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As filed with the Securities and Exchange Commission on June 15, 1998
REGISTRATION NO. 333-56333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MICHIGAN CONSOLIDATED GAS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MICHIGAN 38-0478040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
500 GRISWOLD STREET
DETROIT, MICHIGAN 48226
(313) 965-2430
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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RONALD E. CHRISTIAN, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
MICHIGAN CONSOLIDATED GAS COMPANY
500 GRISWOLD STREET
DETROIT, MICHIGAN 48226
(313) 965-2430
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies To:
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<S> <C>
JOHN W. OSBORN, ESQ. WILLIAM S. LAMB, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
919 THIRD AVENUE 125 WEST 55TH STREET
NEW YORK, NEW YORK 10022-3897 NEW YORK, NEW YORK 10019-5389
(212) 735-3000 (212) 424-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=============================================================================================================================
AMOUNT PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(2) PRICE PER UNIT(1) OFFERING PRICE FEE(2)
<S> <C> <C> <C> <C>
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Senior Debt Securities.................. $185,000,000 100% $185,000,000 $54,575(3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Does not include certain debt securities of Michigan Consolidated Gas
Company covered by Registration Statement No. 333-16285 which are being
carried over to this Registration Statement. Also does not include the
Registration Fee of $78,788 which was previously paid with respect to such
debt securities.
(3) Previously paid.
Pursuant to the provisions of Rule 429 under the Securities Act of 1933, the
Prospectus contained herein constitutes a combined Prospectus relating also to
$215,000,000 of unsold debt securities registered pursuant to the Registration
Statement on Form S-3 (Registration No. 333-16285) which are being carried
forward in connection with this Registration Statement. In the event that any of
such previously registered debt securities are offered prior to the effective
date of this Registration Statement, the amount of such debt securities will not
be included in any Prospectus hereunder. The amount of Senior Debt Securities
being registered hereunder, together with the remaining debt securities
previously registered under Registration Statement No. 333-16285, represents the
maximum amount of the registrant's debt securities which are expected to be
offered for sale.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
The Registration Statement includes two forms of Prospectus Supplement to
be used in connection with the marketing of any offering of Senior Debt
Securities that may occur immediately after the effectiveness of this
Registration Statement.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED JUNE 15, 1998
PROSPECTUS
$400,000,000
MICHIGAN CONSOLIDATED GAS COMPANY
SENIOR DEBT SECURITIES
------------------------
Michigan Consolidated Gas Company ("MichCon" or the "Company") from time to
time may offer, in an aggregate principal amount not to exceed $400,000,000, in
one or more series, its senior debt securities (the "Senior Debt Securities").
Prior to the Release Date (as defined below), the Senior Debt Securities will be
secured by the issuance and delivery to the Senior Trustee (as defined below) in
trust for the benefit of the holders of Senior Debt Securities first mortgage
bonds (the "First Mortgage Bonds") issued under the Company's Mortgage Indenture
(as defined below). The Senior Debt Securities will be issued under the
indenture (the "Senior Indenture") to be entered into between MichCon and
Citibank, N.A., as trustee (the "Senior Trustee"). The Senior Debt Securities
may be offered in amounts, at prices and on terms to be determined at the time
of sale. Certain terms of the Senior Debt Securities including, where
applicable, the specific designation, aggregate principal amount, interest rate,
interest payment dates, maturity, public offering price, any redemption terms or
other specific terms of each series of the Senior Debt Securities in respect of
which this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement or Supplements (a "Prospectus Supplement").
MichCon may sell the Senior Debt Securities to or through underwriters,
through dealers, directly to purchasers or through agents. See "Plan of
Distribution". The Prospectus Supplement will set forth the names of such
underwriters, dealers or agents, if any, any applicable commissions or discounts
and the proceeds to MichCon from such sale.
This Prospectus may not be used to consummate sales of the Senior Debt
Securities unless accompanied by a Prospectus Supplement applicable to the
Senior Debt Securities being sold.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
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AVAILABLE INFORMATION
MichCon is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "SEC"). Such reports and other information can be inspected and copied at
the SEC's Public Reference Room; Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices of the SEC: 7
World Trade Center, Suite 1300, New York, New York 10048; and Northwestern
Atrium Center, 5000 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a Web Site on the
Internet that contains reports and other information regarding registrants that
file electronically with the Commission (http://www.sec.gov).
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by MichCon with the SEC under the Securities Act of 1933, as
amended (the "1933 Act"), with respect to the Senior Debt Securities. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to MichCon and the Senior Debt Securities. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC or incorporated by
reference herein are not necessarily complete, and in each instance reference is
made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus and made a
part hereof the following documents heretofore filed with the SEC pursuant to
the 1934 Act:
1. MichCon's Annual Report on Form 10-K for the year ended December
31, 1997 ("Form 10-K").
2. MichCon's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
3. MichCon's Current Report on Form 8-K dated June 2, 1998.
All documents filed by MichCon pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference in this Prospectus or in any Prospectus Supplement
shall be deemed to be modified or superseded for purposes of this Prospectus or
any Prospectus Supplement to the extent that a statement contained in this
Prospectus or in any Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
MichCon hereby undertakes to provide without charge to each person to whom
a copy of this Prospectus has been delivered, on the written or oral request of
any such person, a copy of any or all of the documents referred to above which
have been or may be incorporated by reference in this Prospectus, other than
exhibits to such documents. Requests for such copies should be directed to:
Investor Relations, MCN Energy Group Inc., 500 Griswold Street, Detroit,
Michigan 48226; telephone 1-800-548-4655.
2
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
FORWARD-LOOKING STATEMENTS
Statements contained in or incorporated by reference into this Prospectus
which are not historical in nature are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve certain risks and uncertainties that may cause actual future
results to differ materially from those contemplated, projected, estimated or
budgeted in such forward-looking statements. Factors that may impact
forward-looking statements include, but are not limited to, the following: (i)
the effects of weather and other natural phenomena; (ii) increased competition
from other energy suppliers as well as alternative forms of energy; (iii) the
capital intensive nature of the Company's business; (iv) the economic climate
and growth in the geographic areas in which the Company does business; (v) the
uncertainty of gas reserve estimates; (vi) the timing and extent of changes in
prices for natural gas, electricity and crude oil; (vii) conditions of capital
markets and equity markets; and (viii) the effects of changes in governmental
policies and regulatory actions, including income taxes, environmental
compliance and authorized rates. See "Incorporation of Certain Documents by
Reference" above.
3
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THE COMPANY
MichCon is a Michigan corporation that was organized in 1898 and, with its
predecessors, has been in business for nearly 150 years. The Company is a public
utility engaged in the distribution and transmission of natural gas in the State
of Michigan. The Company serves 1.2 million residential, commercial and
industrial customers in the Detroit, Grand Rapids, Ann Arbor, Traverse City and
Muskegon metropolitan areas and in various other communities throughout the
state of Michigan. MichCon's gas sales and transportation markets were
approximately 937 billion cubic feet (Bcf) for the twelve months ended December
31, 1997. MichCon is a wholly-owned subsidiary of MCN Energy Group Inc., a
Michigan corporation.
At December 31, 1997, MichCon and its subsidiaries employed 2,867 persons.
The mailing address of MichCon's principal executive office is 500 Griswold
Street, Detroit, Michigan 48226, and its telephone number is (313) 965-2430.
USE OF PROCEEDS
Except as otherwise stated in the applicable Prospectus Supplement, net
proceeds from the sale of the Senior Debt Securities offered hereby will be used
for the acquisition of property; the construction, completion, extension or
improvement of facilities; working capital requirements; the improvement or
maintenance of service; the discharge or lawful retirement of short or long-term
debt and borrowings made or expected to be made; and for other corporate
purposes. Specific allocations of proceeds for such purposes have not been made
at this time. Funds may be borrowed in anticipation of future requirements.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth MichCon's ratio of earnings to fixed charges
for the periods indicated.
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<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------
1998 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1)(2)......... 3.17 3.17 3.27 3.47 3.26 3.58
</TABLE>
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(1) The Company is a guarantor of certain other debt. Fixed charges related to
such debt, deemed to be immaterial, have been excluded in computing the
above ratios.
(2) For the purpose of computing these ratios, earnings consists of net income
plus income taxes and fixed charges. Fixed charges consist of total
interest, amortization of debt discount, premium and expense and the
estimated portion of interest implicit in rentals.
SECURITIES
The Senior Debt Securities may be issued, from time to time, in one or more
series (i) secured by the Company's First Mortgage Bonds issued and delivered to
the Senior Trustee under the Twenty-Ninth Supplemental Indenture dated as of
July 15, 1989 providing for the restatement of the Indenture of Mortgage and
Deed of Trust dated as of March 1, 1944 between the Company and Citibank, N.A.
("Citibank" or the "Mortgage Trustee") and Robert T. Kirchner (the "Individual
Trustee" and, together with Citibank, the "Secured Trustees") which became
effective on April 1, 1994, as supplemented and amended by the supplemental
indentures thereto (collectively, the "Mortgage Indenture") or (ii) following
the Release Date (as defined below), as either unsecured senior notes or as
senior notes secured by first mortgage bonds issued under a mortgage indenture
other than the Mortgage Indenture. On the Release Date, any outstanding Senior
Debt Securities secured by the Company's First Mortgage Bonds when issued will
cease to be secured by First Mortgage Bonds issued under the Company's Mortgage
Indenture and, at the Company's option, either (a) will become unsecured general
obligations of the Company or (b) will be secured by first mortgage bonds issued
under a mortgage indenture other than the Mortgage Indenture.
4
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Senior Debt Securities will be issued under the Senior Indenture, the form
of which is an exhibit to the Registration Statement, and are described below
under the caption "Description of the Senior Debt Securities." Prior to the
Release Date, First Mortgage Bonds securing the Senior Debt Securities (the
"Collateral Bonds") will be issued under the Mortgage Indenture.
There is no requirement, under either the Senior Indenture or the Mortgage
Indenture (collectively, the "Indentures"), that future issues of debt
securities of the Company be issued under the Indentures, and, subject to
certain restrictions following the Release Date which are described in
"Description of the Senior Debt Securities--Restrictions," the Company will be
free to employ other indentures or documentation, containing provisions
different from those included in the Indentures or applicable to one or more
issues of Senior Debt Securities, in connection with future issues of such other
debt securities. Certain capitalized terms herein are defined in the Indentures.
