenders would be
unlawful. The Company also reserves the absolute right, subject to applicable
law, to waive or amend any of the conditions of the Exchange Offer or to waive
any defect or irregularity in the tender of any particular Depositary Shares.
None of the Company, the Exchange Agent, the Information Agent, the Dealer
Managers or any other person will be under any duty to give notification of any
defects or irregularities in tenders or will incur any liability for failure to
give any such notification. No tender of Depositary Shares will be deemed to
have been validly made until all defects and irregularities with respect to such
shares have been cured or waived. Any Depositary Shares received by the Exchange
Agent that are not properly tendered and as to which irregularities have not
been cured or waived will be returned by the Exchange Agent to the appropriate
tendering holder as soon as practicable. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding on all parties.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to tender Depositary Shares and the holder's Depositary
Shares are not immediately available or time will not permit the holder's
Depositary Shares, Letter of Transmittal or other required documents to reach
the Exchange Agent prior to the Expiration Time or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if:
(a) the tender is made by or through an Eligible Institution; and
(b) prior to the Expiration Time, 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)
substantially in the form provided by the Company which contains a
21
<PAGE> 22
signature guaranteed by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery (unless such tender is for the account
of an Eligible Institution) which sets forth the name and address of the
holder of the Depositary Shares and the number of Depositary Shares
tendered, states that the tender is being made thereby and guarantees that
within five NYSE trading days after the Expiration Time, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message in connection
with a book-entry transfer of Depositary Shares, and any other documents
required by the Letter of Transmittal, together with the Depositary Shares
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) all tendered Depositary Shares (or a confirmation of book-entry
transfer of such shares into the Exchange Agent's account at DTC) as well
as the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer of Depositary Shares, and
any other documents required by the Letter of Transmittal, are received by
the Exchange Agent within five NYSE trading days after the Expiration Time.
A Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Exchange Agent and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, in all cases QUIDS will only be
issued in exchange for Depositary Shares accepted for exchange pursuant to the
Exchange Offer after timely receipt by the Exchange Agent of certificates for
such shares (or a confirmation of book-entry transfer of such shares into the
Exchange Agent's account at DTC as described above), the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Depositary Shares for exchange (the "Transferor")
exchanges, assigns and transfers the Preferred Stock underlying such Depositary
Shares to the Company and irrevocably constitutes and appoints the Exchange
Agent as the Transferor's agent and attorney-in-fact to cause the Depositary
Shares and such underlying Preferred Stock to be assigned, transferred and
exchanged. The Transferor specifically authorizes the Exchange Agent to withdraw
under the Deposit Agreement among the Company, the Depositary and the holders
from time to time of certificates for the Depositary Shares (the "Deposit
Agreement") the Preferred Stock underlying any tendered Depositary Shares, and
to tender such underlying Preferred Stock in the Exchange Offer. The Transferor
represents and warrants that it has the full power and authority to tender,
exchange, assign and transfer the Depositary Shares and the underlying Preferred
Stock and to acquire the QUIDS issuable upon the exchange of such tendered
Depositary Shares in accordance with the terms of the Exchange Offer, and that,
when the same are accepted for exchange, the Company will acquire good and
unencumbered title to the Preferred Stock underlying the tendered Depositary
Shares, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents deemed by the Company
to be necessary or desirable to complete the exchange, assignment and transfer
of Preferred Stock underlying the tendered Depositary Shares or transfer
ownership of such Depositary Shares on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
A holder of certificated Depositary Shares who is not a DTC Participant
must either make arrangements with a DTC Participant to have such participant
receive QUIDS issued in exchange for
22
<PAGE> 23
Depositary Shares accepted for exchange in accordance with the terms of the
Exchange Offer or indicated in the Letter of Transmittal that such holder wishes
to make use of the facilities provided by the Custodian, so that, in either
case, such holder may become a beneficial owner of QUIDS issued in exchange for
Depositary Shares accepted pursuant to the Exchange Offer. Under the terms of
the Exchange Offer, no certificated QUIDS will be issued in exchange for
Depositary Shares.
WITHDRAWAL RIGHTS
Tenders of Depositary Shares pursuant to the Exchange Offer are
irrevocable, except that Depositary Shares tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Time and, unless
theretofore accepted for exchange pursuant to the Exchange Offer, may also be
withdrawn at any time after 40 business days from the date of this Prospectus.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange Agent
at the addresses set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the holder. Any such notice of
withdrawal must specify (i) the holder named in the Letter of Transmittal as
having tendered Depositary Shares to be withdrawn, (ii) if the Depositary Shares
are held in certificated form, the certificate numbers of the Depositary Shares
to be withdrawn, (iii) that such holder is withdrawing its election to have such
Depositary Shares exchanged, and the name of the registered holder of such
Depositary Shares, and such notice of withdrawal must be signed by the holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Depositary Shares being withdrawn. The
Exchange Agent will return the properly withdrawn Depositary Shares promptly
following receipt of notice of withdrawal. If Depositary Shares have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawn Depositary Shares and otherwise comply with DTC's procedures.
All questions as to the validity of a notice of withdrawal, including the time
of receipt, will be determined by the Company, and such determination will be
final and binding on all parties. Withdrawal of tenders of Depositary Shares may
not be rescinded and any Depositary Shares withdrawn will not thereafter be
deemed to be validly tendered for the purposes of the Exchange Offer. Properly
withdrawn Depositary Shares, however, may be retendered by following the
procedures therefor described elsewhere herein at any time prior to the
Expiration Time. See "Procedure for Tendering Depositary Shares" above.
ACCEPTANCE OF DEPOSITARY SHARES; DELIVERY OF QUIDS
The acceptance for exchange of Depositary Shares validly tendered and not
properly withdrawn will be made as promptly as practicable after the Expiration
Time. Subject to the rules promulgated pursuant to the Exchange Act, however,
the Company expressly reserves the right to delay acceptance of any of the
Depositary Shares for exchange, or terminate the Exchange Offer and not accept
for exchange any Depositary Shares, if any of the conditions set forth under
"Conditions of the Exchange Offer" below shall not have been satisfied or waived
by the Company or to comply, in whole or in part, with any applicable law. For
purposes of the Exchange Offer, the Company will be deemed to have accepted for
exchange validly tendered and not properly withdrawn Depositary Shares if, as
and when the Company gives oral or written notice thereof to the Exchange Agent.
Subject to the terms and conditions of the Exchange Offer, delivery of QUIDS for
Depositary Shares accepted pursuant to the Exchange Offer will be made by the
Exchange Agent as soon as practicable after receipt of such notice. The Exchange
Agent will act as agent for the tendering holders of Depositary Shares for the
purposes of receiving QUIDS from the Company and transmitting the QUIDS to the
tendering holders. Tendered Depositary Shares not accepted for exchange by the
Company, if any, will be returned without expense to the tendering holder of
such Depositary Shares (or, in the case of Depositary Shares tendered by
book-entry transfer into the
23
<PAGE> 24
Exchange Agent's account at DTC, such shares will be credited to an account
maintained at DTC) as promptly as practicable following the Expiration Time.
The QUIDS will be issued only in book-entry form through the facilities of
DTC. Accordingly, in order to participate in the Exchange Offer, a holder of
certificated Depositary Shares who is not a DTC Participant must either make
arrangements with a DTC Participant to have such participant receive QUIDS
issued in exchange for Depositary Shares accepted for exchange in accordance
with the terms of the Exchange Offer or make use of the facilities provided by
the Custodian, so that, in either case, such holder may become a beneficial
owner of QUIDS issued in the Exchange Offer. See "DTC Book-Entry-Only System".
If the Company extends the Exchange Offer, or for any reason whatsoever,
acceptance for exchange or issuance of QUIDS in exchange for any Depositary
Shares tendered pursuant to the Exchange Offer is delayed, or the Company is
unable to accept for exchange or exchange Depositary Shares tendered pursuant to
the Exchange Offer, then, without prejudice to the Company's rights set forth
herein, the Exchange Agent may nevertheless, on behalf of the Company and
subject to rules promulgated pursuant to the Exchange Act, retain tendered
Depositary Shares and such shares may not be withdrawn except to the extent that
the tendering holder of such Depositary Shares is entitled to withdrawal rights
as described below.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders, by execution of a Letter of Transmittal (or facsimile
thereof) waive any right to receive notice of acceptance of their Depositary
Shares for exchange.
Custodial Arrangement. Under a Custodian Agreement, dated as of July 17,
1995 between the Company and the Custodian (the "Custodial Agreement"), the
Company has retained Bankers Trust Company to act as custodian of QUIDS
delivered by the Company to the Custodian on behalf of the beneficial owners
thereof who are not DTC Participants (the "Account Holders"). The Custodian has
agreed to establish and maintain a custody account (the "Deposit Account") in
the name of each Account Holder requesting a custody account for QUIDS received
by the Custodian for the benefit of such holder simultaneous with the time of
the issuance of such QUIDS.
Under the Custodian Agreement, the Custodian will (i) collect all interest
and principal on the QUIDS and credit the same to the Deposit Accounts and
disburse the same to the Account Holders; (ii) present for payment all QUIDS
held in Deposit Accounts which are called, redeemed or retired or otherwise
become payable; (iii) effect such transfer of an Account Holder's QUIDS to an
institution eligible for the DTC book-entry-only system as may be properly
instructed by such Account Holder; (iv) effect, upon instructions from the
Account Holder, the sale (at a market price with customary commissions) of the
Account Holder's QUIDS held in the Deposit Account; and (v) provide the Account
Holders with notices and other information relative to any QUIDS in the Account
Holders' Deposit Accounts. The Custodian may not vote, execute any proxy, give
any consent or take any action upon or in respect of any QUIDS in the Deposit
Accounts, except upon instructions from the Account Holders thereof.
The proceeds from any sale of QUIDS effected by the Custodian upon the
instructions of an Account Holder will be disbursed to the Account Holder in
accordance with the instructions received from such Account Holder.
Notwithstanding the preceding sentence, settlement and payment for QUIDS may be
effected in accordance with customary or established trading or securities
processing practices.
The Custodian will be responsible for the performance of only such duties
as are set forth or contained in instructions given to the Custodian which are
not contrary to the provisions of the Custodian Agreement. The Custodian has the
right to assume, in the absence of notice to the contrary from the Account
Holder, that any person whose name is on file with the Custodian has been
authorized by the Custodian to give the instructions in question. The Custodian
will use all reasonable care with respect to the safekeeping of the QUIDS in the
Deposit Accounts and carrying out its obligations under the Custodian Agreement.
So long as and to the extent that it has exercised
24
<PAGE> 25
reasonable care, the Custodian will not be responsible for the title, validity
or genuineness of any QUIDS received by it pursuant to the Custodian Agreement
and shall be held harmless by the Company in acting upon any instrument
reasonably believed by it to be genuine and to be signed or furnished by the
proper party, and will be indemnified, to the extent permitted by law, by the
Company for any losses and expenses incurred by the Custodian and arising out of
actions taken or omitted with reasonable care by the Custodian. The Company
reserves the right to seek reimbursement from an Account Holder for any loss it
may sustain as a result of the indemnification granted under the Custodian
Agreement.
The Company has agreed to pay the Custodian for the establishment and
maintenance of Deposit Accounts pursuant to the Custodian Agreement and to
reimburse the Custodian for its out-of-pocket and incidental expenses, as well
as reasonable counsel fees.
PRORATION
If more than 4,200,000 Depositary Shares are validly tendered and not
properly withdrawn prior to the Expiration Time, the Company will, upon the
terms and subject to the conditions of the Exchange Offer, accept for exchange
4,200,000 Depositary Shares so tendered and not properly withdrawn on a pro rata
basis from all holders of Depositary Shares, according to the number of
Depositary Shares validly tendered by each such holder and not properly
withdrawn prior to the Expiration Time (calculated in all cases based on the
number of shares tendered). If 4,200,000 or fewer Depositary Shares are validly
tendered and not properly withdrawn prior to the Expiration Time, the Company
will, upon the terms and subject to the conditions of the Exchange Offer, accept
for exchange all such shares so tendered and not properly withdrawn.
Because of the difficulty of determining the aggregate number of Depositary
Shares validly tendered and not properly withdrawn (including shares tendered by
the guaranteed delivery procedures), the Company may not be able to announce the
final results of such proration until approximately seven NYSE trading days
after the Expiration Time. Preliminary results of proration will be announced by
press release as promptly as practicable after the Expiration Time. Holders of
Depositary Shares may obtain such preliminary information from the Information
Agent and may be able to obtain such information from their brokers. THE COMPANY
WILL NOT ISSUE ANY QUIDS IN EXCHANGE FOR ANY DEPOSITARY SHARES ACCEPTED FOR
EXCHANGE PURSUANT TO THE EXCHANGE OFFER OR RETURN DEPOSITARY SHARES DELIVERED TO
THE EXCHANGE AGENT BUT NOT TENDERED OR RETURN DEPOSITARY SHARES TENDERED BUT NOT
ACCEPTED FOR EXCHANGE BECAUSE OF PRORATION UNTIL THE FINAL PRORATION FACTORS ARE
KNOWN.
ACCRUED DIVIDENDS
Holders of Depositary Shares accepted for exchange pursuant to the Exchange
Offer will not receive dividends from July 15, 1995 (the last regular dividend
payment date with respect to the Depositary Shares). Holders whose Depositary
Shares are accepted for exchange will receive interest on the QUIDS accruing
initially at a rate of 7.75% per annum (equal to the indicated dividend rate on
the Depositary Shares) from July 15, 1995 to but excluding the Issuance Date,
and thereafter at an annual rate of 8.50%, all payable on the first interest
payment on the QUIDS as described in "Description of QUIDS -- Quarterly
Payments". For United States federal income tax purposes, interest accruing from
July 15, 1995 to but excluding the Issuance Date will be treated as part of the
amount received upon the exchange. See "Certain United States Federal Income Tax
Consequences".