DESCRIPTION OF THE SENIOR DEBT SECURITIES
GENERAL
Until the Release Date (as defined below), the Senior Debt Securities will
be secured by one or more series of Collateral Bonds issued and delivered to the
Senior Trustee under the Mortgage Indenture. See "-- Security; Release Date." ON
THE RELEASE DATE (AS DEFINED BELOW), THE SENIOR DEBT SECURITIES WILL CEASE TO BE
SECURED BY THE COLLATERAL BONDS AND, AT THE COMPANY'S OPTION, EITHER (I) WILL
BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL BE SECURED BY
FIRST MORTGAGE BONDS (THE "SUBSTITUTED PLEDGED BONDS") ISSUED UNDER A MORTGAGE
INDENTURE OTHER THAN THE MORTGAGE INDENTURE. The Senior Indenture provides that,
in addition to the Senior Debt Securities offered hereby, additional Senior Debt
Securities may be issued thereunder, without limitation as to aggregate
principal amount, from time to time, in one or more series, provided that, prior
to the Release Date, the amount of Senior Debt Securities that may be issued
cannot exceed the aggregate principal amount of First Mortgage Bonds that the
Company is able to issue under its Mortgage Indenture.
The Senior Indenture does not contain any debt covenants or provisions
which would afford holders of Senior Debt Securities protection in the event of
a highly leveraged transaction.
Reference is made to the Prospectus Supplement relating to the Senior Debt
Securities being offered (the "Offered Senior Debt Securities") for, among other
things, the following terms thereof: (1) the title of the Offered Senior Debt
Securities; (2) any limit on the aggregate principal amount of the Offered
Senior Debt Securities; (3) the date or dates on which the Offered Senior Debt
Securities will mature; (4) the rate or rates (which may be fixed or variable)
per annum at which the Offered Senior Debt Securities will bear interest or the
method by which such rate or rates shall be determined and the date from which
such interest will accrue or the method by which such date or dates shall be
determined; (5) the dates on which such interest will be payable and the Regular
Record Dates for such Interest Payment Dates; (6) the dates, if any, on which,
and the price or prices at which, the Offered Senior Debt Securities may,
pursuant to any mandatory or optional sinking fund provisions, be redeemed by
the Company and other detailed terms and provisions of such sinking funds; (7)
the date, if any, after which, and the price or prices at which, the Offered
Senior Debt Securities may, pursuant to any optional redemption provisions, be
redeemed at the option of the Company or of the Holder thereof and other
detailed terms and provisions of such optional redemption; and (8) any other
terms of the Offered Senior Debt Securities (which terms shall not be
inconsistent with the Senior Indenture). For a description of the terms of the
Offered Senior Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and to the description of Senior Debt Securities set
forth herein.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the principal of, and any premium or interest on, the Offered Senior Debt
Securities will be payable, and the Offered Senior Debt Securities will be
exchangeable and transfers thereof will be registrable, at the Place of Payment,
provided that, at the option of the Company, payment of interest may be made by
check mailed or wire transferred to the address of the person entitled thereto
as it appears in the Security Register.
5
<PAGE> 8
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Senior Debt Securities will be issued in United States dollars in
fully registered form, without coupons, in denominations of $1,000 or any
integral multiple thereof. No service charge will be made for any transfer or
exchange of the Offered Senior Debt Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
For purposes of the descriptions of the Senior Debt Securities, certain
defined terms have the following meanings:
"Indebtedness" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capitalized Lease Obligations of such Person; (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all obligations under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) all obligations of the type referred to in clauses
(i) through (iv) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Significant Subsidiary" means a Subsidiary or Subsidiaries of the Company
possessing assets (including the assets of its own Subsidiaries but without
regard to the Company or any other Subsidiary) having a book value, in the
aggregate, equal to not less than 10% of the book value of the aggregate assets
of the Company and its Subsidiaries calculated on a consolidated basis.
"Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with such
principles.
"Project Finance Indebtedness" means Indebtedness of a Subsidiary secured
by a Lien on any property, acquired, constructed or improved by such Subsidiary
after the date of the Indenture which Lien is created or assumed
contemporaneously with, or within 120 days after, such acquisition or completion
of such construction or improvement, or within six months thereafter pursuant to
a firm commitment for financing arranged with a lender or investor within such
120-day period, to secure or provide for the payment of all or any part of the
purchase price of such property or the cost of such construction or improvement,
or on any property existing at the time of acquisition thereof; provided that
such a Lien shall not apply to any property theretofore owned by any such
Subsidiary other than, in the case of any such construction or improvement, any
theretofore unimproved real property on which the property so constructed or the
improvement is located; and provided further that such Indebtedness, by its
terms, shall limit the recourse of any holder of such Indebtedness (or trustee
on such holder's behalf) in the event of any default in such Indebtedness to the
assets subject to such Liens and the capital stock of the Subsidiary issuing
such Indebtedness. Notwithstanding the foregoing, Project Finance Indebtedness
shall include all Indebtedness that would constitute Project Finance
Indebtedness but for the fact that such Indebtedness was issued prior to the
date of the Indenture and taking into account the fact that the property subject
to the Lien may have been acquired prior to the date of the Indenture.
The Senior Debt Securities may be issued under the Senior Indenture as
Original Issue Discount Securities to be offered and sold at a substantial
discount below their principal amount. Special federal income tax, accounting
and other considerations applicable to any such Original Issue Discount
Securities will be
6
<PAGE> 9
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof as a result of the occurrence of an Event
of Default and the continuation thereof.
SECURITY; RELEASE DATE
Until the Release Date (as defined below), the Senior Debt Securities will
be secured by one or more series of the Collateral Bonds issued and delivered by
the Company to the Senior Trustee. See "Description of the First Mortgage
Bonds." Upon the issuance of Senior Debt Securities prior to the Release Date,
the Company will simultaneously issue and deliver Collateral Bonds to the Senior
Trustee, as security for such Senior Debt Securities. Such Collateral Bonds will
have the same stated rate or rates of interest (or interest calculated in the
same manner), interest payment dates, stated maturity date and redemption
provisions, and will be in the same aggregate principal amount as the Senior
Debt Securities being issued. The Company has agreed to issue a related series
of Collateral Bonds in the name of the Senior Trustee in its capacity as trustee
under the Senior Indenture concurrently with the issuance of each series of
Senior Debt Securities and the Senior Trustee has agreed to hold each series of
Collateral Bonds in such capacity under all circumstances and not transfer such
Collateral Bonds until the earlier of the Release Date or the prior retirement
of the related series of Senior Debt Securities through redemption, repurchase
or otherwise. Prior to the Release Date, the Company shall make payments of the
principal of, and premium or interest on, each series of Collateral Bonds to the
Senior Trustee, which payments shall be applied by the Senior Trustee to
satisfaction of all obligations then due on the related series of Senior Debt
Securities.
THE "RELEASE DATE" WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS OF THE
COMPANY ISSUED AND OUTSTANDING UNDER THE MORTGAGE INDENTURE, OTHER THAN THE
COLLATERAL BONDS, HAVE BEEN RETIRED (AT, BEFORE OR AFTER THE MATURITY THEREOF)
THROUGH PAYMENT, REDEMPTION OR OTHERWISE. ON THE RELEASE DATE, THE SENIOR
TRUSTEE WILL DELIVER TO THE COMPANY FOR CANCELLATION ALL COLLATERAL BONDS, AND
THE COMPANY WILL CAUSE THE SENIOR TRUSTEE TO PROVIDE NOTICE TO ALL HOLDERS OF
SENIOR DEBT SECURITIES OF THE OCCURRENCE OF THE RELEASE DATE. AS A RESULT, ON
THE RELEASE DATE, THE COLLATERAL BONDS WILL CEASE TO SECURE THE SENIOR DEBT
SECURITIES, AND, AT THE OPTION OF THE COMPANY, THE SENIOR DEBT SECURITIES,
EITHER (I) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL
BE SECURED BY SUBSTITUTED PLEDGED BONDS. Each issue of Collateral Bonds will be
secured by a lien on certain property owned by the Company. In certain
circumstances prior to the Release Date, the Company is permitted to reduce the
aggregate principal amount of an issue of Collateral Bonds held by the Senior
Trustee, but in no event to an amount lower than the aggregate outstanding
principal amount of the Senior Debt Securities initially issued
contemporaneously with such Collateral Bonds. Following the Release Date, the
Company will cause the Mortgage Indenture to be closed, and the Company will not
issue any additional bonds under such Mortgage Indenture.
RESTRICTIONS
The Senior Indenture provides that the Company shall not consolidate with,
merge with or into any other corporation (whether or not the Company shall be
the surviving corporation), or sell, assign, transfer or lease all or
substantially all of its properties and assets as an entirety or substantially
as an entirety to any Person or group of affiliated Persons, in one transaction
or a series of related transactions, unless: (1) either the Company shall be the
continuing Person or the Person (if other than the Company) formed by such
consolidation or with which or into which the Company is merged or the Person
(or group of affiliated Persons) to which all or substantially all the
properties and assets of the Company are sold, assigned, transferred or leased
is a corporation (or constitute corporations) organized under the laws of the
United States or any State thereof or the District of Columbia and expressly
assumes, by an indenture supplemental to the Senior Indenture, all the
obligations of the Company under the Senior Debt Securities and the Senior
Indenture, executed and delivered to the Trustee in form satisfactory to the
Trustee; (2) immediately before and after giving effect to such transaction or
series of transactions, no Event of Default, and no Default, with respect to the
Senior Debt Securities shall have occurred and be continuing; and (3) the
Company shall have
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delivered to the Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indentures comply with the Senior Indenture.
The Senior Indenture also provides that, except as described below and
unless Substituted Pledged Bonds are issued to secure the Senior Debt Securities
from and after the Release Date, the Company will not, nor will it permit any
Significant Subsidiary to, issue, assume or guarantee any Indebtedness that is
secured by any Lien in, of or on the property of the Company or any of its
Subsidiaries, without effectively securing all Senior Debt Securities (other
than such Senior Debt Securities, if any, which by their terms, are expressly
excluded from this provision), equally and ratably with such Indebtedness;
except that this restriction shall not apply to: (i) Liens for taxes,
assessments or governmental charges or levies on its property if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings; (ii) Liens imposed
by law, such as carriers', warehousemen's and mechanics' liens and other similar
liens arising in the ordinary course of business which secure payment of
obligations not more than 60 days past due or which are being contested in good
faith by appropriate proceedings; (iii) Liens arising out of pledges or deposits
under worker's compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar legislation; (iv)
utility easements, rights of way, exceptions, agreements for the joint or common
use of property, restrictions and such other encumbrances or charges against
property as are of a nature generally existing with respect to properties of a
similar character and which do not in any material way affect the marketability
of the same or interfere with the use thereof in the business of the Company or
its Subsidiaries; (v) Liens on the capital stock, partnership interest, or other
evidence of ownership of any Subsidiary or such Subsidiary's assets that secure
project financing for such Subsidiary; (vi) purchase money liens upon or in
property now owned or hereafter acquired in the ordinary course of business
(consistent with the Company's business practices) to secure (A) the purchase
price of such property or (B) Indebtedness incurred solely for the purpose of
financing the acquisition, construction, or improvement of any such property to
be subject to such liens, or Liens existing on any such property at the time of
acquisition, or extensions, renewals, or replacements of any of the foregoing
for the same or a lesser amount, provided that no such lien shall extend to or
cover any property other than the property being acquired, constructed, or
improved and replacements, modifications, and proceeds of such property, and no
such extension, renewal, or replacement shall extend to or cover any property
not theretofore subject to the Lien being extended, renewed, or replaced; (vii)
Liens existing on the date the Senior Debt Securities are first issued; (viii)
Liens for no more than 90 days arising from a transaction involving accounts
receivable of the Company (including the sale of such accounts receivable),
where such accounts receivable arose in the ordinary course of the Company's
business; (ix) the right reserved to, or vested in, any municipality or public
authority by the terms of any franchise, grant, license or permit, or by any
provision of law, to terminate such franchise, grant, license or permit or to
purchase or appropriate or recapture or to designate a purchaser of any of the
mortgaged property, or to demand and collect from the Company any tax or other
compensation for the use of streets, alleys or other public places; (x) rights
reserved to, or vested in, any municipality or public authority to use, control,
remove or regulate any property of the Company; (xi) zoning laws and ordinances;
(xii) possible adverse rights or interests and inconsequential defects or
irregularities in title which, in the opinion of counsel, may be properly
disregarded; and (xiii) rights reserved to or vested in others to take or
receive any part of the gas, power, oil or other minerals or timber generated,
developed, manufactured or produced by, or grown on, or acquired with, any
property of the Company.
The Senior Indenture provides that, from and after the Release Date, the
Company will not, nor will it permit any Subsidiary to, enter into any
arrangement with any lender or investor (other than the Company or a
Subsidiary), or to which such lender or investor (other than the Company or a
Subsidiary) is a party, providing for the leasing by the Company or such
Subsidiary for a period, including renewals, in excess of three years of any
real property located within the United States which has been owned by the
Company or such Subsidiary for more than six months and which has been or is to
be sold or transferred by the Company or such Subsidiary to such lender or
investor or to any person to whom funds have been or are to be advanced by such
lender or investor on the security of such real property unless either (a) the
Company or such Subsidiary could create Indebtedness secured by a lien
consistent with the restrictions set forth in the foregoing paragraph on the
real property to be leased in an amount equal to the Value of such transaction
without equally and ratably securing the Senior Debt Securities or (b) the
Company, within six months after
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the sale or transfer shall have been made, applies an amount equal to the
greater of (i) the net proceeds of the sale of the real property leased pursuant
to such arrangement or (ii) the fair market value of the real property so leased
to the retirement of the Senior Debt Securities and other obligations of the
Company ranking on a parity with the Senior Debt Securities.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following are Events of Default under the Senior Indenture with respect
to the Senior Debt Securities of any series; (1) failure to pay interest on any
Senior Debt Security of that series when due, continued for 30 days; (2) failure
to pay the principal of (or premium, if any, on) any Senior Debt Security of
that series when due and payable at Maturity, upon redemption or otherwise; (3)
failure to observe or perform any other covenant, warranty or agreement
contained in the Senior Debt Securities of that series or in the Senior
Indenture (other than a covenant, agreement or warranty included in the Senior
Indenture solely for the benefit of Senior Debt Securities other than that
series), continued for a period to 60 days after notice has been given to the
Company by the Trustee or Holders of at least 25% in aggregate principal amount
of the Outstanding Senior Debt Securities of that series; (4) failure to pay at
final maturity, or acceleration of, Indebtedness of the Company having an
aggregate principal amount of more than 1% of the Company's consolidated total
assets (determined as of its most recent fiscal year-end), unless cured within
10 days after notice has been given to the Company by the Trustee or Holders of
at least 10% in aggregate principal amount of the Outstanding Senior Debt
Securities of that series; (5) prior to the Release Date, the occurrence of a
default under the Mortgage Indenture, of which default the Mortgage Trustee or
the Holders of a majority in aggregate principal amount of the outstanding
Senior Debt Securities have given written notice to the Mortgage Trustee; (6) if
any Substituted Pledged Bonds are outstanding, the occurrence of a default under
the Substituted Mortgage, of which default the trustee under such Substituted
Mortgage or the Holders of a majority in aggregate principal amount of the
outstanding Senior Debt Securities have given written notice to the Senior
Trustee; (7) certain events of bankruptcy, insolvency or reorganization relating
to the Company; and (8) any other Event of Default with respect to the Senior
Debt Securities of that series specified in the Prospectus Supplement relating
thereto or Supplemental Indenture under which such series of Senior Debt
Securities is issued.
The Senior Indenture provides that the Trustee shall, within 30 days after
the occurrence of any Default or Event of Default with respect to Senior Debt
Securities of any series, give the Holders of Senior Debt Securities of that
series notice of all uncured Defaults or Events of Default known to it (the term
"Default" includes any event which after notice or passage of time or both would
be an Event of Default); provided, however, that, except in the case of an Event
of Default or a Default in payment on any Senior Debt Securities of any series,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or directors or responsible officers
of the Trustee in good faith determine that the withholding of such notice is in
the interest of the Holders of Senior Debt Securities of that series.
If an Event of Default with respect to Senior Debt Securities of any series
(other than due to events of bankruptcy, insolvency or reorganization) occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Senior Debt Securities of that series, by
notice in writing to the Company (and to the Trustee if given by the Holders of
at least 25% in aggregate principal amount of the Senior Debt Securities of that
series), may declare the unpaid principal of and accrued interest to the date of
acceleration on all the Outstanding Senior Debt Securities of that series to be
due and payable immediately and, upon any such declaration, the Senior Debt
Securities of that series shall become immediately due and payable.
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Senior Debt Securities of any series will become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
any Senior Debt Security of that series. Upon any acceleration of the Senior
Debt Securities prior to the Release Date, the Senior Trustee is empowered to
cause the mandatory redemption of the Collateral Bonds or Substituted Pledged
Bonds, as the case may be.
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Any such declaration with respect to Senior Debt Securities of any series
may be annulled and past Events of Default and Defaults (except, unless
theretofore cured, an Event of Default or a Default in payment of principal of
or interest on the Senior Debt Securities of that series) may be waived by the
Holders of a majority of the principal amount of the Outstanding Senior Debt
Securities, upon the conditions provided in the Senior Indenture. For purposes
of the provisions described herein, the Company may cure an Event of Default or
Default in payment of principal or interest on the Senior Debt Securities at any
time after an acceleration of the Senior Debt Securities has been declared, but
before a judgment or decree for the immediate payment of the principal amount of
the Senior Debt Securities has been obtained, and, prior to the Release Date, so
long as all first mortgage bonds have not been accelerated, if the Company pays
or deposits with the Trustee a sum sufficient to pay all matured installments of
interest, the principal and any premium which has become due otherwise than by
acceleration and any other amounts due the Trustee, and all defaults shall have
been cured or waived, then such payment or deposit will cause an automatic
rescission and annulment of the acceleration of the Senior Debt Securities.
The Senior Indenture provides that the Company shall periodically file
statements with the Trustee regarding compliance by the Company with certain of
the respective covenants thereof and shall specify any Event of Default or
Defaults with respect to Senior Debt Securities of any series, in performing
such covenants, of which the signers may have knowledge.
MODIFICATION OF THE SENIOR INDENTURE; WAIVER
The Senior Indenture may be modified by the Company and the Trustee without
the consent of any Holders with respect to certain matters, including (i) to
cure any ambiguity, defect or inconsistency or to correct or supplement any
provision which may be inconsistent with any other provision of the Senior
Indenture and (ii) to make any change that does not materially adversely affect
the interests of any Holder of Senior Debt Securities of any series. In
addition, under the Senior Indenture, certain rights and obligations of the
Company and the rights of Holders of the Senior Debt Securities may be modified
by the Company and the Trustee with the written consent of the Holders of at
least a majority in aggregate principal amount of the Outstanding Senior Debt
Securities of each series affected thereby; but no extension of the maturity of
any Senior Debt Securities of any series, reduction in the interest rate or
extension of the time for payment of interest, change in the optional redemption
or repurchase provisions in a manner adverse to any Holder of Senior Debt
Securities of any series, modification that would adversely impair the interest
of the Senior Trustee in the Collateral Bonds held by it or, prior to the
Release Date, reduce the principal amount of any issue of Collateral Bonds
securing the Senior Debt Securities to an amount less than the principal amount
of the related issue of Senior Debt Securities or alter the payment provisions
of such Collateral Bonds in a manner adverse to the holders of the Senior Debt
Securities, other modification in the terms of payment of the principal of, or
interest on, any Senior Debt Securities of any series, or reduction of the
percentage required for modification, will be effective against any Holder of
any Outstanding Senior Debt Security of any series affected thereby without the
Holder's consent. The Senior Indenture does not limit the aggregate amount of
Senior Debt Securities of the Company which may be issued thereunder.
The Holders of a majority in aggregate principal amount of the Outstanding
Senior Debt Securities of any series may on behalf of the Holders of all Senior
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain restrictive covenants of the Senior
Indenture. The Holders of not less than a majority in aggregate principal amount
of the Outstanding Senior Debt Securities of any series may on behalf of the
Holders of all Senior Debt Securities of that series waive any past Event of
Default or Default under the Senior Indenture with respect to that series,
except an Event of Default or a Default in the payment of the principal of, or
premium, if any, or any interest on any Senior Debt Security of that series or
in respect of a provision which under the Senior Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding Senior Debt
Security of that series affected.
DEFEASANCE
The Company may terminate its substantive obligations in respect of the
Senior Debt Securities of any series (except for its obligations to pay the
principal of (and premium, if any, on) and the interest on the
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Senior Debt Securities of that series) by (i) depositing with the Trustee, under
the terms of an irrevocable trust agreement, money or U.S. Government
Obligations sufficient to pay all remaining indebtedness on the Senior Debt
Securities of that series, (ii) delivering to the Trustee either an Opinion of
Counsel or a ruling directed to the Trustee from the Internal Revenue Service to
the effect that the Holders of the Senior Debt Securities of that series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and termination of obligations, and (iii) complying with certain
other requirements set forth in the Senior Indenture.