Dividends on Depositary Shares not exchanged in the Exchange Offer will
continue to accrue and be payable when, as and if declared in accordance with
the terms of the underlying Preferred Stock.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or, subject to any applicable
rules and regulations of the Commission,
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<PAGE> 26
including Rule 14e-1(c) (relating to the Company's obligation to exchange and
issue QUIDS for or return tendered Depositary Shares promptly after termination
of the Exchange Offer), exchange and issue QUIDS for any Depositary Shares
tendered and may postpone the acceptance for exchange of or, subject to the
restriction set forth above, exchange and issuance of QUIDS for Depositary
Shares tendered and to be exchanged and may terminate or amend the Exchange
Offer, if at any time prior to the time of acceptance for exchange of, or
exchange and issuance of QUIDS for, any such Depositary Shares (whether or not
any other Depositary Shares have theretofore been accepted for exchange or QUIDS
have been issued in respect thereof pursuant to the Exchange Offer), any of the
following events shall occur:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
financial condition, operations, results of operations or prospects of the
Company or any of its subsidiaries, or in the general economic or financial
market conditions in the United States or abroad, which is or may be
materially adverse to the Company and its subsidiaries or its stockholders
or to the value of the Depositary Shares or there shall have been a
significant decrease in the market prices of or trading in the Depositary
Shares, or the Company shall have become aware of any fact or occurrence
which is or may be materially adverse with respect to the value of the
Depositary Shares or the Exchange Offer's contemplated benefits to the
Company; or
(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or the over-the-counter market, (2) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (3) declaration of a national emergency or a commencement of a war,
armed hostilities or other national or international calamity directly or
indirectly involving the United States, (4) any limitation (whether or not
mandatory) by any governmental or regulatory authority on, or any other
event might affect, the nature or extension of credit by banks or other
financial institutions, (5) any significant adverse change in the United
States securities or financial markets, or (6) in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer a
material acceleration, escalation or worsening thereof; or
(c) there shall have been any action taken or threatened, or any
statute, rule, regulation, pronouncement, judgment, order or injunction
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the Exchange Offer by any local, state, federal or foreign
government or governmental authority or by any court, domestic or foreign,
that might, directly or indirectly, (1) make the acceptance for exchange or
issuance of QUIDS for some or all of the Depositary Shares illegal or
otherwise restrict or prohibit consummation of the Exchange Offer, (2)
result in a delay in, or restrict the ability of the Company, or render the
Company unable, to accept for exchange some or all of the Depositary Shares
or to issue some or all of the QUIDS in exchange therefor, (3) adversely
affect the transactions contemplated by the Exchange Offer, (4) otherwise
adversely affect the Company or (5) result in a material limitation in the
benefits expected to be derived by the Company as a result of the
transactions contemplated by the Exchange Offer; or
(d) there shall be threatened, instituted or pending any action,
proceeding or claim by or before any court or governmental, administrative
or regulatory agency or authority or any other person or tribunal, domestic
or foreign, challenging the making of the Exchange Offer, the acquisition
by the Company of any Depositary Shares, or seeking to obtain any material
damages as a result thereof, or otherwise adversely affecting the Company
or the value of the Preferred Stock underlying the Depositary Shares;
which makes it inadvisable to proceed with the Exchange Offer or such acceptance
for exchange of Depositary Shares or the issuance of the QUIDS in exchange
therefor.
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<PAGE> 27
All the foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
such condition and may be waived by the Company, in whole or in part, at any
time and from time to time, in the sole discretion of the Company. The failure
by the Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by the Company concerning the foregoing conditions shall be final
and binding.
If any of the foregoing conditions shall not be satisfied (or, with respect
to the above enumerated events, shall have occurred), the Company may, subject
to applicable law, (i) terminate the Exchange Offer and return all Depositary
Shares tendered pursuant to the Exchange Offer to tendering security holders;
(ii) extend the Exchange Offer and retain all tendered Depositary Shares until
the Expiration Time for the extended Exchange Offer; or (iii) waive the
unsatisfied conditions with respect to the Exchange Offer and accept all
Depositary Shares tendered pursuant to the Exchange Offer.
DEALER MANAGERS
Goldman, Sachs & Co. and Smith Barney Inc. are acting as Dealer Managers
for the Exchange Offer under a Dealer Managers Agreement dated July 17, 1995
(the "Dealer Managers Agreement"). Pursuant to the Dealer Managers Agreement,
the Company has agreed to pay the Dealer Managers aggregate fees of up to
$840,000. In addition, the Company has agreed to reimburse the Dealer Managers
for all of their reasonable out-of-pocket expenses, including the reasonable
fees and expenses of their legal counsel.
The Dealer Managers have agreed to use their best efforts to solicit the
exchange of Depositary Shares pursuant to the Exchange Offer.
The Company has agreed to indemnify the Dealer Managers against certain
liabilities, including liabilities under the federal securities laws.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Depositary Shares will be borne
by the Company. For compensation to be paid to the Dealer Managers, see "Dealer
Managers" above. The total cash expenditures to be incurred by the Company in
connection with the Exchange Offer, other than fees payable to the Dealer
Managers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent, the
Information Agent and the Trustee (as hereinafter defined) under the Indenture,
and the solicitation fee to Soliciting Dealers are estimated to be up to
$2,715,000.
The Company will pay to a Soliciting Dealer (as hereinafter defined) a
solicitation fee of $0.50 per Depositary Share for any Depositary Share tendered
and accepted for exchange pursuant to the Exchange Offer if such Soliciting
Dealer has solicited and obtained such tender. "Soliciting Dealer" includes (i)
any broker or dealer in securities, including the Dealer Managers in their
capacity as a broker or dealer, which is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), (ii) any foreign broker or dealer not eligible for membership in the
NASD which agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member or (iii) any bank or trust company. In order for a Soliciting Dealer to
receive a solicitation fee with respect to the tender of Depositary Shares, the
Exchange Agent must have received a Letter of Transmittal with the portion
thereof entitled "Notice of Solicited Tenders" properly completed and duly
executed.
No such fee shall be payable to the Soliciting Dealer with respect to the
tender of Depositary Shares by the holder of record, for the benefit of the
beneficial owner, unless the beneficial owner has designated such Soliciting
Dealer. No such fee shall be payable to a Soliciting Dealer if such Soliciting
Dealer is required for any reason to transfer the amount of such fee to a
depositing holder. No broker, dealer, bank, trust company or fiduciary shall be
deemed to be the agent of the
27
<PAGE> 28
Company, the Exchange Agent, the Information Agent or the Dealer Manager for
purposes of the Exchange Offer. Soliciting Dealers are not entitled to a
solicitation fee for Depositary Shares beneficially owned by such Soliciting
Dealer. The maximum fee payable to Soliciting Dealers is $2,100,000, exclusive
of the amount that the Dealer Manager is entitled to.
The Company will pay any transfer taxes with respect to transfer and
exchange of shares pursuant to the Exchange Offer. If, however, the QUIDS due in
respect of the Depositary Shares accepted for exchange are to be issued to, or
(in the circumstances permitted hereby) if certificates for Depositary Shares
not tendered or not exchanged and paid for are to be registered in the name of,
any person other than the person signing the Letter of Transmittal, the amount
of any transfer taxes (whether imposed on the registered holder or such person)
payable on account of the transfer to such person will be deducted from the
QUIDS due in respect of the Depositary Shares accepted for exchange if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted.
EXCHANGE AGENT AND INFORMATION AGENT
Bankers Trust Company will act as exchange agent for the Exchange Offer.
All correspondence in connection with the Exchange Offer, the Letter of
Transmittal and the Notice of Guaranteed Delivery should be addressed to the
Exchange Agent as follows:
BANKERS TRUST COMPANY
BY HAND/OVERNIGHT COURIER BY MAIL
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Dept.
123 Washington St., 1st Floor P.O. Box 1458
New York, NY 10006 Church Street Station
New York, NY 10008-1458
Facsimile Transmission
(212) 250-6275
(212) 250-3290
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 250-6270
Shareholder Inquiries
(212) 250-6270
Bankers Trust Company is the Trustee under the Indenture with respect to
both collateralized and uncollateralized notes, including the QUIDS. Bankers
Trust Company also serves as Trustee for the Company's Mortgage and Deed of
Trust with respect to General and Refunding Mortgage Bonds and is the Exchange
Agent for the Exchange Offer. It has also agreed to serve, at the request of
tendering holders of Depositary Shares, as Custodian for QUIDS issued as part of
the Exchange Offer.
Georgeson & Company Inc. will act as Information Agent for the Exchange
Offer. In such capacity, the Information Agent will assist with the mailing of
the Prospectus and related materials to holders of Depositary Shares, respond to
inquiries of and provide information to holders of Depositary Shares in
connection with the Exchange Offer and provide other similar advisory services
as the Company may request from time to time. All inquiries relating to the
Exchange Offer should be directed to the Information Agent as follows:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers call collect:
(212) 440-9800
All others call toll-free:
1-800-223-2064
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<PAGE> 29
The Company will pay the Information Agent and the Exchange Agent their
reasonable and customary compensation, which the Company estimates will total
approximately $60,000, for their services in connection with the Exchange Offer.
In addition, the Company will reimburse the Exchange Agent and the Information
Agent for their out-of-pocket expenses, and will indemnify the Exchange Agent
and the Information Agent against certain liabilities and expenses in connection
with their services, including liabilities under the federal securities laws.
The Company also will pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus and related documents to beneficial holders of
Depositary Shares, and in handling or forwarding tenders or consents for their
customers.
Directors, officers and regular employes of the Company, none of whom will
be specifically compensated for such services, may contact holders of Depositary
Shares by mail, telephone, facsimile transmission, telex, telegraph and personal
interviews regarding the Exchange Offer, and may request brokers, dealers,
commercial banks, trust companies and other nominees to forward this Prospectus
(and all related materials) to beneficial owners of Depositary Shares.
MARKET AND TRADING INFORMATION
The Depositary Shares are listed and traded on the NYSE. The following
table sets forth for the calendar periods indicated the high and low closing
sales prices for the Depositary Shares per share as reported in published
financial sources:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1993:
First Quarter....................................................... 25 3/8 25 1/8
Second Quarter...................................................... 26 24 1/2
Third Quarter....................................................... 26 5/8 25 5/8
Fourth Quarter...................................................... 26 1/2 24 7/8
1994:
First Quarter....................................................... 26 24
Second Quarter...................................................... 24 3/4 22
Third Quarter....................................................... 24 5/8 22 3/4
Fourth Quarter...................................................... 23 3/8 21
1995:
First Quarter....................................................... 24 3/4 21 3/4
Second Quarter...................................................... 25 1/2 23 5/8
Third Quarter (through July 12)..................................... 25 1/8 24 7/8
</TABLE>
On April 12, 1995, the last full day the Depositary Shares traded prior to
the initial public announcement of the Exchange Offer, the closing sales price
of the Depositary Shares, as reported on the NYSE Composite Tape, was $24.00 per
share. On July 14, 1995, the last full day the Depositary Shares traded prior to
the commencement of the Exchange Offer, the closing sales price of the
Depositary Shares on the NYSE as reported on the Composite Tape was $ per
share. On July 13, 1995, the last full day the Depositary Shares traded prior to
the effectiveness of the Registration Statement of which this Prospectus is a
part, the closing sales price of the Depositary Shares was $25.00 per share.
There can be no assurance concerning the prices at which the Depositary Shares
might be traded following the Exchange Offer. The exchange of Depositary Shares
pursuant to the Exchange Offer will reduce the number of Depositary Shares that
might otherwise trade publicly and the number of holders of such shares, and
depending on the number of Depositary Shares exchanged, could adversely effect
the liquidity and market value of the remaining Depositary Shares held by the
public.
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<PAGE> 30
Holders of Depositary Shares are urged to obtain current information with
respect to the sales prices of Depositary Shares.
There has not been any public market for the QUIDS. While the Company
intends to list the QUIDS on the NYSE, there can be no assurance that an active
market for the QUIDS will develop or be sustained in the future on such
exchange. Listing will depend upon the satisfaction of the NYSE's listing
requirements with respect to the QUIDS, including requirements as to the
principal amount and distribution of the QUIDS. Although the Dealer Managers
have indicated to the Company that they intend to make a market in the QUIDS as
permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any such market-making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or trading market
for, the QUIDS.
30
<PAGE> 31
DESCRIPTION OF QUIDS
GENERAL
The QUIDS will be a series of notes to be issued under the Note Indenture,
dated as of June 30, 1993, as supplemented by a First Supplemental Indenture
dated as of June 30, 1993, a Second Supplemental Indenture dated as of September
15, 1993, a Third Supplemental Indenture dated as of August 15, 1994 and a
Fourth Supplemental Indenture dated on or about July 15, 1995 creating the QUIDS
(as supplemented, the "Indenture") between the Company and Bankers Trust
Company, as trustee (the "Trustee"). The following statements with respect to
the QUIDS are summaries and are subject to the detailed provisions of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
Indenture, a copy of the form of which has been filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all the provisions of the QUIDS and the
Indenture, including the definitions therein of certain terms capitalized and
not otherwise defined in this Prospectus. Wherever references are made to
particular provisions of the Indenture or terms defined therein, such provisions
or definitions are incorporated by reference as part of the statements made and
such statements are qualified in their entirety by such references.
The notes of the Company previously issued under the Indenture are secured
as to payment of principal, interest and premium, if any, by the Company's
General and Refunding Mortgage Bonds pledged to the Trustee for the benefit of
the holders of such securities. The QUIDS offered hereby will not have the
benefit of any Mortgage Bonds or any other security.
The QUIDS will constitute a series of unsecured, subordinated debt
securities, will be subordinated to Senior Indebtedness of the Company, as
described herein, will be limited in aggregate principal amount to the aggregate
principal amount of QUIDS issued in the Exchange Offer and will mature on
September 30, 2025 (the "Stated Maturity"). The annual interest requirement on
the QUIDS (assuming 4,200,000 Depositary Shares are exchanged) will be
$8,925,000.
The QUIDS will be issued only in book-entry form through the facilities of
DTC and will be in denominations of $25 and integral multiples thereof.
Transfers or exchanges of beneficial interests in the QUIDS may be effected only
through records maintained by DTC or its nominee. Payment on the QUIDS will be
made in same-day funds through DTC. For a description of DTC and the specific
terms of the depository arrangements, see "DTC Book-Entry-Only System".
QUARTERLY PAYMENTS
Interest on the QUIDS will accrue from the Issuance Date at a rate of 8.50%
per annum and will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each an "Interest Payment Date"),
commencing September 30, 1995 to the persons in whose names the QUIDS are
registered on the relevant record dates, which will be one Business Day (as
hereinafter defined) prior to the relevant Interest Payment Dates (each a
"Record Date"). In addition, holders of the QUIDS will receive interest at a
rate of 7.75% per annum from July 15, 1995 (the last regular dividend payment
date with respect to the Depositary Shares) to but excluding the Issuance Date
payable at the time of the first interest payment on the QUIDS.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full quarterly interest period, will be computed on the basis of the actual
number of days elapsed in such period. In the event that any date on which
interest is payable on the QUIDS is not a Business Day, then payment of the
amount payable on such date will be made on (i) the next succeeding day which is
a Business Day (and without interest or other payment in respect of any such
delay) with the same force and effect as if made on such date or (ii) the
preceding Business Day if the succeeding Business Day would fall within a new
calendar year (and without reduction in amount due to such early payment) with
the
31
<PAGE> 32
same force and effect as if made on such date, subject, in each case, to certain
rights of deferral described below. A "Business Day" shall mean any day other
than a day on which banking institutions in the State of New York or the State
of Michigan are authorized or obligated pursuant to law or executive order to
close.
PAYMENT DEFERRAL
The Company shall have the right at any time, on one or more occasions, so
long as an Event of Default (as hereinafter defined) has not occurred and is not
continuing under the Indenture with respect to the QUIDS, to extend any interest
payment period on the QUIDS; provided that the aggregate interest payment
period, as extended, must end on an interest payment date and must not exceed 20
consecutive quarterly interest payment periods or extend beyond the maturity of
the QUIDS or any date on which any QUIDS are fixed for redemption. As a
consequence, the quarterly interest payments on the QUIDS would be deferred (but
would continue to accrue with interest thereon at the rate of interest on the
QUIDS) during any such Deferral Period. At the end of each Deferral Period, the
Company shall pay all interest then accrued and unpaid (compounded quarterly).
In the event the Company exercises this right, Company shall not declare or pay
any dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its Capital Stock or make any guarantee payments with respect
to the foregoing during such Deferral Period, other than redemptions of any
series of Capital Stock of the Company pursuant to the terms of any sinking fund
provisions with respect thereto. In addition, during any Deferral Period, the
Company may not make any advance or loan to, or purchase any securities of, or
make any other investment in, any affiliate of the Company, including Holdings,
for the purpose of, or to enable the payment of, directly or indirectly,
dividends on any equity securities of Holdings. The Company has no current
intention of exercising its right to extend an interest payment period. During
any Deferral Period, the Company may continue to extend the interest payment
period by extending the Deferral Period; provided that the aggregate Deferral
Period, as extended, must end on an Interest Payment Date and must not exceed 20
consecutive quarterly interest payment periods or extend beyond the maturity of
the QUIDS or any date on which the QUIDS are fixed for redemption. The Company
shall give the holders of QUIDS notice of its election to defer payments or to
extend the Deferral Period ten Business Days prior to the earlier of (i) the
next scheduled quarterly payment date and (ii) the date the Company is required
to give notice of the record date of such related interest payment to the NYSE
or other applicable self-regulatory organization or to the holders of the QUIDS,
but in any event not less than two Business Days prior to such record date.
OPTIONAL REDEMPTION
The QUIDS will be redeemable at the option of the Company, in whole or in
part, at any time on or after June 30, 1998 and prior to maturity, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to 100% of
the principal amount redeemed plus accrued and unpaid interest to the date fixed
for redemption.
SATISFACTION AND DISCHARGE
The Company shall be deemed to have paid and discharged the indebtedness on
all the QUIDS and the Trustee shall execute instruments acknowledging the
satisfaction and discharge of such indebtedness if (1) (i) the Company has
deposited or caused to be deposited with the Trustee an amount sufficient to pay
and discharge the entire indebtedness on all outstanding QUIDS for principal and
interest to the Stated Maturity or any redemption date, as the case may be; or
(ii) the Company has deposited or caused to be deposited with the Trustee such
amount of direct noncallable obligations of, or noncallable obligations the
payment of principal of and interest on which is fully guaranteed by, the United
States of America maturing as to principal and interest in such amounts and at
such times as will, without consideration of any reinvestment thereof, be
sufficient to pay and discharge the entire indebtedness on all outstanding QUIDS
for principal and
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interest to the Stated Maturity or any redemption date, as the case may be; and
(2) the Company has paid or caused to be paid all other sums payable with
respect to the QUIDS.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to the QUIDS offered hereby: (a) failure to pay any
interest on the QUIDS when due, continued for 30 days; (b) failure to pay
principal on the QUIDS when due; (c) failure to perform any other covenant or
warranty of the Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of securities other
than the QUIDS), continued for 60 days after written notice as provided in the
Indenture; and (d) certain events of bankruptcy, insolvency or reorganization
involving the Company. With respect to the QUIDS offered hereby, the Indenture
does not contain any cross-default to any other indebtedness of the Company, and
therefore, default with respect to, or an acceleration of, any such indebtedness
will not constitute an Event of Default with respect to the QUIDS.
If an Event of Default with respect to the QUIDS occurs and is continuing,
either the Trustee or the holders of at least 25% in aggregate principal amount
of the outstanding QUIDS by notice as provided in the Indenture may declare the
principal amount of the QUIDS to be due and payable immediately. At any time
after a declaration of acceleration has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, and subject to
applicable law and certain other provisions of the Indenture, the holders of a
majority in aggregate principal amount of the QUIDS may, under certain
circumstances, rescind and annul such acceleration.
The Indenture provides that within 90 days after the occurrence of any
Event of Default thereunder with respect to the QUIDS, the Trustee shall
transmit, in the manner set forth in the Indenture, notice of such Event of
Default to the holders of the QUIDS unless such Event of Default has been cured
or waived; provided, however, that except in the case of a default in the
payment of the principal of or interest on any QUIDS of such series, the Trustee
may withhold such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or responsible officers of the
Trustee has in good faith determined that the withholding of such notice is in
the interest of the holders of QUIDS.
If an Event of Default occurs and is continuing with respect to the QUIDS,
the Trustee may in its discretion proceed to protect and enforce its rights and
the rights of the holders of QUIDS by all appropriate judicial proceedings.
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of the Indenture.
The Indenture provides that, subject to the duty of the Trustee during any
default to act with the required standard of care, the Trustee 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 QUIDS, unless such holders shall
have offered to the Trustee reasonable indemnity. Subject to such provisions for
the indemnification of the Trustee, and subject to applicable law and certain
other provisions of the Indenture, the holders of a majority in aggregate
principal amount of the outstanding QUIDS will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the QUIDS.
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of not less than a majority in
aggregate principal amount of each series of debt securities issued under the
Indenture ("Debt Securities") affected thereby; provided, however, that no such
modification or amendment may, without the consent of all holders of each
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such series of Debt Securities effected thereby, (a) change the stated maturity
of the principal of, or any installment of principal of or interest on, any Debt
Securities, (b) reduce the principal amount of, or premium or interest on, any
Debt Securities, (c) change the coin or currency in which any Debt Securities or
any premium or any interest thereon is payable, (d) impair the right to
institute suit for the enforcement of any payment on or after the stated
maturity of any Debt Securities (or, in the case of redemption, on or after the
redemption date), (e) reduce the percentage and principal amount of the
outstanding Debt Securities, the consent of whose holders is required in order
to take certain actions, (f) change any obligation of the Company to maintain an
office or agency in the places and for the purposes required by the Indenture,
(g) reduce the requirements for quorum or voting or (h) modify any of the above
provisions.
The holders of at least 66 2/3% in aggregate principal amount of QUIDS may,
on behalf of the holders of all QUIDS, waive compliance by the Company with
certain restrictive provisions of the Indenture. The holders of not less than a
majority in aggregate principal amount of QUIDS may, on behalf of all holders of
QUIDS, waive any past default and its consequences under the Indenture with
respect to the QUIDS, except a default (a) in the payment of principal of (or
premium, if any) or any interest on any QUIDS when due or (b) in respect of a
covenant or provision of the Indenture that cannot be modified or amended
without the consent of the holder of each QUIDS.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may, without the consent of the holders of the QUIDS,
consolidate or merge with or into, or convey, transfer or lease its properties
and assets substantially as an entirety to, any person that is a corporation,
partnership or trust organized and validly existing under the laws of any
domestic jurisdiction, or may permit any such person to consolidate with or
merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, provided that any successor person
assumes the Company's obligations on the QUIDS and under the Indenture, that
after giving effect to the transaction no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing, and that certain other conditions are met.
SUBORDINATION
The payment of the principal of and interest on the QUIDS will be expressly
subordinated, to the extent and in the manner set forth in the Indenture, in
right of payment to the prior payment in full of all existing and future Senior
Indebtedness of the Company.
Upon (i) any acceleration of the principal amount due on the QUIDS or (ii)
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding-up or total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all principal and premium, if any, and interest due upon all
Senior Indebtedness shall first be paid in full, or payment thereof provided for
in money or money's worth in accordance with its terms, before any payment is
made on account of the principal of or interest on the indebtedness evidenced by
the QUIDS, and upon any such dissolution or winding-up or liquidation or
reorganization any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the holders of
the QUIDS would be entitled, except for the provisions of the Indenture, shall
(subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of the
Indenture upon the Senior Indebtedness and the holders thereof with respect to
the QUIDS and the holders thereof by a lawful plan of reorganization under
applicable bankruptcy law), be paid by the Company or any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the QUIDS if received by them, directly to
the holders of Senior Indebtedness (pro rata to each such holder on the basis of
the respective amounts of Senior Indebtedness held by such holder) or their
representatives, to the
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extent necessary to pay all Senior Indebtedness (including interest thereon) in
full, in money or money's worth, after giving effect to any concurrent payments
or distribution to or for the holders of Senior Indebtedness, before any payment
or distribution is made to the holders of the indebtedness evidenced by the
QUIDS. The consolidation of the Company with or the merger of the Company into
another person or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another person upon the terms and conditions provided in the
Indenture shall not be deemed a dissolution, winding-up, liquidation or
reorganization for these purposes.
In the event that any payment or distribution of assets of the Company of
any kind or character not permitted by the foregoing provisions, whether in
cash, property or securities, shall be received by the holders of QUIDS before
all Senior Indebtedness is paid in full, or provision made for such payment, in
accordance with its terms, such payment or distribution shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of such
Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.
No payment on account of principal of or interest on the QUIDS shall be
made unless full payment of amounts then due for principal, premium, if any,
sinking funds and interest on any Senior Indebtedness has been made or duly
provided for in money or money's worth in accordance with the terms of such
Senior Indebtedness. No payment on account of principal or interest on the QUIDS
shall be made if, at the time of such payment or immediately after giving effect
thereto, (i) there shall exist a default in the payment of principal, premium,
if any, sinking fund or interest with respect to any Senior Indebtedness, or
(ii) there shall have occurred an event of default (other than a default in the
payment of principal, premium, if any, sinking funds or interest) with respect
to any Senior Indebtedness, as defined therein or in the instrument under which
the same is outstanding, permitting the holders thereof to accelerate the
maturity thereof, and such event of default shall not have been cured or waived
or shall not have ceased to exist.
SUBROGATION
From and after the payment in full of all Senior Indebtedness, the holders
of the QUIDS (together with the holders of any other indebtedness of the Company
which is subordinate in right of payment to the payment in full of all Senior
Indebtedness, which is not subordinate in right of payment to the QUIDS and
which by its terms grants such right of subrogation to the holder thereof) shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets or securities of the Company applicable to
the Senior Indebtedness until the QUIDS shall be paid in full, and, for the
purposes of such subrogation, no such payments or distributions to the holders
of Senior Indebtedness of assets or securities, which otherwise would have been
payable or distributable to holders of the QUIDS, shall, as between the Company,
its creditors other than the holders of Senior Indebtedness, and the holders of
the QUIDS, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness, it being understood that these provisions of the Indenture
are and are intended solely for the purpose of defining the relative rights of
the holders of the QUIDS, on the one hand, and the holders of the Senior
Indebtedness, on the other hand, and nothing contained in the Indenture is
intended to or shall impair as between the Company, its creditors other than the
holders of Senior Indebtedness, and the holders of the QUIDS, the obligation of
the Company, which is unconditional and absolute, to pay to the holders of the
QUIDS the principal of and interest on the QUIDS as and when the same shall
become due and payable in accordance with their terms, or to affect the relative
rights of the holders of the QUIDS and creditors of the Company other than the
holders of the Senior
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Indebtedness, nor shall anything therein prevent the holder of any QUIDS from
exercising all remedies otherwise permitted by applicable law upon default under
such QUIDS subject to the rights of the holders of Senior Indebtedness to
receive cash, property or securities of the Company otherwise payable or
deliverable to the holders of the QUIDS or to a representative of such Holders,
on their behalf.