VOTING OF COLLATERAL BONDS HELD BY SENIOR TRUSTEE
The Senior Trustee, as holder of Collateral Bonds, will attend any meeting
of holders of First Mortgage Bonds under the Mortgage Indenture, as to which it
receives due notice, or, at its option, will deliver its proxy in connection
therewith. Either at such meeting, or otherwise where the consent of holders of
First Mortgage Bonds is sought without a meeting, the Senior Trustee will vote
all of the Collateral Bonds held by it, or will consent with respect thereto, as
directed by the holders of a majority in aggregate principal amount of the
outstanding Senior Debt Securities; provided, however, that the Senior Trustee
shall not be required to vote the Collateral Bonds of any particular issue in
favor of, or give consent to, any action except upon notification by the Senior
Trustee to the holders of the related issue of Senior Debt Securities of such
proposal and consent thereto of the holders of a majority in principal amount of
the outstanding Senior Debt Securities of such issue.
CONCERNING THE SENIOR TRUSTEE
Citibank is the Senior Trustee under the Senior Indenture. Citibank is also
Trustee under the Mortgage Indenture and a depositary of funds of the Company.
See "Description of the First Mortgage Bonds -- Concerning the Secured
Trustees."
BOOK-ENTRY SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Senior Debt Securities of a series may be issued in whole or in part in the form
of one or more Global Securities (as such term is defined below) that will be
deposited with, or on behalf of, a depositary ("Depositary") or its nominee
identified in the applicable Prospectus Supplement. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of outstanding Senior
Debt Securities of the series to be represented by such Global Security or
Global Securities. Unless and until it is exchanged in whole or in part for
Senior Debt Securities in registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any nominee to a successor Depositary or a nominee of such
successor Depositary and except in the circumstances described in the applicable
Prospectus Supplement. The term "Global Security", when used with respect to any
series of Senior Debt Securities, means a Security that is executed by the
Company and authenticated and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, which shall be registered in the name
of the Depositary or its nominee and which shall represent, and shall be
denominated in an amount equal to the aggregate principal amount of, all of the
Outstanding Securities of such series or any portion thereof, in either case
having the same terms, including, without limitation, the same original issue
date, date or dates on which principal is due, and interest rate or method of
determining interest.
The specific terms of the depositary arrangement with respect to any
portion of a series of Senior Debt Securities to be represented by a Global
Security will be described in the applicable Prospectus Supplement. The Company
expects that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Senior
Debt Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Depositary will be represented by a Global Security
registered in the name of such Depositary or its nominee. Upon the issuance of
such Global
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Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Senior Debt Securities represented by such Global Security to the accounts
of institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Senior Debt Securities or, if such Senior Debt
Securities are offered and sold directly by the Company, by the Company.
Ownership of beneficial interests in such Global Security will be limited to
participants or Persons that may hold interests through participants. Ownership
of beneficial interests by participants in such Global Security will be shown
on, and the transfer of that ownership interest will be effected only through,
records maintained by the Depositary or its nominee for such Global Security.
Ownership of beneficial interests in such Global Security by Persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Global Securities.
Unless otherwise specified in the applicable Prospectus Supplement, so long
as the Depositary for a Global Security, or its nominee, is the registered owner
of such Global Security, such Depositary or such nominee, as the case may be,
will be considered the sole owner or Holder of the Senior Debt Securities
represented by such Global Security for all purposes under the Senior Indenture.
Unless otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Senior
Debt Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Senior Debt Securities of such series in certificated form and will not be
considered the Holders thereof for any purposes under the Senior Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person owns
its interest, to exercise any rights of a Holder under the Senior Indenture. The
Company understands that under existing industry practices, if the Company
requests any action of Holders or an owner of a beneficial interest in such
Global Security desires to give any notice or take any action a Holder is
entitled to give or take under the Senior Indenture, the Depositary would
authorize the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through such participants
to give such notice or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
DESCRIPTION OF THE FIRST MORTGAGE BONDS
The following summaries of certain provisions of the First Mortgage Bonds
and the Mortgage Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by express reference to, all the provisions of
the Mortgage Indenture, including the definitions therein of certain terms.
Certain capitalized terms herein are defined in the Mortgage Indenture.
GENERAL
Prior to the Release Date, any series of First Mortgage Bonds issued as
Collateral Bonds will be issued to the Senior Trustee. Each issue of such
Collateral Bonds to the Senior Trustee will be in a principal amount equal to
the principal amount of the Senior Debt Securities issued contemporaneously with
such Collateral Bonds. Prior to the Release Date, the Company shall make
payments of the principal of, and premium or interest on, each series of
Collateral Bonds to the Senior Trustee, which payments shall be applied by the
Senior Trustee to satisfaction of all obligations then due on the related series
of Senior Debt Securities. The Collateral Bonds will be exchangeable for a like
aggregate principal amount of Collateral Bonds of the same series of other
authorized denominations at the office of the Secured Trustees in New York, New
York.
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SECURITY AND PRIORITY
The Mortgage Indenture constitutes a first mortgage lien (subject to
exceptions and reservations set forth therein, to "permissible encumbrances,"
and to various matters specified under "Business; Franchises" and "Properties"
in MichCon's Form 10-K) upon substantially all of the fixed property and
franchises of MichCon, consisting principally of gas distribution and
transmission lines and systems, underground storage fields and buildings,
including property of the character initially mortgaged which has been or may be
acquired by MichCon subsequent to the execution and delivery of the Mortgage
Indenture. It prohibits creation of prior liens upon the mortgaged property,
other than "permissible encumbrances," but, within specified limitations in
certain cases, property may be acquired subject to preexisting liens or purchase
money and other liens created at the time or in connection with the acquisition
of such property. The property excepted from the lien of the Mortgage Indenture
consists principally of cash (unless deposited with the Mortgage Trustee under
the Mortgage Indenture), accounts receivable, gas stored in reservoirs except to
the extent specially pledged, materials and supplies, securities, vehicles and
leases.
The Mortgage Indenture does not contain any debt covenants or provisions
which would afford holders of First Mortgage Bonds protection in the event of a
highly leveraged transaction.
The First Mortgage Bonds will rank equally and ratably (except as to
sinking fund and other analogous funds established for the exclusive benefit of
a particular series) with all First Mortgage Bonds, regardless of series, from
time to time issued and outstanding under the Indenture.
RELEASE OF PROPERTY
Unless an event of default shall have occurred and be continuing, the
Company is entitled to possess, use and enjoy all the property and
appurtenances, franchise and rights conveyed by the Mortgage Indenture. Subject
to various limitations and requirements, the Company may obtain a release of any
part of the mortgaged property, except prior lien bonds, upon receipt by
Citibank of cash, as adjusted, equal to the consideration, if any, received or
to be received from the sale, surrender or other disposition of the property to
be released or the then fair value thereof (whichever shall be greater).
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
Additional First Mortgage Bonds may be issued under the Mortgage Indenture
in principal amounts (unlimited except as provided by law) equal to:
(1) 70% of the cost or fair value to the Company, whichever is less,
of unbonded net property additions made after December 31, 1943 (subject to
deductions in certain cases, if such net property additions secure prior
lien bonds);
(2) the sum of the principal amount of First Mortgage Bonds previously
issued under the Indenture, and of prior lien bonds theretofore deducted
under the Indenture, which have been retired or are then being retired and
have not theretofore been bonded; and
(3) the amount of cash deposited with Citibank for such purpose.
First Mortgage Bonds may be issued on the basis of net property additions
which include substantially all utility property subject to the Mortgage
Indenture or deposit of cash only if net earnings available for interest and
depreciation (before deduction for income taxes) for any specified 12
consecutive calendar months within the preceding 15 months equal 2 1/2 times
annual interest charges on the First Mortgage Bonds and any prior lien bonds.
Such earnings requirement need not be met where First Mortgage Bonds are to be
issued against First Mortgage Bonds or prior lien bonds which have been or are
being retired as described in (2) above if the First Mortgage Bonds to be issued
bear interest at a lower rate than the First Mortgage Bonds or prior lien bonds
which have been or are to be retired, or if the proceeds from the First Mortgage
Bonds to be issued are used to refund First Mortgage Bonds or prior lien bonds
which have been retired within two years prior to such issuance unless
additional First Mortgage Bonds requiring an earnings certificate have been
issued in the
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period between the retirement of the retired First Mortgage Bonds and the
issuance of the First Mortgage Bonds.
As of March 31, 1998, MichCon had approximately $1.235 billion of unbonded
net property additions, which would entitle it to issue approximately $864
million principal amount of additional First Mortgage Bonds on the basis of
unbonded net property additions as discussed under (1) in the second preceding
paragraph.
WITHDRAWAL OF CERTAIN CASH
Cash deposited with the Mortgage Trustee as a basis for the issuance of
additional First Mortgage Bonds may be withdrawn by MichCon in amounts described
in (1) and (2) under "Issuance of Additional Bonds".
DEFEASANCE
The Company may require the discharge of the Mortgage Indenture or treat a
series of First Mortgage Bonds as no longer outstanding thereunder if: (1) the
Company deposits with Citibank monies or certain obligations of the United
States of America or certain securities which are guaranteed by, or backed by
obligations of, the United States of America, in an amount sufficient to pay,
when due, the principal, premium if any, and any interest due and to become due;
and (2) the Company delivers an opinion of counsel to the effect that
registration is not required under the Investment Company Act of 1940, as
amended, applicable laws are not violated, and such discharge will not result in
a taxable event with respect to the First Mortgage Bonds the payment of which is
being provided for. In such event, the obligation of the Company duly and
punctually to pay and cause to be paid the principal, premium, if any, and
interest in respect of such First Mortgage Bonds shall be completely discharged.
Thereafter, the holders of such First Mortgage Bonds shall be entitled to
payment only out of funds on deposit with Citibank as aforesaid for their
payment.