With respect to the QUIDS offered hereby, the term "Senior Indebtedness" is
defined in the Indenture as (1) any Payment Obligation (as defined) of the
Company in respect of any indebtedness, directly or indirectly, created,
incurred or assumed for borrowed money or in connection with the acquisition of
any business, property or asset (including securities), other than any account
payable or other indebtedness created, incurred or assumed in the ordinary
course of business in connection with the obtaining of materials or services;
(2) any Payment Obligation of the Company in respect of any lease that would be
required to be classified and accounted for as a capital lease; (3) any Payment
Obligation of the Company in respect of any interest rate exchange agreement,
currency exchange agreement or similar agreement that provides for payment
(whether or not contingent) over a period or term (including any renewals or
extensions) longer than one year from the execution thereof; (4) any Payment
Obligation of the Company in respect of any agreement relating to an acquisition
(including a sale and buyback) or the lease (including a sale and leaseback) of
real or personal property and that provides for payment (whether or not
contingent) over a period or term (including any renewals or extensions) longer
than one year from the execution thereof; (5) any Payment Obligation of any
Subsidiary (as defined in the Indenture) or of others of the kind described in
the preceding clauses (1) through (4) assumed or guaranteed by the Company or
for which the Company is otherwise responsible or liable; and (6) any amendment
renewal, extension or refunding of any of the foregoing Payment Obligations.
The term "Payment Obligation", when used with respect to Senior
Indebtedness, means an obligation stated in an agreement, instrument or lease to
pay money (whether for principal, premium, interest, sinking fund, periodic
rent, stipulated value, termination value, liquidated damages or otherwise), but
excludes an obligation to pay money in respect of fees of, or as payment or
reimbursement for expenses incurred by or on behalf of, or as indemnity for
losses, damages, taxes or other indemnity claims of any kind owed to, any holder
of Senior Indebtedness or other party to such agreement, instrument or lease.
The Indenture does not restrict the amount of Senior Indebtedness that the
Company may incur.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture with respect to
both collateralized and uncollateralized notes, including the QUIDS. Bankers
Trust Company also serves as Trustee for the Company's Mortgage and Deed of
Trust with respect to General and Refunding Mortgage Bonds and is the Exchange
Agent for the Exchange Offer. It has also agreed to serve, at the request of
tendering holders of Depositary Shares, as Custodian for QUIDS issued as part of
the Exchange Offer.
DTC BOOK-ENTRY-ONLY SYSTEM
The book-entry-only system will evidence ownership interests in the QUIDS
in book-entry-only form. Purchasers of ownership interests in the QUIDS will not
receive certificates representing their interests in the QUIDS. Transfers of
ownership interests will be effected on the records of DTC and its participating
organizations (the "DTC Participants") pursuant to rules and procedures
established by DTC. While the QUIDS will be issued only in book-entry form, the
Depositary Shares were issued in fully registered form. Accordingly, in order to
participate in the Exchange Offer a holder of certificated Depositary Shares who
is not a DTC Participant must either make arrangements with a DTC Participant to
have such participant receive QUIDS issued in exchange for Depositary Shares
accepted for exchange in accordance with the terms of the Exchange Offer or make
use of the
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facilities provided by the Custodian, so that such holder, in either case, may
become a beneficial owner of QUIDS issued in exchange for Depositary Shares
accepted pursuant to the Exchange Offer.
Certain of the following information concerning the procedures and record
keeping with respect to ownership interests in the QUIDS, payment of interest
and other payments on the QUIDS to DTC Participants or Beneficial Owners (as
hereafter defined), confirmation and transfer of ownership interests in the
QUIDS and other related transactions by and between DTC, the DTC Participants
and Beneficial Owners is based solely on information contained in a published
report of DTC.
DTC, an automated clearinghouse for securities transactions, will act as
securities depository for the QUIDS. DTC is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the 1934 Act, as amended. DTC was created to hold
securities of the DTC Participants and to facilitate the clearance and
settlement of securities transactions among DTC Participants in such securities
through electronic book-entry changes in accounts of the DTC Participants,
thereby eliminating the need for physical movement of security certificates. DTC
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations, some of which (and/or
their representatives) own DTC. Access to the DTC system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly (the "Indirect Participants").
The ownership of the fully-registered QUIDS will be registered in the name
of Cede & Co., as nominee for DTC. Ownership interests in the QUIDS may be
purchased by or through DTC Participants and will be recorded on the records of
the DTC Participants, whose interests in turn will be recorded on a computerized
book-entry-only system operated by DTC. Such DTC Participants and the persons
for whom they acquire interests in the QUIDS as nominees ("Beneficial Owners")
will not receive QUIDS certificates, but each such DTC Participant will receive
a credit balance in the records of DTC in the amount of such DTC Participant's
interest in the QUIDS, which will be confirmed in accordance with DTC's standard
procedures. Each such Beneficial Owner for whom a DTC Participant acquires an
interest in the QUIDS, as nominee, may desire to make arrangements with such DTC
Participant to have all communications of the Company and the Trustee to DTC,
which may affect such Beneficial Owner, be forwarded in writing by such DTC
Participant and to have notifications made of all payments of principal and
interest with respect to his beneficial interest. The Company and the Trustee
will treat DTC (or its nominee) as the sole and exclusive owner of the QUIDS
registered in its name for the purposes of payment of the principal and interest
on the QUIDS, giving any notice permitted or required to be given to holders
under the Indenture, registering the transfer of QUIDS, and for all other
purposes whatsoever, and shall not be affected by any notice to the contrary.
The Company and the Trustee shall not have any responsibility or obligation to
any DTC Participant, any person claiming a beneficial ownership interest in the
QUIDS under or through DTC or any DTC Participant, or any other person which is
not shown on the registration books of the Trustee as being a holder, with
respect to: the accuracy of any records maintained by DTC or any DTC
Participant; the payment by DTC or any DTC Participant of any amount in respect
of the principal or interest on the QUIDS; any notice which is permitted or
required to be given to holders thereunder or under the conditions to transfers
or exchanges adopted by the Company; or any other action taken by DTC as a
holder. Principal and interest on the QUIDS will be paid by the Trustee to DTC
or its nominee. Disbursement of such payments to the DTC Participants is the
responsibility of DTC and disbursement of such payments to the Beneficial Owners
is the responsibility of the DTC Participants or the Indirect Participants.
NEITHER THE COMPANY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS
TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH
RESPECT
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TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, OR THE
INDIRECT PARTICIPANTS, OR THE BENEFICIAL OWNERS.
SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE
QUIDS, REFERENCES HEREIN TO THE SECURITYHOLDERS OR REGISTERED OWNERS OF THE
QUIDS SHALL MEAN CEDE & CO., AND SHALL NOT MEAN THE BENEFICIAL OWNERS.
For every transfer and exchange of beneficial ownership of QUIDS, a
Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other
governmental charge that may be imposed in relation thereto.
When reference is made to any action which is required or permitted to be
taken by the Beneficial Owners, such reference shall only relate to action by
such Beneficial Owners or others permitted to act (by statute, regulation or
otherwise) on behalf of such Beneficial Owners for such purposes. When notices
are given, they shall be sent by the Trustee to DTC only. Conveyance of notices
and other communications by DTC to DTC Participants and Indirect Participants
and in turn by DTC Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory and
regulatory requirements then in effect.
Principal and interest payments on the QUIDS will be made to DTC or its
nominee, Cede & Co., as registered owner of the QUIDS. Upon receipt of any such
payments, DTC's current practice is to immediately credit the accounts of the
DTC Participants in accordance with their respective holdings shown on the
records of DTC. Payments by DTC Participants and Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name", and will be the responsibility of
such DTC Participant or Indirect Participant.
DTC may determine to discontinue providing its services with respect to the
QUIDS at any time by giving notice to the Company and discharging its
responsibilities with respect thereto under applicable law. In addition, the
Company may determine that continuation of the system of book-entry-only
transfers through DTC (or a successor securities depository) is not in the best
interests of the Beneficial Owners or is burdensome to the Company. If for
either reason the book-entry-only system is discontinued, certificates for the
QUIDS will be delivered to the Beneficial Owners thereof.
Certain of the information contained in this sub-section has been extracted
from a report from DTC. No representation is made by the Company as to the
completeness or the accuracy of such information or as to the absence of
material adverse changes in such information subsequent to the date hereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the QUIDS will be made by a purchaser in immediately
available funds. While the QUIDS are in the book-entry-only system described
above, all payments of principal and interest will be made by the Trustee on
behalf of the Company to DTC in immediately available funds.
Secondary trading in long-term debt securities is generally settled in
clearing-house or next-day funds. While the QUIDS are in the book-entry-only
system described above, they will trade in DTC's Same-Day Fund Settlement System
until maturity. During such period, secondary market trading activity in the
QUIDS will settle in immediately available funds. No assurance can be gives as
to the effect, if any, of settlement in immediately available funds on the
trading activity in the QUIDS.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following description relating to the Preferred Stock set forth herein
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Company's Restated
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Articles of Incorporation ("Articles"). Copies of the Articles are available
from the Company upon request. The following statements concerning Depositary
Shares, Depositary Receipts (as defined below) and the Deposit Agreement do not
purport to be complete and are qualified in their entirety by reference to the
forms of such documents which have been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Preferred Stock ranks equally with all other series of preferred stock
of the Company and senior to the Company's preference (none of which is
currently outstanding) and common stock upon liquidation and as to dividends and
redemption. If dividends or amounts payable on liquidation are not paid in full
on the preferred stock of all series, then all series share ratably in the
amount available therefor.
DIVIDENDS
The holders of the Preferred Stock are entitled to receive, when and as
declared by the Board of Directors, out of the surplus of the Company legally
available therefor, cumulative cash dividends at the rate of 7.75% per annum.
So long as any shares of any series of preferred stock of the Company are
outstanding, no dividend shall be paid or declared other distribution made upon
any junior stock (defined to include the Company's preference and common stock),
nor shall any junior stock of the Company be acquired (except by exchange for or
through application of an amount not in excess of the proceeds of sale of junior
stock) by the Company or any Subsidiary thereof (as defined in the Articles),
unless, in each case, the full cumulative dividends on all outstanding shares of
all series of the Company's preferred stock shall have been paid or provided for
and the Company shall have made all payments, if any, then or theretofore due
under the requirements of any sinking funds for all series of the Company's
preferred stock.
VOTING
The Company's preferred stock, including the Preferred Stock, are
non-voting, except that while four quarterly dividends on any series of
preferred stock are in arrears, in whole or in part, the holders of all series
of preferred stock, voting separately as a class, are entitled to elect two
additional members of the Board of Directors. Unless provision has been made for
the redemption of all outstanding preferred stock (a) the vote or consent of the
holders of two-thirds of the outstanding preferred stocks is required to permit
the authorization of any stock senior thereto, any adverse changes in the terms
of the preferred stock, or the purchase (otherwise than pursuant to purchase
offers as provided in the Articles) or the redemption of less than all the
outstanding preferred stocks when all dividends thereon have not been declared
and provided for or paid (b) any adverse changes in the terms of any one but not
all series of preferred stocks must also be consented to by the holders of
two-thirds of the preferred stock of such series, and (c) the vote or consent of
the holders of a majority of the outstanding preferred stocks is required to
authorize any increase in the authorized amount of the Company's preferred stock
or of any stock ranking on a parity with the Company's preferred stock, or the
voluntary liquidation, dissolution or winding-up of the Company, the sale, lease
or conveyance of all or substantially all of its property or business or a
consolidation or merger of the Company (other than with a wholly-owned
subsidiary).
Shareholders possessing voting power at the time are entitled to one vote
for each share held and may cumulate their votes in the election of directors
for whom they are entitled to vote. The Company's Board of Directors is divided
into three classes, as nearly equal in number as possible, with terms currently
expiring at the 1996, 1997 and 1998 annual meetings of common shareholders. In
the event the holders of the Company's preferred stock are entitled to elect
directors as discussed above, then such directors to be elected will be for
terms expiring at the next annual meeting of shareholders and without regard to
the classification of the remaining members of the Board of Directors.
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LIQUIDATION
Upon any involuntary liquidation, dissolution or winding up of the Company,
holders of all series of the Company's preferred stock, including the Preferred
Stock, are entitled to receive $100 per share and upon any voluntary
liquidation, dissolution or winding-up, holders of the Preferred Stock together
with holders of all other series of the Company's preferred stock, are entitled
to receive an amount equal to the optional redemption price applicable at the
time, as fixed at the time series was authorized, in each case together with the
amount of any accrued and unpaid dividends and before any distribution to
holders of junior stock.
REDEMPTION
The Preferred Stock is redeemable at the option of the Company at any time
on or after April 15, 1998, in whole or in part, at a redemption price equal to
$100 per share (equivalent to $25 per Depositary Share) plus accrued and
accumulated but unpaid dividends to the redemption date.
If fewer than all the outstanding shares of the Preferred Stock are to be
redeemed, the selection of the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Company. From and after any redemption
date (unless default shall be made by the Company in providing for the payment
of the redemption price), dividends shall cease to accrue on the shares of
Preferred Stock called for redemption and all rights of the holders thereof
(except the right to receive the redemption price) shall cease.
While any divided arrearages exist on any series of preferred stock, the
Company may not redeem (for a sinking fund or otherwise) less than all of the
outstanding preferred stock, or purchase any preferred stock except through a
purchase offer made to all holders of all series of preferred stock at the time
outstanding as provided in the Articles. The rights of the holders of preferred
stock called for redemption (whether for a sinking fund or otherwise) may be
terminated before any redemption date upon notice and upon deposit in trust of
funds necessary for such redemption, except the right to receive such funds.
DEPOSITARY SHARES
General. In connection with the issuance of the Preferred Stock, the
Company issued the Preferred Stock to the Depositary. The Depositary then issued
receipts for Depositary Shares, each of which represents one-quarter of a share
of the Preferred Stock.
Each owner of a Depositary Share is entitled, proportionately, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
The Depositary Shares are evidenced by depositary receipts issued pursuant
to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts are
distributed to those persons holding fractional shares of Preferred Stock.
The Depositary forwards all reports and communications from the Company
which are delivered to the Depositary and which the Company is required or
otherwise determines to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Company is liable if it is presented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement are limited to performance in good faith
of their duties thereunder and they will not be obligated to prosecute or defend
any legal proceeding in respect of any Depositary Shares or Preferred Stock
unless satisfactory indemnity is furnished. They may rely upon written advice of
counsel or accountants, or upon information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Receipts or other persons
believed to be competent and on documents believed to be genuine.
The Depositary currently acts as transfer agent and registrar for the
Depositary Receipts.
40
<PAGE> 41
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership of QUIDS as of the date hereof and represents the
opinion of Simpson Thacher & Bartlett, special tax counsel to the Company,
insofar as it relates to matters of law or legal conclusions. Except where
noted, it deals only with QUIDS held as capital assets and acquired pursuant to
the Exchange Offer and does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, life insurance
companies, persons holding QUIDS as a part of a hedging or conversion
transaction or a straddle, United States Holders (as defined below) whose
"functional currency" is not the U.S. dollar, or Non-United States Holders (as
defined below) who own (actually or constructively) ten percent or more of the
combined voting power of all classes of voting stock of the Company, who are
present in the United States or who have any other special status with respect
to the United States. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code") 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
federal income tax consequences different from those discussed below. PERSONS
CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF QUIDS SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF
THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS
OF ANY OTHER TAXING JURISDICTION.
UNITED STATES HOLDERS
As used herein, a "United States Holder" of QUIDS means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. A
"Non-United States Holder" is a holder that is not a United States Holder.
Exchange of Depositary Shares for QUIDS
The exchange of the Depositary Shares for QUIDS pursuant to the Exchange
Offer will be a taxable transaction. In the case of a United States Holder who
owns (actually or constructively) solely Depositary Shares, or not more than one
percent of the Preferred Stock underlying the Depositary Shares and not more
than one percent of any other class of the Company's stock, gain or loss will be
recognized in an amount equal to the difference between the fair market value of
the QUIDS (including any pre-issuance accrued interest) at the time of the
exchange and the exchanging holder's tax basis in the Depositary Shares
exchanged therefor and will be long-term capital gain or loss if the Depositary
Shares have been held for more than one year as of such date. A United States
Holder's aggregate tax basis in the QUIDS will be equal to their fair market
value at the time of the exchange.
Holders of the Depositary Shares owning (actually or constructively) more
than one percent of any class of the Company's stock are advised to consult
their own tax advisers as to the income tax consequences of exchanging the
Depositary Shares for QUIDS.
Original Issue Discount, Market Discount and Acquisition Premium
Under the terms of the QUIDS, the Company has the option to defer payments
of interest for up to 20 consecutive quarterly interest payment periods and to
pay as a lump sum at the end of such period all of the interest that has accrued
during such period. Because of this option to extend the interest payment
periods, all of the stated interest payments (excluding any pre-issuance accrued
interest) on the QUIDS will be treated as "original issue discount" ("OID"). As
a result, United States Holders will, in effect, be required to accrue interest
income even if the holders are on the cash method of tax accounting. In
addition, the amount of OID will be increased or decreased if the
41
<PAGE> 42
"issue price" of the QUIDS (fair market value at the time of the exchange) is
less than or greater than their stated principal amount. Consequently, in the
event that the interest payment period is extended, a United States Holder would
be required to include OID in income on an economic accrual basis
notwithstanding that the Company will not make any interest payments on the
QUIDS. The OID accrual rules may also accelerate the timing of a holder's
recognition of income.
To the extent a holder acquires QUIDS at a price that is less than their
adjusted issue price (the fair market value of the QUIDS at the time of the
exchange adjusted for the accrual of OID and interest payments), the holder will
have purchased such QUIDS at a market discount. Under the market discount rules,
a United States Holder will be required to treat any principal payment on, or
any gain on the sale, exchange, retirement or other disposition of, QUIDS as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such QUIDS at the
time of such payment or disposition. Market discount accrues ratably, or, at the
election of the holder, under a constant yield method over the remaining term of
the QUIDS. In addition, the United States Holder may be required to defer, until
the maturity of the QUIDS or their earlier disposition in a taxable transaction,
the deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such QUIDS. In lieu of the foregoing,
a holder may elect to include market discount in income currently as it accrues
on all market discount instruments acquired by such holder in the taxable year
of the election or thereafter, in which case the interest deferral rule will not
apply. This election to include market discount in income currently may not be
revoked without the consent of the Internal Revenue Service ("IRS").
A United States Holder that purchases QUIDS for an amount that is greater
than their adjusted issue price will be able to offset a portion of such
acquisition premium properly allocable to a taxable year against the accrual of
income on such QUIDS.
Sale, Exchange and Retirement of the QUIDS
Upon the sale, exchange or retirement of QUIDS, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange or retirement and the adjusted tax basis of the QUIDS. A
United States Holder's adjusted tax basis in QUIDS will, in general, be the
United States Holder's initial basis therefor, increased by OID or market
discount previously included in income by the United States Holder and reduced
by any amortized premium and any cash payments on the QUIDS. Except as described
above with respect to market discount, such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if at the time of sale, exchange
or retirement, the QUIDS have been held for more than one year. Under current
law, net capital gains of individuals are, under certain circumstances, taxed at
lower rates than items of ordinary income. The deductibility of capital losses
is subject to limitations.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to a Non-United States Holder upon the exchange of
the Depositary Shares for QUIDS pursuant to the Exchange Offer provided
such holder certifies to the Company that such holder owns (actually or
constructively) solely Depositary Shares, or not more than one percent of
the Preferred Stock underlying the Depositary Shares and not more than one
percent of any other class of the Company's stock. If a Non-United States
Holder does not provide the certification described in the preceding
sentence, the Company will withhold federal income tax at a rate of 30% of
the gross proceeds paid to such holder pursuant to the Exchange Offer;
(b) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest (which for purposes of
42
<PAGE> 43
this discussion includes OID) on QUIDS owned by a Non-United States Holder,
provided (i) the beneficial owner is not a controlled foreign corporation
that is related to the Company through stock ownership, (ii) the beneficial
owner is not a bank whose receipt of interest on the QUIDS is described in
section 881(c)(3)(A) of the Code and (iii) either (y) the beneficial owner
certifies to the Company or its agent, under the penalties of perjury, that
it is not a U.S. person, citizen or resident and provides its name and
address or (z) a financial institution holding the QUIDS on behalf of the
beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes the Company or its agent with a copy
thereof;
(c) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange or retirement of QUIDS; and
(d) QUIDS beneficially owned by an individual who at the time of death
is a Non-United States Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that the
interest payments with respect to such QUIDS would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a trade or business by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to (i) certain
payments of principal, interest and OID paid on the QUIDS, (ii) the exchange of
the Depositary Shares for the QUIDS pursuant to the Exchange Offer and (iii) to
the proceeds of sale of the QUIDS made to United States Holders other than
certain exempt recipients (such as corporations). A 31 percent backup
withholding tax will apply to payments described in (i) and (iii) of the
preceding sentence if the United States Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in (b)(iii) under "Non-United States Holders"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
Payments of the proceeds from the sale by a Non-United States Holder of
QUIDS and the exchange of the Depositary Shares for the QUIDS pursuant to the
Exchange Offer made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that if the
broker is, for federal income tax purposes, a United States person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States, such payments will not be subject to backup withholding but may be
subject to information reporting. Such payment of the proceeds of the sale of
QUIDS to or through the United States office of a broker is subject to
information reporting and backup withholding and the exchange of the Depositary
Shares for QUIDS is subject to information reporting unless the Non-United
States Holder or the beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
43
<PAGE> 44
LEGAL OPINIONS
The validity of the QUIDS will be passed upon for the Company by
Christopher C. Nern, Esq., Vice President and General Counsel of the Company,
and for the Dealer Managers by Simpson Thacher & Bartlett (a partnership which
includes professional corporations). Simpson Thacher & Bartlett (a partnership
which includes professional corporations), special tax counsel to the Company,
has passed upon certain United States federal income tax considerations with
respect to the QUIDS.
EXPERTS
The consolidated financial statements incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEPENDENT AUDITORS
The Company has engaged Deloitte & Touche LLP as independent auditors for
the year ending December 31, 1995.
With respect to the unaudited interim financial information of The Detroit
Edison Company and subsidiary companies for the three-month and twelve-month
periods ended March 31, 1995, which is incorporated herein by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their report included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act of 1933 for their reports on the unaudited interim
financial information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
44
<PAGE> 45
Facsimile copies of the Letter of Transmittal will be accepted. Letters of
Transmittal, certificates representing shares of Preferred Stock, Notices of
Guaranteed Delivery and any other required documents should be sent by each
stockholder or his broker, dealer, commercial bank, trust company or other
nominee to the Exchange Agent at one of the addresses as set forth below:
The Exchange Agent is:
BANKERS TRUST COMPANY
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER BY MAIL
Bankers Trust Company Bankers Trust Company
Corporate Trust & Agency Group Corporate Trust & Agency Group
Receipt & Delivery Window Reorganization Dept.
123 Washington St., 1st Floor P.O. Box 1458
New York, NY 10006 Church Street Station
New York, NY 10008-1458
Facsimile Transmission
(212) 250-6275
(212) 250-3290
(For Eligible Institutions Only)
Confirm by Telephone:
(212) 250-6270
Shareholder Inquiries
(212) 250-6270
</TABLE>
Any questions or requests for assistance or additional copies of this
Prospectus, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Managers at their respective
telephone numbers and locations set forth below. You may also contact your
broker, dealer, commercial bank or trust company or other nominee for assistance
concerning the Exchange Offer.
The Information Agent is:
(LOGO)
Wall Street Plaza
New York, NY 10005
BANKS AND BROKERS CALL COLLECT:
(212) 440-9800
ALL OTHERS CALL TOLL-FREE:
1-800-223-2064
The Dealer Managers for the Exchange Offer are:
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. SMITH BARNEY INC.
85 Broad Street 388 Greenwich Street
New York, New York 10004 New York, New York 10013
(800) 828-3182 (Toll-Free) (800) 813-3754 (Toll Free)
</TABLE>
<PAGE> 1
EXHIBIT 1-36
The Detroit Edison Company
DEALER MANAGERS AGREEMENT
July 17, 1995
Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
The Detroit Edison Company, a Michigan corporation (the
"Company"), plans to make an offer (the "Exchange Offer") for up to 4,200,000
of depositary shares (the "Depositary Shares"), each representing a
one-quarter interest in a share of its Cumulative Preferred Stock ($100 par
value), 7.75% Series (the "Preferred Stock"), in exchange for a maximum of
$105,000,000 in aggregate principal amount of 8.50% Quarterly Income Debt
Securities (Junior Subordinated Deferrable Interest Debentures Due 2025) (the
"QUIDS") to be issued under the Note Indenture, dated as of June 30, 1993, as
supplemented by a First Supplemental Indenture dated as of September 15, 1993,
a Second Supplemental Indenture dated as of September 15, 1993, a Third
Supplemental Indenture dated as of August 15, 1994 and a Fourth Supplemental
Indenture dated on or about July 15, 1995 (as supplemented, the "Indenture"),
between the Company and Bankers Trust Company, as trustee (the "Trustee"), on
the basis of $25 principal amount of QUIDS for every Depositary Share or $100
principal amount of QUIDS for every share of Preferred Stock. The Exchange
Offer will be conducted upon the terms and subject to the conditions set forth
in the exchange offer material (the "Exchange Offer Material"), which the
Company has caused to be prepared and furnished to the Dealer Managers for use
in connection with the Exchange Offer, namely (a) a Registration Statement on
Form S-4 (File No. 33-60333), including the Prospectus, dated July 17, 1995;
(b) a Statement on Schedule 13E-4 with respect to the Exchange Offer; (c) the
form of letter from the Dealer Managers to securities dealers, commercial
banks, trust companies and other nominees; (d) the form of letter to beneficial
owners of Depositary Shares; (e) the form of letter of transmittal (the "Letter
of Transmittal"); (f) the form of notices of guaranteed delivery (the "Notice
of Guaranteed Delivery"); (g) the form of Questions and Answers Sheet to be
sent to holders and to be used
<PAGE> 2
2
by brokers, dealers, commercial banks, trust companies and other nominees in
responding to inquiries from their clients; (h) the form of newspaper
advertisements relating to the Exchange Offer; and (i) the form of press
release relating to the Exchange Offer. Any other offering materials and
information that the Company may prepare or approve in connection with the
Exchange Offer shall be called "Additional Material."