MODIFICATION OF MORTGAGE INDENTURE
In general, modifications or alterations of the Mortgage Indenture and of
the rights or obligations of the Company and of the holders of First Mortgage
Bonds, as well as waivers of compliance with the Mortgage Indenture, may be made
with the consent of holders of 60% of the First Mortgage Bonds, or, if less than
all series of the First Mortgage Bonds are adversely affected, the consent of
the holders of 60% of the First Mortgage Bonds adversely affected. No such
modification, alteration or waiver may be made which will (1) permit the
extension of the time or times of payment of the principal of, or the interest
or the premium (if any) on, any First Mortgage Bond, or a reduction in the rate
of interest thereon, or otherwise affect the terms of payment of the principal
of, or the interest or the premium (if any) on, any First Mortgage Bond, or
affect the right of any holder of First Mortgage Bonds to institute suit for the
enforcement of any such payment on or after the due date thereof, (2) otherwise
than as permitted by the Mortgage Indenture, permit the creation of any lien
ranking prior or equal to the lien of the Mortgage Indenture with respect to any
of the mortgaged properties or (3) permit the reduction of the percentage of
First Mortgage Bonds required for the making of any such modification,
alteration or waiver.
CONCERNING THE SECURED TRUSTEES
Citibank is the Mortgage Trustee under the Mortgage Indenture. Citibank has
acted as paying agent on the outstanding First Mortgage Bonds and will act in
the same capacity with respect to any additional First Mortgage Bonds issued
under the Mortgage Indenture. It is also a depositary of funds of the Company.
Robert T. Kirchner, Individual Trustee under the Mortgage Indenture, is an
Officer of Citibank. Citibank also serves as trustee for the Senior Debt
Securities.
DEFAULT AND NOTICE THEREOF TO HOLDERS OF FIRST MORTGAGE BONDS
The Mortgage Indenture provides that, in case of an event of default as
defined therein, Citibank or the holders of not less than 25% in principal
amount of the First Mortgage Bonds may declare the principal and all accrued and
unpaid interest of all First Mortgage Bonds, if not already due, to be
immediately due and
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payable. Citibank, upon request of the holders of a majority in principal amount
of the outstanding First Mortgage Bonds, shall waive such default and rescind
any such declaration if such default is cured. The holders of a majority in
principal amount of the First Mortgage Bonds shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Secured Trustees and of exercising any power or trust conferred upon the
Secured Trustees, but under certain circumstances, the Secured Trustees may
decline to follow such directions or to exercise certain of their powers.
Holders of First Mortgage Bonds have no right to enforce any remedy under
the Mortgage Indenture unless the Secured Trustees have first had a reasonable
opportunity to do so following notice of default to Citibank and request by the
holders of 25% in principal amount of the First Mortgage Bonds for action by the
Secured Trustees with offer of indemnity satisfactory to the Secured Trustees
against cost, expenses and liabilities that may be incurred thereby, but this
provision does not impair the absolute right of any holder of First Mortgage
Bonds to enforce payment of the principal of and interest on his First Mortgage
Bond when due.
The Mortgage Indenture provides that the following shall constitute events
of default: failure to pay any installment of interest on any First Mortgage
Bond when due and payable, and continuance of such failure for 60 days; failure
to pay the principal of any First Mortgage Bond when due and payable, whether at
maturity, in connection with any sinking fund payment, or otherwise; failure to
pay any installment of interest on any prior lien bonds, and continuance of such
failure for the period of grace, if any, specified in the prior lien securing
such bonds; failure to pay any installment applied to the purchase or redemption
of any First Mortgage Bond, and continuance of such failure for 60 days; failure
to pay the principal of any prior lien bond when due and payable, whether at
maturity or otherwise; failure on the part of the Company to perform or observe
any other covenant, agreement or condition contained in the Mortgage Indenture
or in the First Mortgage Bonds or any prior lien bonds, continuance of such
failure for 90 days after written notice to the Company by Citibank or by the
holders of not less than 25% in principal amount of the First Mortgage Bonds;
and insolvency or bankruptcy, receivership or similar proceedings initiated by
the Company, or initiated against the Company and not dismissed or stayed within
45 days; and failure to renew or extend its corporate charter upon or prior to
the expiration of such under the provision of its Articles of Incorporation or
of law.
The Mortgage Indenture provides that the Secured Trustees shall give to the
holders of First Mortgage Bonds notice of the happening of a default known to
them within 90 days after the occurrence thereof (disregarding any period of
grace in the defaults referred to above) unless such default shall have been
cured, but except in case of default in the payment of principal, premium, if
any, or interest on the First Mortgage Bonds or in the payment of any sinking
fund installment, the Secured Trustees 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 Citibank in good faith determine that the
withholding of such notice is in the interest of the holders of First Mortgage
Bonds.
PLAN OF DISTRIBUTION
The Company may sell any series of the Senior Debt Securities (i) to or
through underwriters; (ii) to or through dealers; (iii) directly to purchasers;
or (iv) through agents. A Prospectus Supplement will set forth the terms of the
offering of the Senior Debt Securities; including the name or names of any
underwriters, dealers or agents, the purchase price of such Senior Debt
Securities and the proceeds to the Company from such sale, any underwriting
discounts and other items constituting underwriters' or agents' compensation,
any initial public offering price, any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchange on which such Senior
Debt Securities may be listed. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time. Only firms named in the Prospectus Supplement or a related
pricing supplement, if applicable, will be deemed to be underwriters, dealers or
agents in connection with the Senior Debt Securities offered thereby, and if any
of the firms expressly referred to below is not named in such Prospectus
Supplement or a related pricing supplement, then such firm will not be a party
to the underwriting or distribution agreement in respect of such Senior Debt
Securities, will not be purchasing any such Senior Debt Securities from the
Company and will have no direct
15
<PAGE> 18
or indirect participation in the underwriting or other distribution of such
Senior Debt Securities, although it may participate in the distribution of such
Senior Debt Securities under circumstances entitling it to a dealer's
commission.
If underwriters are used in the sale, the Senior Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Senior Debt Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Senior Debt Securities will be
named in the Prospectus relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the
Senior Debt Securities offered thereby will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of such Senior
Debt Securities if any are purchased.
The Senior Debt Securities may be sold directly by the Company or through
agents designated by the Company, from time to time. The Prospectus Supplement
will set forth the name of any agent involved in the offer or sale of the Senior
Debt Securities in respect of which the Prospectus Supplement is delivered and
any commissions payable by the Company to such agent. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
The Senior Debt Securities may be sold directly by the Company to investors
or others who may be deemed to be underwriters within the meaning of the 1933
Act with respect to any resale thereof. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase the Senior Debt Securities from the Company at the
public offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the 1933 Act, or to contribution with
respect to payments which such underwriters, dealers or agents may be required
to make in respect thereof. Underwriters, dealers and agents may engage in
transactions with, or perform services for the Company in the ordinary course of
business.
The Senior Debt Securities may or may not be listed on a national
securities exchange. No assurance can be given that there will be a market for
the Senior Debt Securities.
VALIDITY OF SECURITIES
The validity of the Senior Debt Securities offered hereby will be passed
upon for the Company by Ronald E. Christian, Esq., Vice President, General
Counsel and Secretary of MichCon and for any agents or underwriters by LeBoeuf,
Lamb, Greene & MacRae, L.L.P., a limited liability partnership including
professional corporations, 125 West 55th Street, New York, New York. LeBoeuf,
Lamb, Greene & MacRae, L.L.P. from time to time renders legal services to
MichCon and its affiliates. Certain legal matters with respect to the Senior
Debt Securities will be passed upon for the Company by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in this prospectus by reference from MichCon's Form 10-K
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
16
<PAGE> 19
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN
CONNECTION WITH AN OFFER MADE BY THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER PERSON,
UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Forward-Looking Statements............ 3
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Securities............................ 4
Description of the Senior Debt
Securities.......................... 5
Description of the First Mortgage
Bonds............................... 12
Plan of Distribution.................. 15
Validity of Securities................ 16
Experts............................... 16
</TABLE>
======================================================
======================================================
MICHIGAN CONSOLIDATED
GAS COMPANY
SENIOR DEBT SECURITIES
---------------------------
PROSPECTUS
---------------------------
======================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation are:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 54,575
Printing and Engraving...................................... 40,000*
Trustee Fees................................................ 10,000*
Legal Fees.................................................. 300,000*
Accounting Fees............................................. 25,000*
Rating Agency Fees.......................................... 125,000*
Miscellaneous............................................... 20,425*
--------
Total.................................................. $575,000*
========
</TABLE>
- -------------------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of Michigan Consolidated Gas Company ("MichCon" or the
"Company") and the Michigan Business Corporation Act ("MBCA") permit the
Company's officers and directors to be indemnified under certain circumstances
for expenses and, in some instances, for judgments, fines or amounts paid in
settlement of civil, criminal, administrative and investigative suits or
proceedings, including those involving alleged violations of the Securities Act
of 1933 (the "1933 Act"). There is directors' and officers' liability insurance
presently outstanding which insures the directors and officers of the Company
against claims arising out of the performance of their duties. Any agreement
relating to the issuance and sale of the Senior Debt Securities may provide for
indemnification by the underwriters, dealers or agents of the directors and
officers of the Company against certain civil liabilities, including liabilities
under the 1933 Act.
MichCon has entered into indemnification contracts with each officer and
director of MichCon that contain provisions similar to the provisions of the
MBCA referred to above.
II-1
<PAGE> 21
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1-1 Form of Distribution Agreement (to be filed on a subsequent
Form 8-K).
4-1 Form of Indenture between MichCon and Citibank, N.A. related
to Senior Debt.**
4-2 Indentures defining the rights of the holders of the
Company's First Mortgage Bonds: MichCon's Indenture of
Mortgage and Deed of Trust dated March 1, 1944 (Exhibit 7-D
to Registration Statement No. 2-5252); Twenty-ninth
Supplemental Indenture, dated July 15, 1989 (Exhibit 4-1 to
July 27, 1989 Form 8-K); Thirtieth Supplemental Indenture,
dated September 1, 1991 (Exhibit 4-1 to September 27, 1991
Form 8-K); Thirty-first Supplemental Indenture, dated
December 15, 1991 (Exhibit 4-1 to February 28, 1992 Form
8-K); Thirty-second Supplemental Indenture, dated January 1,
1993 (Exhibit 4-1 to 1992 Form 10-K); Thirty-third
Supplemental Indenture, dated May 5, 1995 (Exhibit 4-2 to
Registration Statement No. 33-59093); and Thirty-fourth
Supplemental Indenture, dated November 1, 1996 (Exhibit 4-2
to Registration Statement No. 333-16285); Note -- MichCon
hereby agrees to furnish to the SEC, upon request, a copy of
any instruments defining the rights of holders of long-term
debt issued by MichCon.