1. APPOINTMENT OF DEALER MANAGERS.
The Company hereby appoints Goldman, Sachs & Co. and Smith
Barney Inc., as Dealer Managers (the "Dealer Managers"), in connection with the
Exchange Offer and authorizes the Dealer Managers to act on its behalf in
accordance with this letter agreement and the terms of the Exchange Offer
Material and Additional Material. The Company has approved the Exchange Offer
Material and authorizes the Dealer Managers and any other securities dealer or
any commercial bank or trust company to use the Exchange Offer Material and
Additional Material in connection with the solicitation of exchanges pursuant
to the Exchange Offer. In soliciting exchanges, the Dealer Managers shall act
as independent contractors and shall not be deemed to act as agent of the
Company, and the Company shall not be deemed to act as agent of the Dealer
Managers. The Company authorizes the Dealer Managers to communicate with any
agent appointed by the Company to act in such capacity with respect to matters
relating to the Exchange Offer (the "Exchange Agent") pursuant to an Exchange
Agent Agreement to be entered into between the Company and the Exchange Agent
(the "Exchange Agent Agreement").
2. MAILING OF EXCHANGE OFFER MATERIAL AND ADDITIONAL MATERIAL.
The Company shall cause to be mailed to each registered holder
of Depositary Shares, as soon as practicable, copies of appropriate Exchange
Offer Material and Additional Material, together with a return envelope. The
date of the commencement of such distribution is herein called the
"Commencement Date." Thereafter, to the extent practicable until the date of
the expiration of the Exchange Offer (the "Expiration Date"), the Company shall
use its best efforts to cause copies of such material and a return envelope to
be mailed to each person who becomes a beneficial owner of any Depositary
Shares.
3. SOLICITATION OF TENDERS.
(a) The Dealer Managers agree to use their
reasonable best efforts to solicit tenders of Depositary
Shares pursuant to the Exchange Offer. Neither Dealer Manager
shall have any liability, in tort, contract or otherwise, to
the Company or any person related to the
<PAGE> 3
3
Company for any act or omission on the part of any securities
broker or dealer (other than itself), commercial bank or trust
company that solicits exchanges, and neither Dealer Manager
shall have any liability in tort, contract or otherwise
hereunder except for its own gross negligence or bad faith.
In soliciting exchanges, no securities broker or dealer (other
than such Dealer Manager), commercial bank or trust company
shall be deemed to act as the agent of the Dealer Managers or
the agent of the Company, and neither Dealer Manager shall be
deemed the agent of any other securities broker or dealer or
of any commercial bank or trust company.
(b) The Company agrees to furnish to the Dealer
Managers as many copies as they may reasonably request of the
Exchange Offer Material and Additional Material in final form
for use by them in connection with the Exchange Offer. The
Company shall not amend or supplement the Exchange Offer
Material, or prepare or approve any Additional Material for
use in connection with the Exchange Offer, without the Dealer
Managers' consent, which consent shall not be unreasonably
withheld.
(c) The Company agrees to advise the Dealer
Managers promptly of the occurrence of any event which could
cause the Company to withdraw, rescind or modify the Exchange
Offer or to amend or supplement the Exchange Offer Material or
Additional Material. In particular, the Company will advise
the Dealer Managers promptly of (i) any proposal to amend or
supplement the Registration Statement (as defined in Section
5(a)), the Prospectus (as defined in Section 5(a)) or the
Schedule 13E-4 (as defined in Section 5(a)); (ii) the filing
or effectiveness of any post-effective amendment to the
Registration Statement or the filing of any amendment or
supplement to the Prospectus or the Schedule 13E-4; and (iii)
the institution by the Securities and Exchange Commission (the
"Commission") of any stop order proceedings in respect of the
Registration Statement and, in the case of clause (iii) above,
will use its best efforts to prevent the issuance of any such
stop order and to obtain as soon as possible its lifting, if
issued.
(d) If at any time when a prospectus relating to
the QUIDS is required to be delivered under the United States
Securities Act of 1933, as amended (the "Act"), any event
occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue
<PAGE> 4
4
statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend or
supplement the Prospectus so as to comply with the Act or the
United States Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the
Commission promulgated thereunder, the Company promptly will
prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an
amendment or supplement which will effect such compliance.
(e) The Company will not use or publish any
material in connection with the Exchange Offer, or refer to
the Dealer Managers in any such material, without first
consulting the Dealer Managers. The Company will promptly
inform the Dealer Managers of any litigation or administrative
or governmental action with respect to the Exchange Offer.
(f) The Company agrees to furnish to the Dealer
Managers, to the extent the same is available to the Company,
cards or lists or copies thereof showing the names and
addresses of, and aggregate number of shares held by, the
holders of record of Depositary Shares and shares of Preferred
Stock, as of a recent date, and shall use its best efforts to
advise the Dealer Managers from day to day during the period
of the Exchange Offer as to any transfers of record of
Depositary Shares and shares of Preferred Stock.
Additionally, the Company shall advise the Dealer Managers, to
the extent known and available to the Company, of the names
and addresses of beneficial owners of the Depositary Shares
and shares of Preferred Stock. The Dealer Managers agree to
use such information only in connection with the Exchange
Offer and not to furnish such information to any other person
except in connection with the Exchange Offer.
(g) The Company shall arrange for the Exchange Agent
orally to inform the Dealer Managers during each business day
during the Exchange Offer (to be followed on a daily basis by
written confirmation) as to the number of shares of Preferred
Stock or Depositary Shares, as the case may be, that have been
tendered for exchange pursuant to the Exchange Offer during
the interval since its previous daily report to the Dealer
Managers under this provision. The Dealer Managers agree to
use such information only in connection with the Exchange
Offer and not to furnish such information
<PAGE> 5
5
to any other person except in connection with the Exchange
Offer.
(h) The Company agrees to use its best efforts to
have the QUIDS approved for listing on the New York Stock
Exchange.
4. COMPENSATION AND EXPENSES.
(a) The Company shall pay to the Dealer Managers,
as compensation for their services as Dealer Managers, a fee
of 0.8% of the aggregate principal amount of the QUIDS offered
in exchange for tendered Preferred Stock pursuant to the
Exchange Offer (the "Fee"), which fee shall be payable to the
Dealer Managers upon the consummation of the Exchange Offer in
Federal Funds to a bank account previously designated by them.
(b) Whether or not any shares of Preferred Stock
or Depositary Shares, as the case may be, are tendered in
exchange for QUIDS pursuant to the Exchange Offer, the Company
shall pay (i) all expenses of the preparation, printing,
mailing and publishing of the Exchange Offer Material and
Additional Material, including all fees and disbursements of
the Company's counsel and accountants; (ii) all expenses in
connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus (as defined
herein) and the Prospectus and amendments and supplements
thereto; (iii) the cost of printing or producing this letter
agreement, any Blue Sky Memoranda, closing documents
(including any compilations thereof) and any other documents
in connection with the Exchange Offer; (iv) all expenses in
connection with the qualification of the QUIDS for offering
under state securities laws and securities laws of such other
jurisdictions as may be necessary to effect the Exchange
Offer, including the reasonable fees and disbursements of
counsel for the Dealer Managers in connection with such
qualification and any Blue Sky survey; (v) any filing fees
incident to, and the reasonable fees and disbursements of
counsel for the Dealer Managers in connection with, any
required review by the National Association of Securities
Dealers, Inc. of the terms of the Exchange Offer; (vi) the
cost of preparing the QUIDS; (vii) the fees and expenses of
the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the Indenture and the QUIDS; (viii)
the fees and expenses
<PAGE> 6
6
of the Exchange Agent and the Information Agent and the fees
and disbursements of counsel for the Exchange Agent and the
Information Agent in connection with the Exchange Offer; (ix)
all expenses in connection with the tendering and
cancellation of the Preferred Stock and the Depositary Shares;
(x) all fees payable to securities dealers (including the
Dealer Managers), commercial banks, trust companies and
nominees as reimbursement of their customary mailing and
handling expenses incurred in forwarding the Exchange Offer
Material and Additional Material to their customers and all
solicitation fees or commissions payable to such entities;
(xi) all fees and expenses of Chemical Bank, as Depositary
(the "Depositary"), and any information agent; (xii) all
advertising charges; (xiii) any applicable transfer taxes
payable by the Company in connection with the Exchange Offer;
(xiv) all fees in connection with the listing of the QUIDS on
the New York Stock Exchange; (xv) all other costs and expenses
in connection with the Exchange Offer, and shall reimburse the
Dealer Managers for all expenses incurred by them in
connection with their serving as Dealer Managers, including
their reasonable expenses and the reasonable fees and the
disbursements of their counsel; and (xvi) any expenses
incurred as a result of presenting testimony or evidence, or
preparing to present testimony or evidence, in connection with
any court or administrative proceeding arising out of the
Exchange Offer.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants to, and agrees with, the
Dealer Managers that:
(a) The Company's Registration Statement on Form S-4
(File No. 33-60333) with respect to the QUIDS and the Exchange
Offer and the Schedule 13E-4 have been filed with the
Commission; such Registration Statement and Schedule 13E-4 and
any post-effective amendment thereto, each in the form
heretofore delivered or to be delivered to the Dealer
Managers, have been declared effective by the Commission in
such form; no other document with respect to such Registration
Statement or the Schedule 13E-4 has heretofore been filed with
the Commission (other than prospectuses filed pursuant to Rule
424(b) of the rules and regulations of the Commission under
the Act, each in the form heretofore delivered to the Dealer
Managers); and no stop order suspending the effectiveness of
such Registration Statement or Schedule 13E-4 has been issued
and no
<PAGE> 7
7
proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in such
Registration Statement or filed with the Commission pursuant
to Rule 424(a) under the Act is hereinafter called a
"Preliminary Prospectus"; the various parts of such
Registration Statement, including all exhibits thereto and the
documents incorporated by reference in the prospectus
contained in such Registration Statement, at the time such
part of the Registration Statement became effective but
excluding the Statements of Eligibility and Qualification of
the Trustee (the "Forms T-1"), each as amended at the time
such part of the Registration Statement became effective, are
hereinafter collectively referred to as the "Registration
Statement"; the Schedule 13E-4, as amended, supplemented or
modified at any time is hereinafter called the "Schedule
13E-4"; the prospectus relating to the QUIDS and the Exchange
Offer, in the form in which it has most recently been filed
with the Commission on or prior to the date of this letter
agreement, being hereinafter referred to as the "Prospectus";
any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be,
under the Exchange Act, and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may be; and
any reference to the Prospectus as amended or supplemented
shall be deemed to refer to the Prospectus as amended or
supplemented in relation to the Exchange Offer in the form in
which it is filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof,
including any documents incorporated by reference therein as
of the date of such filing);
(b) The documents incorporated by reference in
the Prospectus, when they became effective or were filed with
the Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act,
as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents 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; and any further documents
so filed and incorporated by reference in the Prospectus or
any further amendment or supplement thereto, when such
documents become effective or are
<PAGE> 8
8
filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by the Dealer Managers expressly for use in the
Prospectus as amended or supplemented relating to the Exchange
Offer;
(c) The Registration Statement and the Prospectus
conform, and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"),
and the rules and regulations of the Commission thereunder and
do not and will not, as of the applicable effective date as to
the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by a Dealer
Manager expressly for use in the Prospectus as amended or
supplemented relating to such Exchange Offer;
(d) The Schedule 13E-4, as originally filed and
subsequently amended, the other Exchange Offer Materials and
any amendment or supplement thereto conform, or will conform,
in all material respects with all applicable requirements of
the Act and the Exchange Act and the rules and regulations of
the Commission thereunder; and none of the Schedule 13E-4, the
other Exchange Offer Materials or any amendment or supplement
thereto includes, or will include, an untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon
and in
<PAGE> 9
9
conformity with information furnished to the Company in
writing by a Dealer Manager expressly for use therein;
(e) Neither the Company nor any of its
subsidiaries has sustained since the date of the latest
audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any material change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any
development involving a prospective material adverse change,
in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus;
(f) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(g) The Company has good and marketable title to
all properties standing of record in its name (which includes,
without limitation, all of those properties, except pollution
control facilities standing in the names of certain
municipalities which are being purchased by the Company
pursuant to installment sales contracts and the undivided
ownership interest of Michigan Public Power Agency in a
portion of the Belle River Power Plant, in each case as
described in the Prospectus, which constitute or on which
there are erected its principal plants, generating stations
and substations and on which its general office and service
buildings are constructed and all other important parcels of
real estate) and improvements thereon, subject to the lien of
the Mortgage and Deed of Trust between the Company and the
Trustee and to minor exceptions and minor defects,
irregularities and deficiencies which, in the opinion of the
Company, do not materially impair the use of such property for
the purpose for which it is held by the Company, and the
<PAGE> 10
10
Company has adequate rights to maintain and operate such of
its transmissions and distribution facilities as are
located on public or other property not owned by the Company;
(h) The execution and delivery of this letter
agreement and all other documents to be executed and delivered
by the Company hereunder have been duly authorized by the
Company, and this letter agreement constitutes the valid and
binding agreement of the Company enforceable against the
Company in accordance with its terms;
(i) The making and consummation of the Exchange
Offer have been duly authorized by all necessary corporate
action on the part of the Company;
(j) The QUIDS have been duly authorized, and,
when issued and delivered pursuant to the Exchange Offer, will
have been duly executed, authenticated, issued and delivered
and will constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the
Indenture, substantially in the form filed as an exhibit to
the Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act
and constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the
Indenture conforms, and the QUIDS will conform, to the
descriptions thereof contained in the Prospectus as amended or
supplemented with respect to the Exchange Offer;
(k) Other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company
or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the consolidated
financial position, shareholders' equity or results of
operations of the Company and its subsidiaries; and, to the
best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
<PAGE> 11
11
(l) The making and consummation of the Exchange
Offer, the execution, delivery and performance by the Company
of this letter agreement, the issuance and delivery of the
QUIDS and the compliance by the Company with all of the
provisions of the QUIDS, the Indenture and this letter
agreement and the consummation of the transactions herein and
therein contemplated do not and will not conflict with or
result in a violation or breach of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement to
which the Company is a party or by which it is bound or to
which any of the property or assets of the Company is subject,
nor will such action result in any violation of the provisions
of the Restated and Amended Articles of Incorporation or
By-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency including,
without limitation, the Michigan Public Service Commission, or
body having jurisdiction over the Company or any of its
properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and
delivery of the QUIDS or the consummation by the Company of
the transactions contemplated by this letter agreement or the
Indenture, except such as have been, or will have been prior
to the Expiration Date, obtained under the Act, the Exchange
Act and the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the QUIDS by the Dealer
Managers; and
(m) The Company has an authorized capitalization
as set forth in the Prospectus and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
(n) On the Commencement Date, the Company will
have filed an application for the listing of the QUIDS on the
New York Stock Exchange (the "NYSE");
(o) The Company has made or will make appropriate
arrangements with the Exchange Agent to allow for delivery of
tendered Depositary Shares in exchange for QUIDS by book-entry
movement in the security clearance and cash accounts operated
by the Exchange Agent; and
<PAGE> 12
12
(p) The Exchange Agent Agreement has been duly
authorized by the Company and, when executed and delivered,
will constitute a valid and legally binding agreement of the
Company enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization and other similar laws relating to or affecting
creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law).
6. CONDITIONS.
The Dealer Managers' obligation to act as Dealer Managers
hereunder shall at all times be subject, in their discretion, to the conditions
that:
(a) All representations, warranties and other
statements of the Company contained herein are now, and at all
times during the Exchange Offer and until the date of
settlement of the Exchange Offer (the "Exchange Date") will
be, true and correct;
(b) The Company at all times during the Exchange
Offer shall have performed all of its obligations hereunder
theretofore required to have been performed;
(c) The Prospectus as amended or supplemented in
relation to the Exchange Offer shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations
under the Act and in accordance with Section 5(a) hereof; no
stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been
complied with to the Dealer Managers' reasonable satisfaction;
(d) On each of the Commencement Date and the
Exchange Date, Christopher C. Nern, Vice President and General
Counsel of the Company; shall have furnished to the Dealer
Managers his opinion, dated the respective date of delivery
thereof, substantially in the form of Exhibit A hereto;
(e) On each of the Commencement Date and the
Exchange Date, Simpson Thacher & Bartlett, the Dealer
Managers' counsel, shall have furnished to them, an opinion or
opinions, dated the respective date of
<PAGE> 13
13
delivery thereof, with respect to the validity of the
Indenture and the QUIDS, the Registration Statement, the
Prospectus, and other related matters as the Dealer Managers
may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to
enable them to pass upon such matters;
(f) On each of the Commencement Date and the
Exchange Date, the independent accountants of the Company who
have certified the financial statements of the Company and its
subsidiaries included or incorporated by reference in the
Registration Statement, the Prospectus and the Schedule 13E-4
shall have furnished to the Dealer Managers a letter, dated
the respective date of delivery thereof, each in a form
satisfactory to the Dealer Managers;
(g) The Company shall have furnished to the
Dealer Managers on each of the Commencement Date and the
Exchange Date, a certificate or certificates of officers of
the Company satisfactory to the Dealer Managers as to the
accuracy of the representations and warranties of the Company
in this letter agreement, as to the performance by the Company
of all of its obligations hereunder to be performed at or
prior to such date, as to the matters set forth in subsections
(c) and (h) of this Section and as to such other matters as
the Dealer Managers may reasonably request;
(h) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included or incorporated by
reference in the Prospectus as amended or supplemented any
loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated
in the Prospectus as amended or supplemented, and (ii) since
the respective dates as of which information is given in the
Prospectus as amended or supplemented there shall not have
been any material change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
shareholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus as amended or supplemented, the
effect of which, in any such case
<PAGE> 14
14
described in clause (i) or (ii), is in the judgment of the
Dealer Managers, so material and adverse as to make it
impracticable or inadvisable to proceed with the Exchange
Offer or the delivery of the QUIDS on the terms and in the
manner contemplated in the Prospectus as amended or
supplemented;
(i) On or after the date hereof (A) no
downgrading shall have occurred in the rating accorded the
Company's debt securities by any "nationally recognized
statistical rating organization," as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act
and (B) none of them shall have publicly announced that it has
under surveillance or review, with possible negative
implications, its rating of any of the Company's debt
securities;
(j) On or after the date hereof there shall not
have occurred any of the following: (A) a suspension or
material limitation in trading in securities generally on the
NYSE; (B) trading of any securities of the Company shall have
been formally suspended on any exchange or in any
over-the-counter market; provided that, in connection with the
formation of DTE Holdings, Inc. as described in the
Prospectus, the Company's common stock may be formally
suspended on the NYSE or other exchanges on which it is
traded; provided that Holdings' common stock shall have been
duly listed on the NYSE; (C) a general moratorium on
commercial banking activities in New York or the Company
declared by either Federal or New York State authorities; (D)
the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national
emergency or war if the effect of any such event specified in
this clause (D) in the judgment of the Dealer Managers makes
it impracticable or inadvisable to proceed with the Exchange
Offer or the delivery of the QUIDS on the terms and in the
manner contemplated in the Prospectus as amended or
supplemented;
(k) The Company shall have furnished to the
Dealer Managers on each of the Commencement Date and the
Exchange Date, such further information, certificates and
documents as the Dealer Managers may reasonably request;
(l) On each of the Commencement Date and the
Exchange Date, the Exchange Agent shall have furnished to the
Dealer Managers a certificate, dated the respective date of
delivery thereof, of an appropriate
<PAGE> 15
15
officer of the Exchange Agent, in form and substance
satisfactory to the Dealer Managers, to the effect
that:
(i) the Exchange Agent has been duly
incorporated and is validly existing as a trust
company in good standing under the laws of the State
of New York, with full power, authority and legal
right under such law to execute, deliver and carry
out the terms of the Exchange Agent Agreement;
(ii) the Exchange Agent Agreement has
been duly authorized, executed and delivered by the
Exchange Agent; and
(iii) the Exchange Agent Agreement
constitutes a valid and binding obligation
of the Exchange Agent;
(m) On or prior to the Exchange Date, the QUIDS
shall have been duly listed, subject to notice of issuance, on
the NYSE;
(n) On or prior to the Exchange Date, the Exchange
Agent Agreement shall be in full force and effect; and
(o) On or prior to the Exchange Date, Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group
shall have publicly assigned to the QUIDS ratings acceptable
to the Dealer Managers.
7. COVENANTS.
The Company agrees with the Dealer Managers:
(a) To prepare the Prospectus in a form approved
by the Dealer Managers and to file such Prospectus pursuant to
Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the
execution and delivery of this letter agreement or, if
applicable, such earlier time as may be required by Rule
424(b); to make no further amendment or any supplement to the
Registration Statement or Prospectus as amended or
supplemented after the date of this letter agreement and prior
to the Expiration Date for the QUIDS which shall be
disapproved by the Dealer Managers for such QUIDS promptly
after reasonable notice thereof; to advise the Dealer Managers
promptly of any such amendment or
<PAGE> 16
16
supplement after such Expiration Date and furnish the Dealer
Managers with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act for so long as
the delivery of a prospectus is required in connection with
the offering or sale of the QUIDS; and during such same period
to advise the Dealer Managers, promptly after it receives
notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has
been filed with the Commission, of the issuance by the
Commission of any stop order or of any order preventing or
suspending the use of any prospectus relating to the Exchange
Offer, of the suspension of the qualification of the QUIDS for
offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any such
stop order or of any such order preventing or suspending the
use of any prospectus relating to the QUIDS or suspending any
such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) Promptly from time to time during and
following the Expiration Date to take such action as the
Dealer Managers may reasonably request to qualify the Exchange
Offer under the securities laws of such jurisdictions as the
Dealer Managers may request and to comply with such laws so as
to permit the continuance of the Exchange Offer therein in
such jurisdictions for as long as may be necessary to complete
the Exchange Offer, provided that in connection therewith the
Company shall not be required to file a general consent to
service of process in any jurisdiction;
(c) Not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company which
(i) have terms similar to those of the QUIDS or (ii) accrue
interest at a rate similar to that of the QUIDS, from the date
hereof and continuing until 7 days following the Exchange Date
without the Dealer Managers' prior written consent;
(d) To make generally available to its
securityholders as soon as practicable, but in any event not
later than eighteen months after the
<PAGE> 17
17
effective date of the Registration Statement (as defined in
Rule 158(c)), an earning statement of the Company and its
subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including at the option of the Company
Rule 158);
(e) To furnish the Dealer Managers with copies of
the Prospectus and the Schedule 13E-4, each as amended or
supplemented, in such quantities as the Dealer Managers may
from time to time reasonably request, and, if the delivery of
a prospectus is required at any time in connection with the
Exchange Offer and if at such time any event shall have
occurred as a result of which the Prospectus or the Schedule
13E-4, as then amended or supplemented, would include an
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such
same period to amend or supplement the Prospectus or the
Schedule 13E-4 or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act and
the rules and regulations of the Commission thereunder, to
notify the Dealer Managers and upon their request to file such
document and to prepare and furnish without charge to the
Dealer Managers and to the dealer through which QUIDS may have
been exchanged as many copies as the Dealer Managers may from
time to time reasonably request of an amended Schedule 13E-4
or Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance;
(f) The Company will promptly after the date
hereof, in the event it has not already done so, file an
application for the listing of the QUIDS on the NYSE and will
use its best efforts to cause such QUIDS to be duly authorized
for listing thereon, subject to official notice of issuance,
and to be registered under the Exchange Act;
(g) The Company shall promptly give the Dealer
Managers notice of any change of the record date with respect
to the Preferred Stock and notice of any change in the
Expiration Date; and
(h) The Company will promptly enter into an
agreement with the Exchange Agent substantially in the
<PAGE> 18
18
form of such agreement previously furnished to the Dealer
Managers.
8. INDEMNITY AND SURVIVAL OF CERTAIN PROVISIONS.
(a) The Company agrees (i) to indemnify and hold each
Dealer Manager harmless against any loss, damage, expense, liability or claim
(or action in respect thereof) (A) which arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented, or any
amendment or supplement thereto, the Schedule 13E-4, as amended or
supplemented, or any amendment or supplement thereto, the Exchange Offer
Material, Additional Material or any of the documents referred to therein or in
any amendment or supplement to any of the foregoing, or which arises out of or
is based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented, or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by a Dealer Manager expressly for use in the
Prospectus as amended or supplemented, (B) which arises out of or is based upon
any breach by the Company of any representation or warranty or failure to
comply with any of the agreements set forth herein or (C) which arises out of
or is based upon a withdrawal, rescission, termination or modification of or a
failure to make or consummate the Exchange Offer; and (ii) to indemnify and
hold each Dealer Manager harmless against any other loss, damage, expense,
liability or claim (or action in respect thereof) which otherwise arises out of
or is based upon or asserted against such Dealer Manager in connection with its
acting as Dealer Manager in connection with the Exchange Offer or rendering any
financial advisory services to the Company in connection with the transactions
contemplated by the Exchange Offer or which arises in connection with any other
matter referred to in this letter agreement, except to the extent that any such
loss, damage, expense, liability or claim referred to in clause (ii) of this
Section 8(a) results from such Dealer Manager's gross negligence or bad faith
in performing the services that are the subject of this letter agreement. In
the event that a Dealer Manager becomes involved in any capacity in any action,
proceeding or investigation brought by or against any person, including
stockholders of the Company, in connection with
<PAGE> 19
19
any matter referred to in this agreement, the Company also agrees periodically
to reimburse such Dealer Manager for its reasonable legal and other expenses
(including the reasonable cost of any investigation and preparation) incurred
in connection therewith. The Company also agrees that neither Dealer Manager
nor any of its affiliates, nor any of its partners, directors, agents,
employees or controlling persons (if any), as the case may be, of such Dealer
Manager or any such affiliates, shall have any liability, in tort or contract
or otherwise, to the Company or any person asserting claims on behalf of or in
right of the Company for or in connection with any matter referred to in this
letter agreement except to the extent that any loss, damage, expense, liability
or claim incurred by the Company results from such Dealer Manager's gross
negligence or bad faith in performing the services that are the subject of this
letter agreement. The Company also agrees to indemnify and hold each Dealer
Manager harmless against and reimburse such Dealer Manager for any and all
reasonable expenses whatsoever (including legal and other fees and expenses)
incurred by such Dealer Manager in connection with investigating, preparing for
or defending against any such losses, damages, expenses, liabilities or claims
(or actions in respect thereof), whether or not resulting in any liability, and
any amount paid in settlement of any litigation, commenced or threatened, or of
any claim whatsoever as set forth herein if such settlement is effected with
the written consent of the Company.