4-3 Form of Supplemental Indenture related to Senior Debt
Securities (to be filed on a subsequent Form 8-K).
4-4 Form of Supplemental Indenture related to Pledged Bonds (to
be filed on a subsequent Form 8-K).
5-1 Opinion of Ronald E. Christian, Esq., Vice President,
General Counsel and Secretary for MichCon.+
8-1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain tax matters.*
12-1 Computation of Ratio of Earnings to Fixed Charges.+
23-1 Independent Auditors' Consent -- Deloitte & Touche LLP.+
23-2 Consent of Ronald E. Christian, Esq., Vice President,
General Counsel and Secretary for MichCon. (included in
Exhibit 5-1).
23-3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8-1).
24-1 Powers of Attorney.+
24-2 Board Resolution authorizing issuance of the Senior Debt
Securities.+
25-1 Statement of Eligibility of Citibank, N.A.+
</TABLE>
- -------------------------
* Indicates documents filed herein.
** To be filed by Amendment.
+ Indicates documents previously filed.
References are to MichCon (File No. 1-7310) for documents incorporated by
reference.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any
II-2
<PAGE> 22
deviation from the low or high end of the estimated maximum offering
range may be reflected in the Form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Company
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 (the "1934 Act") that are incorporated by reference in this
Registration Statement;
(b) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(d) That, for purposes of determining any liability under the 1933
Act, each filing of the Company's annual report pursuant to Section 13(a)
or Section 15(d) of the 1934 Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof; and
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions of the Company's By-Laws, the Michigan
Business Corporation Act or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action suit or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be covered by the final adjudication of such
issue.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Detroit, State of Michigan, on June 15, 1998.
MICHIGAN CONSOLIDATED GAS COMPANY
By: /s/ HOWARD L. DOW III
------------------------------------
HOWARD L. DOW III
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on the date indicated.
<TABLE>
<CAPTION>
TITLE DATE
----- ----
<C> <C> <S>
Director, Chairman
- ------------------------------------------------
Alfred R. Glancy III
* Director, President and June 15, 1998
- ------------------------------------------------ Chief Executive Officer
Stephen E. Ewing
/s/ HOWARD L. DOW III Director, Senior Vice President June 15, 1998
- ------------------------------------------------ and Chief Financial Officer
Howard L. Dow III
* Director, Senior Vice President, June 15, 1998
- ------------------------------------------------ Business Development
Carl J. Croskey
* Controller June 15, 1998
- ------------------------------------------------
Robert Kaslik
* Director June 15, 1998
- ------------------------------------------------
William K. McCrackin
* Director June 15, 1998
- ------------------------------------------------
Daniel L. Schiffer
*By: /s/ HOWARD L. DOW III
------------------------------------------
Howard L. Dow III
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1-1 Form of Distribution Agreement (to be filed on a subsequent
Form 8-K).
4-1 Form of Indenture between MichCon and Citibank, N.A. related
to Senior Debt Securities.**
4-2 Indentures defining the rights of the holders of the
Company's First Mortgage Bonds: MichCon's Indenture of
Mortgage and Deed of Trust dated March 1, 1944 (Exhibit 7-D
to Registration Statement No. 2-5252); Twenty-ninth
Supplemental Indenture, dated July 15, 1989 (Exhibit 4-1 to
July 27, 1989 Form 8-K); Thirtieth Supplemental Indenture,
dated September 1, 1991 (Exhibit 4-1 to September 27, 1991
Form 8-K); Thirty-first Supplemental Indenture, dated
December 15, 1991 (Exhibit 4-1 to February 28, 1992 Form
8-K); Thirty-second Supplemental Indenture, dated January 1,
1993 (Exhibit 4-1 to 1992 Form 10-K); Thirty-third
Supplemental Indenture, dated May 5, 1995 (Exhibit 4-2 to
Registration Statement No. 33-59093); and Thirty-fourth
Supplemental Indenture, dated November 1, 1996 (Exhibit 4-2
to Registration Statement No. 333-16285); Note -- MichCon
hereby agrees to furnish to the SEC, upon request, a copy of
any instruments defining the rights of holders of long-term
debt issued by MichCon.
4-3 Form of Supplemental Indenture related to Senior Debt
Securities (to be filed on a subsequent Form 8-K).
4-4 Form of Supplemental Indenture related to Pledged Bonds (to
be filed on a subsequent Form 8-K).
5-1 Opinion of Ronald E. Christian, Esq., Vice President,
General Counsel and Secretary for MichCon.+
8-1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain tax matters.*
12-1 Computation of Ratio of Earnings to Fixed Charges.+
23-1 Independent Auditors' Consent -- Deloitte & Touche LLP.+
23-2 Consent of Ronald E. Christian, Esq., Vice President,
General Counsel and Secretary for MichCon. (included in
Exhibit 5-1).
23-3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8-1).
24-1 Powers of Attorney.+
24-2 Board Resolution authorizing issuance of the Senior Debt
Securities.+
25-1 Statement of Eligibility of Citibank, N.A.+
</TABLE>
- -------------------------
* Indicates documents filed herein.
** To be filed by Amendment.
+ Indicates documents previously filed.
References are to MichCon (File No. 1-7310) for documents incorporated by
reference.
II-5
<PAGE> 25
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 15, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE , 1998)
$
MICHIGAN CONSOLIDATED
GAS COMPANY
RESETABLE MANDATORY PUTABLE/REMARKETABLE SECURITIES
("MAPSSM"), DUE JUNE , 2038
------------------
The Resetable MAndatory Putable/remarketable Securities ("MAPSSM"), due
June , 2038 (the "Notes") offered hereby (the "Notes Offering") are being
issued by Michigan Consolidated Gas Company ("MichCon" or the "Company"). During
the period from and including June , 1998 to but excluding June , 2003 (the
"Initial Spread Period"), interest on the Notes will accrue at a per annum rate
equal to %. THE NOTES ARE SUBJECT TO MANDATORY OR OPTIONAL TENDER ON JUNE ,
2003 (THE "FIRST REMARKETING DATE"). (continued on next page)
UNTIL THE RELEASE DATE (AS DEFINED HEREIN), THE NOTES WILL BE SECURED BY
THE COMPANY'S FIRST MORTGAGE BONDS (THE "FIRST MORTGAGE BONDS") ISSUED AND
DELIVERED TO THE SENIOR TRUSTEE (AS DEFINED HEREIN) UNDER ITS MORTGAGE INDENTURE
(AS DEFINED HEREIN). ON THE RELEASE DATE, THE NOTES WILL CEASE TO BE SECURED BY
SUCH FIRST MORTGAGE BONDS AND, AT THE COMPANY'S OPTION, EITHER (i) WILL BECOME
UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (ii) WILL BE SECURED BY FIRST
MORTGAGE BONDS UNDER A SECURED MORTGAGE INDENTURE OTHER THAN THE MORTGAGE
INDENTURE. SEE "DESCRIPTION OF THE NOTES -- SECURITY; RELEASE DATE."
Concurrently with the Notes Offering, the Company is offering (the
"Separate Notes Offering") pursuant to a separate Prospectus Supplement,
$ aggregate principal amount of its senior debt securities (the
"Separate Notes"). Consummation of the Notes Offering is not a condition to
consummation of the Separate Notes Offering, and consummation of the Separate
Notes Offering is not a condition to consummation of the Notes Offering.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) THE COMPANY(3)(4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Resetable MAPS % % %
- -------------------------------------------------------------------------------------------------------------
Total $ $ $
=============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at
$ .
(4) The proceeds to the Company include a premium paid by the Mandatory
Tender Remarketing Agent for the right to require the mandatory tender
of all outstanding Resetable MAPS. See "Underwriting."
------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued by the Company and delivered to and accepted by the Underwriters
and subject to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the Notes will be made through the book-entry
facilities of The Depository Trust Company ("DTC") on or about June , 1998.
------------------
SALOMON SMITH BARNEY A.G. EDWARDS & SONS, INC.
June , 1998.
- ------------------
"MAPSSM" is a service mark of Salomon Brothers Inc
<PAGE> 26
(continued from previous page)
If Salomon Brothers Inc, as mandatory tender remarketing agent (the
"Mandatory Tender Remarketing Agent"), has elected to exercise its option to
remarket the Notes (the "Remarketing Right") upon the terms described herein,
except in certain circumstances, (i) the Notes will be subject to mandatory
tender to the Mandatory Tender Remarketing Agent at 100% of the principal amount
thereof for remarketing on the First Remarketing Date and (ii) the Notes will
bear interest from and after the First Remarketing Date to but excluding June
, 2013 (the "Second Remarketing Date") at the rate determined by the Mandatory
Tender Remarketing Agent in accordance with the procedures set forth herein. On
the date of such an election by the Mandatory Tender Remarketing Agent, the
Notes will be deemed to be in "Mandatory Tender Mode". If the Remarketing Right
is exercised, but the Mandatory Tender Remarketing Agent fails for any reason to
purchase any or all of the tendered Notes, the Company will be required to
repurchase the entire aggregate principal amount of such Notes from the
beneficial owners (the "Beneficial Owners") thereof, on the First Remarketing
Date at 100% of the principal amount thereof plus accrued interest, if any. From
and after the earlier to occur of (i) the First Remarketing Date in the event
that the Mandatory Tender Remarketing Agent elects not to remarket the Notes
pursuant to the Remarketing Right and (ii) the Second Remarketing Date, the
character and duration of the interest rate on the Notes will be determined by
the Reset Remarketing Agent (as defined herein) and agreed to by the Company on
each applicable Duration/Interest Mode Determination Date (as defined herein)
and the spread will be as agreed to by the Company and the Reset Remarketing
Agent on the corresponding Spread Determination Date (as defined herein),
subject to certain limitations. The Notes will be deemed to be in "Reset Mode"
on the date that is ten business days prior to (i) the First Remarketing Date in
the event that the Mandatory Tender Remarketing Agent fails to give notice of
exercise of the Remarketing Right or (ii) the Second Remarketing Date if the
Remarketing Right is exercised. If the Company and the Reset Remarketing Agent
are unable to agree on the Spread for any Spread Period either (i) after the
Initial Spread Period, if the Remarketing Right has not been exercised or (ii)
or after the Second Remarketing Date, if the Remarketing Right is exercised (in
either case, a "Subsequent Spread Period"), the Company will be required
unconditionally to repurchase and retire all of the Notes on the date
immediately following the end of the Initial Spread Period or the prior
Subsequent Spread Period, as the case may be (a "Reset Tender Date"), at a price
equal to 100% of the principal amount thereof, together with accrued interest to
the Reset Tender Date. In addition, if the Reset Remarketing Agent does not
purchase any of the Notes that are tendered on the Reset Tender Date, the
Company will be required unconditionally to repurchase and retire any such Notes
that were tendered but not repurchased by the Reset Remarketing Agent on the
Reset Tender Date at a price equal to 100% of the principal amount thereof,
together with accrued interest to the Reset Tender Date. The initial Reset
Remarketing Agent shall be Salomon Brothers Inc.
During the Initial Spread Period, interest on the Notes will be payable
semiannually on June and December of each year commencing December , 1998.
If the Notes are in Mandatory Tender Mode, interest will be payable semiannually
on June and December of each year, commencing December , 2003. If the
Notes are in Reset Mode, interest on the Notes during each Subsequent Spread
Period will be payable, as applicable, either (i) at a floating interest rate
(such Notes being in the "Floating Rate Interest Mode", and such interest rate
being a "Floating Rate") or (ii) at a fixed interest rate (such Notes being in
the "Fixed Rate Interest Mode" and such interest rate being a "Fixed Rate"), in
each case as determined on the applicable Duration/Interest Mode Determination
Date by the Reset Remarketing Agent and the Company in accordance with a
remarketing agreement between the Reset Remarketing Agent and the Company (the
"Reset Remarketing Agreement"). In Reset Mode, the Spread used in determining
the interest rate for the Notes during each Subsequent Spread Period will be
determined on each subsequent Spread Determination Date which precedes the
beginning of the corresponding Subsequent Spread Period, pursuant to agreement
between the Company and the Reset Remarketing Agent (except as otherwise
provided below). In Reset Mode, (i) if the Notes are in the Floating Rate
Interest Mode, interest on the Notes will be payable in arrears, as specified on
the applicable Duration/Interest Mode Determination Date, either monthly,
quarterly or semiannually, or (ii) if the Notes are in the Fixed Rate Interest
Mode, interest on the Notes will be payable semiannually in arrears on each June
and December during the applicable Subsequent Spread Period. "Interest
Payment Dates" as used herein shall mean each June and December except if
the Notes are in
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Reset Mode and the interest rate is a Floating Rate, in which case the Interest
Payment Dates shall be the first day of the month, quarter or semiannual period
established as interest payment dates on the applicable Duration/Interest Mode
Determination Date. See "Description of the Notes."
The Notes are not redeemable prior to the First Remarketing Date and, if
the Notes are remarketed pursuant to the Remarketing Right, they may not be
redeemed prior to the Second Remarketing Date; provided, however that the Notes
may be redeemed, at the option of the Company, on the First Remarketing Date at
the Optional Redemption Price described herein. Thereafter, if the Notes are in
Reset Mode, they may be redeemable, at the option of the Company, on any date of
commencement of a Subsequent Spread Period and on those Interest Payment Dates
that are specified as redemption dates by the Company on the applicable
Duration/Interest Mode Determination Date, in whole or in part, upon notice
thereof given at any time during the 30 calendar day period ending on the tenth
Business Day prior to the redemption date (provided that notice of any partial
redemption must be given to the holders ("Holders") at least 15 Business Days
prior to the redemption date), in accordance with the redemption type selected
on the Duration/Interest Mode Determination Date. Unless previously redeemed or
repurchased, the Notes will mature on June , 2038. See "Description of the
Notes -- Redemption of the Notes".
The obligations of the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent to purchase the Notes on the relevant tender date are each
subject to certain conditions and termination events customary in the Company's
public offerings. No Beneficial Owner of any Note shall have any rights or
claims against the Company or the Reset Remarketing Agent as a result of the
Reset Remarketing Agent not purchasing such Notes. The Company will agree to
indemnify the Mandatory Tender Remarketing Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
arising out of or in connection with its duties under the Mandatory Tender
Remarketing Agreement (as defined below). See "Description of the Notes --
Tender at Option of Beneficial Owners in Reset Mode," "-- Mandatory Tender" and
"-- Concerning the Mandatory Tender Remarketing Agent and the Reset Remarketing
Agent".
The Notes will be represented by a single Global Note registered in the
name of DTC or its nominee. Beneficial interests in the Global Note will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Except as described herein, Notes in
definitive form will not be issued.
-------------------------
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT MAINTAIN OR OTHERWISE
AFFECT THE PRICE OF THE NOTES. SUCH TRANSACTIONS MAY INCLUDE OVERALLOTMENT
TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER THE UNDERWRITERS' SHORT
POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
FORWARD-LOOKING STATEMENTS
Statements contained in or incorporated by reference into this Prospectus
Supplement or the accompanying Prospectus include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements involve certain risks and uncertainties that may cause future results
to differ materially from those contemplated, projected, estimated or budgeted
in such forward-looking statements. Factors that may impact forward-looking
statements include, but are not limited to, the following: (i) the effects of
weather and other natural phenomena; (ii) increased competition from other
energy suppliers as well as alternative forms of energy; (iii) the capital
intensive nature of the Company's businesses; (iv) economic climate and growth
in the geographic areas in which the Company does business; (v) the uncertainty
of gas and oil reserve estimates; (vi) the timing and extent of changes in
commodity prices for natural gas, electricity and crude oil; (vii) conditions of
capital markets and equity markets; and (viii) the effects of changes in
governmental policies and regulatory actions, including income taxes,
environmental compliance and authorized rates.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus, and by the more detailed information and the financial
statements and notes appearing in the incorporated documents.
THE COMPANY
MichCon is a Michigan corporation that was organized in 1898 and, with its
predecessors, has been in business for nearly 150 years. MichCon is a natural
gas utility primarily engaged in the distribution and transmission of natural
gas in the state of Michigan. MichCon also has subsidiaries involved in the
gathering and transmission of natural gas in northern Michigan. MichCon operates
one of the largest natural gas distribution and transmission systems in the
United States and the largest in Michigan.
MichCon serves 1.2 million customers in the Detroit, Grand Rapids, Ann
Arbor, Traverse City and Muskegon metropolitan areas and in various other
communities throughout the state of Michigan. The following services are
provided by MichCon:
- Gas Sales -- Includes the sale and delivery of natural gas to
residential and small-volume commercial customers.
- End User Transportation -- Through this service, large-volume
commercial and industrial customers that purchase natural gas
directly from producers or brokerage companies utilize the Company's
network to transport the gas to their facilities.
- Intermediate Transportation -- Provides transportation service
through the Company's gathering and high pressure transmission
system to producers, brokers and other local distribution companies
that own the natural gas, but are not the ultimate consumer.
MichCon is a wholly-owned subsidiary of MCN Energy Group, Inc. ("MCN"), a
New York Stock Exchange-listed company (ticker symbol: MCN). MCN's other
principal operating subsidiary is MCN Investment Corporation, a subsidiary
holding company for various diversified energy businesses.
THE NOTES OFFERING
SECURITIES OFFERED............ $ aggregate principal amount of Resetable
MAPS, due June , 2038.
MATURITY DATE................. The stated maturity of the Notes is June ,
2038.
INITIAL SPREAD PERIOD......... The Notes offered hereby will initially bear
interest at a per annum rate of % for the
period from and including June , 1998, to but
excluding June , 2003.
MANDATORY TENDER MODE AND
MANDATORY TENDER............ On the First Remarketing Date, the Mandatory
Tender Remarketing Agent will have the option,
if elected, to purchase the Notes following a
mandatory tender at 100% of the principal
amount thereof for subsequent remarketing. If
the Remarketing Right is exercised, such Notes
will be in "Mandatory Tender Mode" and will,
except in certain circumstances bear interest
at a rate determined in accordance with the
procedures set forth herein from the First
Remarketing Date to but excluding the Second
Remarketing Date.
RESET MODE AND OPTIONAL
TENDER........................ Upon the earlier to occur of ten business days
prior to (i) the First Remarketing Date if the
Mandatory Tender Remarketing Agent does not
exercise the Remarketing Right and (ii) the
Second
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Remarketing Date, the Notes will be in Reset
Mode commencing on such date. While in Reset
Mode, the Notes will be subject to optional
tender by the Holders thereof at the end of
each Spread period following the Initial Spread
Period, if the Remarketing Right is not
exercised or the Second Remarketing Date, if
the Remarketing Right is exercised, under each
case, thereafter following each Subsequent
Spread Period. If the Company and the Reset
Remarketing Agent agree on a subsequent Spread,
except in certain circumstances, the Notes will
bear interest either in a Floating Rate
Interest Mode or a Fixed Rate Interest Mode, as
determined by the Company and the Reset
Remarketing Agent.
REDEMPTION AND REPURCHASE..... The Notes may not be redeemed prior to the
First Remarketing Date and, if the Notes are
remarketed pursuant to the Remarketing Right,
they may not be redeemed prior to the Second
Remarketing Date. The Notes will be subject to
optional redemption by the Company (i) on the
First Remarketing Date at the Optional
Redemption Price or (ii) if the Notes are in
Reset Mode, on each Commencement Date and such
other dates as established by the Company on
the applicable Duration/Interest Mode
Determination Date. In the event that (i) the
Mandatory Tender Remarketing Agent fails for
any reason to purchase the Notes in Mandatory
Tender Mode following exercise of the
Remarketing Right, (ii) the Company and the
Reset Remarketing Agent fail for any reason to
agree on a Subsequent Spread for Reset Mode
Notes or (iii) the Reset Remarketing Agent
fails for any reason to purchase any Notes in
Reset Mode that are tendered on the Reset
Tender Date, the Company is required to
repurchase and retire any such Notes that were
tendered but not purchased by the Mandatory
Tender Remarketing Agent or the Reset
Remarketing Agent, as the case may be, at 100%
of the principal amount thereof plus accrued
interest.
SECURITY...................... Until the Release Date, the Notes will be
secured by the Company's First Mortgage Bonds
and thereafter will either (i) become unsecured
general obligations of the Company or (ii) be
secured by Substituted Mortgage Bonds.
USE OF PROCEEDS............... Proceeds from the sale of the Notes, in respect
of which this Prospectus Supplement is being
delivered, will be used to repay short-term
debt used for the retirement of First Mortgage
Bonds pursuant to a fixed-spread tender offer,
to fund capital expenditures and for general
corporate purposes.
SEPARATE NOTES OFFERING....... Concurrently with the Notes Offering, the
Company is offering $ aggregate
principal amount of the Separate Notes.