(b) Promptly after receipt by a Dealer Manager of notice
of its involvement in any action, proceeding or investigation, it shall, if a
claim in respect thereof is to be made against the Company under paragraph (a)
of this Section 8, notify the Company in writing of such involvement, but the
omission so to notify the Company shall not relieve it from any liability which
it may otherwise have to such Dealer Manager. In case any such action,
proceeding or investigation shall be brought against or otherwise involve a
Dealer Manager and such Dealer Manager shall notify the Company of the
commencement thereof or its involvement therein, the Company shall be entitled
to participate therein, and, to the extent that it shall wish, to assume the
defense of such action, proceeding or investigation with counsel satisfactory
to such Dealer Manager (who shall not, except with such Dealer Manager's
additional consent, be counsel to the Company). Upon assumption by the Company
of the defense of such action, proceeding or investigation, the Company shall
not be liable to a Dealer Manager under this paragraph (b) of this Section 8
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such Dealer Manager, in connection with the defense
thereof other than reasonable costs of investigation and preparation, unless
the Company and such Dealer Manager are named parties to any such action,
proceeding or investigation (including any impleaded
<PAGE> 20
20
parties) and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
(c) If for any reason the indemnification provided for in
paragraph (a) of this Section 8 is unavailable or insufficient to hold a Dealer
Manager harmless, then the Company shall contribute to the amount paid or
payable by such Dealer Manager as a result of such loss, damage, expense,
liability or claim (or actions in respect thereof) referred to therein in such
proportion as is appropriate to reflect the relative economic interests of the
Company on the one hand and such Dealer Manager on the other hand from the
acquisition of the Depositary Shares and underlying Preferred Stock as well as
the relative fault of the Company and such Dealer Manager (or actions in
respect thereof) and any other relevant equitable considerations; provided
however, that in no case shall a Dealer Manager be responsible for any amount
in excess of the benefits received (or anticipated to be received) by such
Dealer Manager. The relative economic interests of the Company on the one hand
and a Dealer Manager on the other hand shall be deemed to be in the same
proportion as the maximum aggregate value of the QUIDS proposed, on the date
hereof, to be issued and provided in exchange for Depositary Shares and
underlying Preferred Stock by the Company pursuant to the Exchange Offer bears
to the maximum aggregate fee proposed to be paid to such Dealer Manager
pursuant to Section 4(a) of this letter agreement as a result of such Exchange
Offer. The relative fault of the Company and a Dealer Manager 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, or relating to, the
Company, such Dealer Manager and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Dealer Managers agree that it would not be just
and equitable if contribution pursuant to this paragraph (c) of this Section 8
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
paragraph (c) of this Section 8.
(d) The agreements contained in Section 4, Section 7 and
in this Section 8 and the representations and warranties of the Company set
forth in Section 5 hereof shall survive any termination or cancellation of this
letter agreement, any completion of the engagement provided by this letter
agreement or any investigation made by or on behalf of the Dealer Managers and
any of their officers or partners or any person controlling them and shall
survive the issuance and delivery of the QUIDS, whether pursuant to the
Exchange Offer or otherwise.
<PAGE> 21
21
(e) The reimbursement, indemnity and contribution
obligations of the Company under this Section 8 shall be in addition to any
liability that the Company may otherwise have, shall extend upon the same terms
and conditions to the Dealer Managers' affiliates and the partners, directors,
agents, employees and controlling persons (if any), as the case may be, of the
Dealer Managers and any such affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Dealer Managers, any such affiliate and any such person. If after all or
substantially all of the Company's assets are sold or the Company is merged
into another person and the obligations of the Company set forth in this
Section 8 are not assumed by operation of law or by contract by a party or
parties satisfactory to the Dealer Managers, the purchaser of such assets or
the person into which the Company is merged agrees to arrange alternative means
of providing for such obligations, including providing insurance or creating an
escrow, in each case in an amount and upon terms and conditions satisfactory to
the Dealer Managers.
9. MISCELLANEOUS.
(a) This letter agreement is made solely for the benefit
of the Dealer Managers, the Company and any partner, director, agent, employee,
controlling person or affiliate referred to in Section 8 hereof, and their
respective successors, assigns, and legal representatives, and no other person
shall acquire or have any right under or by virtue of this letter agreement.
(b) In the event that any provision hereof shall be
determined to be invalid or unenforceable in any respect, such determination
shall not affect such provision in any other respect or any other provision
hereof, which shall remain in full force and effect.
(c) Except as otherwise expressly provided in this letter
agreement, whenever notice is required by the provisions of this letter
agreement to be given to (i) the Company, such notice shall be in writing
addressed to the Company, at its office at 2000 Second Avenue, Detroit,
Michigan 48226, Attn: Treasurer, Facsimile No.: 313-237-6743 and (ii) the
Dealer Managers, such notice shall be in writing addressed to the Dealer
Managers c/o Goldman, Sachs & Co. at 85 Broad Street, New York,
<PAGE> 22
22
New York 10004, facsimile number (212) 902-4103, Attention: Registration
Department.
(d) This letter agreement contains the entire
understanding of the parties with respect to the Dealer Managers acting as
Dealer Managers of the Exchange Offer, superseding all prior agreements,
understandings and negotiations with respect to such activities by the Dealer
Managers. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This letter agreement may
be executed in any number of counterparts, each of which shall be an original,
but all such counterparts shall together constitute one and the same agreement.
Please sign and return to us a duplicate of this letter
agreement, whereupon it will become a binding agreement.
Very truly yours,
THE DETROIT EDISON COMPANY
By:________________________
Name:
Title:
The undersigned hereby confirms that the
foregoing letter agreement, as of the
date thereof, correctly sets forth the
agreement between The Detroit Edison
Company and the undersigned.
_____________________________________
(Goldman, Sachs & Co.)
<PAGE> 23
EXHIBIT A
July 17, 1995
Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
I am Vice President and General Counsel of The Detroit Edison Company
(the "Company"), which intends to make an offer (the "Exchange Offer") for up
to 4,200,000 of depositary shares (the "Depositary Shares"), each representing
a one-quarter interest in a share of its Cumulative Preferred Stock, 7.75%
Series, par value $100 per share (the "Preferred Stock" and, together with the
Depositary Shares, the "Securities"), in exchange for a maximum of $105,000,000
in aggregate principal amount of 8.50% Quarterly Income Debt Securities (the
"QUIDS"). Such exchange offer, on the terms and subject to the conditions set
forth in the Exchange Offer Material and Additional Material described in the
Dealer Managers Agreement referred to below, is hereinafter referred to as the
"Exchange Offer". Terms used in the Dealer Managers Agreement are used herein
as therein defined.
In that connection, I, in conjunction with the members of the Legal
Department of the Company, have examined the Exchange Offer Material and
Additional Material, a signed copy of the agreement, dated July 17, 1995,
between the Company and the Dealer Managers providing for their services as
Dealer Managers for the Exchange Offer (the "Dealer Managers Agreement" or
"Letter Agreement") and such other documents as I have deemed necessary or
appropriate for the purpose of this opinion and advise the Dealer Managers as
follows:
(1) The Registration Statement, the Prospectus and the Schedule
13E-4 and any further amendments and supplements thereto made
by the Company prior to the Expiration Date (other than the
financial statements and related schedules, other financial
data therein and the Forms T-1, as to which I express no
opinion) comply as to form in all material respects with the
requirements of the Act and the Trust Indenture Act and the
rules and regulations thereunder; I have no reason to believe,
after due inquiry, that, as of its effective date, the
Registration Statement or any further amendment thereto made
by the Company prior to the Exchange Date (other than the
financial statements
<PAGE> 24
2
and related schedules therein and except for that part of the
Registration Statement that constitutes the Forms T-1, as to
which I express no opinion) 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, as of its date, the Prospectus as
amended or supplemented or any further amendment or supplement
thereto made by the Company prior to the Exchange Date (other
than the financial statements and related schedules therein
and except for that part of the Registration Statement that
constitutes the Forms T-1, as to which I need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading or that, as of the Exchange
Date, either the Registration Statement or the Prospectus as
amended or supplemented or any further amendment or supplement
thereto made by the Company prior to the Exchange Date (other
than the financial statements and related schedules therein
and except for that part of the Registration Statement that
constitutes the Forms T-1, as to which I express no opinion)
contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made
not misleading; and I do not know of any amendment to the
Registration Statement required to be filed or of any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required
to be incorporated by reference into the Prospectus or
required to be described in the Registration Statement or the
Prospectus which are not filed or incorporated by reference or
described as required;
(2) The documents incorporated by reference in the Prospectus as
amended or supplemented (other than the financial statements
and related schedules therein and except for those parts of
the Registration Statement which constitute the Forms T-1, as
to which I express no opinion), when they became effective or
were filed with the Commission, as the case may be, complied
as to form in all material respects with the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder; and I have no reason
to believe that any of such documents, when they became
effective or were so filed, as the case may be, contained, in
the case of a Registration Statement when it became effective
under the Act, 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, in the case of other documents which
<PAGE> 25
3
were filed under the Act or the Exchange Act with the
Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statement therein, in the light of the circumstances under
which they were made when such documents were so filed, not
misleading; and
(3) Nothing has come to my attention, after due inquiry, to
indicate that either the Company or any of its subsidiaries
has sustained, since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and,
since the respective dates as of which information is given in
the Registration Statement and the Prospectus, to the best of
my knowledge, after due inquiry, there has not been any
material change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the general affairs,
management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus;
(4) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus as amended or
supplemented;
(5) The Company has good and marketable title to all properties
standing of record in its name (which includes, without
limitation, all of those properties, except pollution control
facilities standing in the names of certain municipalities
which are being purchased by the Company pursuant to
installment sales contracts and the undivided ownership
interest of Michigan Public Power Agency in a portion of the
Belle River Power Plant, in each case as described in the
Prospectus, which constitute or on which there are erected its
principal plants, generating stations and substations and on
which its general office and service buildings are constructed
and all other important parcels of real estate) and
improvements thereon, subject to the lien of the Mortgage and
Deed of Trust between the Company and the Trustee and to minor
exceptions and minor defects, irregularities and deficiencies
which, in the opinion of the Company, do
<PAGE> 26
4
not materially impair the use of such property for the
purpose for which it is held by the Company, and the Company
has adequate rights to maintain and operate such of its
transmission and distribution facilities as are located on
public or other property owned by the Company;
(6) The execution and delivery of the Letter Agreement and all
other documents to be executed and delivered by the Company
pursuant to the Letter Agreement have been duly authorized by
the Company and, assuming that the Letter Agreement
constitutes a valid and legally binding agreement under New
York law, which assumption is made with the Dealer Managers'
express approval;
(7) The QUIDS have been duly authorized, and, when issued and
delivered pursuant to the Exchange Offer and the Indenture,
will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding
obligations of the Company entitled to the benefits provided
by the Indenture, substantially in the form filed as an
exhibit to the Registration Statement; the Indenture has been
duly authorized and duly qualified under the Trust Indenture
Act and, on the Commencement Date, assuming due authorization,
execution and delivery thereof by the Trustee and that the
Indenture constitutes a valid and legally binding agreement
under New York law, which assumption is made with the Dealer
Managers' express approval, will constitute valid and legally
binding obligations, enforceable in accordance with their
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles; and the Indenture conforms, and the QUIDS
will conform, to the descriptions thereof contained in the
Prospectus as amended or supplemented with respect to the
Exchange Offer;
(8) To the best of my knowledge, after due inquiry, and other than
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the consolidated financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of my
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
<PAGE> 27
5
(9) The Company is not (x) in violation of its Restated Articles
of Incorporation or By-laws or (y) in default in the
performance or observance of any material obligation, covenant
or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument
known to me, after due inquiry, to which it is a party or by
which it or any of its properties may be bound;
(10) The making and consummation of the Exchange Offer, the
execution, delivery and performance by the Company of the
Letter Agreement, the issuance and delivery of the QUIDS and
the compliance by the Company with all of the provisions of
the QUIDS, the Indenture and the Letter Agreement and the
consummation of the transactions contemplated therein do not
and will not conflict with, violate or result in a breach of
any of the terms, conditions or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to me, after
due inquiry, to which the Company is a party or by which it is
bound or to which any of the property or assets of the Company
is subject, nor will such action result in any violation of
the provisions of the Restated Articles of Incorporation or
By-laws of the Company or any statute or any order, rule or
regulation known to me of any court or governmental agency,
including, without limitation, the Michigan Public Service
Commission ("MPSC") or any body having jurisdiction over the
Company or any of its properties, except that I express no
opinion as to rights of indemnity which may be limited by
applicable law; and no consent, approval, authorization,
order, registration or qualification of or with any such court
or governmental agency including, or body having jurisdiction
over the Company or any of its subsidiaries is required for
the issue and delivery of the QUIDS or the consummation by the
Company of the transactions contemplated by the Letter
Agreement or the Indenture, except such as have been, or will
have been prior to the Expiration Date, obtained under the
Act, the Exchange Act and the Trust Indenture Act and from the
MPSC and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the
distribution of the QUIDS pursuant to the Exchange Offer (as
to which I express no opinion).
I am licensed to practice in the State of Michigan and under
the Federal law of the United States. This opinion is for the benefit of the
Dealer Managers is not to be relied upon by any other parties without my
express written consent.
Very truly yours,