Consummation of the Notes Offering is not a
condition to consummation of the Separate Notes
Offering, and consummation of the Separate
Notes Offering is not a condition to the
consummation of the Notes Offering.
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USE OF PROCEEDS
Proceeds from the sale of the Notes, in respect of which this Prospectus
Supplement is being delivered, will be used to repay short-term debt used for
the retirement of First Mortgage Bonds pursuant to a fixed-spread tender offer,
to fund capital expenditures and for general corporate purposes.
DESCRIPTION OF THE NOTES
The following information concerning the Notes supplements and, to the
extent inconsistent, replaces the description of the general terms and
provisions of Senior Debt Securities set forth in the accompanying Prospectus.
Reference is also made to the remarketing agreement between the Company and the
Mandatory Tender Remarketing Agent (the "Mandatory Tender Remarketing
Agreement"), the Reset Remarketing Agreement and any Reset Remarketing Agreement
Supplement, as defined below. The forms of Reset Remarketing Agreement and any
Reset Remarketing Agreement Supplement are or will be filed with the Commission
and incorporated into the Registration Statement of which the Prospectus forms a
part. The Mandatory Tender Remarketing Agreement and the Reset Remarketing
Agreement, as it may be supplemented, are referred jointly herein as the
"Remarketing Agreements". Wherever a defined term is referred to and not herein
defined, the definition thereof is contained in the accompanying Prospectus or
the Indenture referred to therein.
GENERAL
The Notes will be issued as a new series of Senior Debt Securities under an
Indenture, dated as of June 1, 1998 (the "Senior Indenture"), between the
Company and Citibank, N.A., as trustee (the "Senior Trustee"), which is more
fully described in the accompanying Prospectus.
MATURITY
The Notes will mature on June 1, 2038 (the "Stated Maturity Date") unless
previously redeemed and will be issued only in fully registered, book-entry
form. See "-- Book-Entry Only -- The Depository Trust Company" below. If the
maturity date of the Notes falls on a day that is not a Business Day, the
related payment of principal and interest will be made on the next succeeding
Business Day as if it were made on the date such payment was due, and no
interest will accrue on the amounts so payable for the period from and after
such date.
SECURITY; RELEASE DATE
Upon the issuance of the Notes, the Company will simultaneously issue and
deliver to the Senior Trustee, as security for such Notes, First Mortgage Bonds,
Collateral Series B (the "Collateral Bonds"), under the Twenty-Ninth
Supplemental Indenture dated as of July 15, 1989, providing for the restatement
of the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between
the Company and Citibank, N.A. ("Citibank" or the "Mortgage Trustee") and Robert
T. Kirchner (the "Individual Trustee" and, together with Citibank, the "Secured
Trustees"), as supplemented by the Thirty-Fifth Supplemental Indenture to be
entered into relating to the Collateral Bonds (as so supplemented, the "Mortgage
Indenture") in an aggregate principal amount of $ . The Company has agreed
to issue the Collateral Bonds in the name of the Senior Trustee in its capacity
as trustee under the Senior Indenture and the Senior Trustee has agreed to hold
the Collateral Bonds in such capacity under all circumstances and not transfer
the Collateral Bonds until the earlier of the Release Date or the prior
retirement of the Notes through redemption, repurchase or otherwise. The
interest rates, Interest Payment Dates, method of paying interest, stated
maturity date and redemption provisions for the Collateral Bonds will
automatically mirror those of the Notes.
Prior to the Release Date, the Company shall make payments of the principal
of, and premium or interest on, the Collateral Bonds to the Senior Trustee,
which payments shall be applied by the Senior Trustee to satisfaction of all
obligations then due on the related Notes.
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Reference is made to "Description of Senior Debt Securities -- Security;
Release Date" in the accompanying Prospectus for a description of the
circumstances under which all or part of the Collateral Bonds will cease to be
held by the Senior Trustee as security for the Notes. As explained in the
Prospectus, the Notes will cease to be secured by the Collateral Bonds on the
Release Date and, at the option of the Company either (i) will become unsecured
general obligations of the Company or (ii) will be secured by first mortgage
bonds issued under a mortgage indenture other than the Mortgage Indenture (the
"Substituted Pledged Bonds"). If the Company does not elect to have the Notes
become unsecured on the Release Date, upon the issuance of any of the Notes on
or after the Release Date, the Company will simultaneously issue and deliver to
the Senior Trustee, as security for such Notes, Substituted Pledged Bonds. The
Substituted Pledged Bonds will have the same interest rate, interest payment
dates, Stated Maturity Date and redemption provisions, and will be in the same
aggregate principal amount, as the Notes then issued. The Company will be
required to give notice to the Holders, the Mandatory Tender Remarketing Agent
and the Reset Remarketing Agent of the occurrence of the Release Date.
In the event the Company elects to have the Notes become unsecured on the
Release Date, the Company's ability to create, assume or incur certain liens or
to enter into certain financing transactions will be restricted as described in
"Description of the Senior Debt Securities -- Restrictions" in the accompanying
Prospectus.
INITIAL INTEREST PERIOD
For the period from and including June , 1998 to but excluding June ,
2003 (the "Initial Spread Period"), interest on the Notes will accrue at a per
annum rate equal to % (computed on the basis of a 360-day year of twelve 30-day
months) and will be payable semiannually on June and December of each year
commencing December , 1998 to the persons in whose names the Notes are
registered at the close of business on the fifteenth calendar day (whether or
not a Business Day) immediately preceding the related Interest Payment Date. If
any Interest Payment Date during the Initial Spread Period falls on a day that
is not a Business Day, the payment shall be made on the next Business Day with
the same force and effect as if it were on the date such payment was due and no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date.
MANDATORY TENDER MODE INTEREST
If the Remarketing Right is exercised by the Mandatory Tender Remarketing
Agent, the Notes will bear interest from the First Remarketing Date to but
excluding the Second Remarketing Date at the rate determined by the Mandatory
Tender Remarketing Agent in accordance with the procedures set forth below
("Interest Rate to Second Remarketing"), except in certain circumstances. See
"-- Tenders -- Mandatory Tender". Such Interest Rate to Second Remarketing shall
be payable semiannually on June and December of each year, commencing
December , 2003, to the persons in whose name the Mandatory Tender Mode Notes
are registered on the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date. Interest on such Notes
will be computed on the basis of a 360-day year of twelve 30-day months. If any
Interest Payment Date or date of redemption or repurchase of the Notes in
Mandatory Tender Mode falls on a day that is not a Business Day, the payment
shall be made on the next Business Day with the same force and effect as if it
were on the date such payment was due and no interest shall accrue on the amount
so payable for the period from and after such Interest Payment Date or date of
earlier redemption or repurchase, as the case may be.
RESET MODE INTEREST
The Notes will be in Reset Mode on the date that is ten business days prior
to (i) the First Remarketing Date in the event the Mandatory Tender Remarketing
Agent fails to give notice of exercise of the Remarketing Right and (ii) the
Second Remarketing Date if the Remarketing Right is exercised. If the Notes are
in Reset Mode, the interest rate will be determined in the manner described
below for each Subsequent Spread Period which will be a period of at least six
months and not extending beyond the maturity date, designated by the Company.
Each Subsequent Spread Period will commence on a June or December , as
applicable (a "Commencement Date"), and will end on or before June , 2038.
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Floating Rate Interest Mode. During the Floating Rate Interest Mode,
interest on the Reset Mode Notes for each Subsequent Spread Period will be
payable either monthly, quarterly, or semiannually, as specified by the Company
on each Duration/Interest Mode Determination Date. With respect to Notes in the
Floating Rate Interest Mode, interest will be payable, in arrears, in the case
of Notes which pay: (i) monthly, on the first day of each month; (ii) quarterly,
on the first day of each March, June, September and December; and (iii)
semiannually, on the first day of each June and December. During any Subsequent
Spread Period during which the Reset Mode Notes are in the Floating Rate
Interest Mode, the interest rate on the Notes will be reset either monthly,
quarterly or semiannually, and the Notes will bear interest at a per annum rate
(computed on the basis of the actual number of days elapsed over a 360-day year)
equal to LIBOR (as defined below) for the applicable Interest Period (as defined
below), plus the applicable Spread. Interest on the Notes will accrue from and
including each Interest Payment Date to but excluding the next succeeding
Interest Payment Date or maturity date, as the case may be. Each interest period
during any Subsequent Spread Period (each, an "Interest Period") will be from
and including the most recent Interest Payment Date on which interest has been
paid to but excluding the next Interest Payment Date. The first day of an
Interest Period is referred to herein as an "Interest Reset Date".
If any Interest Payment Date (other than at maturity), redemption date,
Interest Reset Date, Duration/Interest Mode Determination Date, Spread
Determination Date (as defined below), Commencement Date or Reset Tender Date
would otherwise be a day that is not a Business Day, such Interest Payment Date,
redemption date, Interest Reset Date, Duration/Interest Mode Determination Date,
Spread Determination Date, Commencement Date or Reset Tender Date will be
postponed to the next succeeding day that is a Business Day.
LIBOR applicable for an Interest Period will be determined by the Rate
Agent (as defined under "-- Tenders -- Tender at Option of Beneficial Owners in
Reset Mode" below) as of the second London Business Day (as defined below)
preceding each Interest Reset Date (a "LIBOR Determination Date") in accordance
with the following provisions:
(i) LIBOR will be determined on the basis of the offered rate for
deposits in U.S. Dollars of the applicable Index Maturity commencing on the
second London Business Day immediately following such LIBOR Determination
Date, which appears on Telerate Page 3750 (as defined below) as of
approximately 11:00 a.m., London time, on such LIBOR Determination Date.
"Telerate Page 3750" means the display designated on page "3750" on Dow
Jones Markets Limited or any successor thereto (or such other page as may
replace the 3750 page on that service or such other service or services as
may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. Dollar deposits). If no
such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR
Determination Date will be determined in accordance with the provisions of
paragraph (ii) below. The term "London Business Day" means any day on which
dealings in deposits in U.S. Dollars are transacted in the London interbank
market.
(ii) With respect to a LIBOR Determination Date on which no rate
appears on Telerate Page 3750 as of approximately 11:00 a.m., London time,
on such LIBOR Determination Date, the Rate Agent shall request the
principal London offices of each of four major reference banks in the
London interbank market selected by the Rate Agent (after consultation with
the Company) to provide the Rate Agent with a quotation of the rate at
which deposits in U.S. Dollars of the applicable Index Maturity commencing
on the second London Business Day immediately following such LIBOR
Determination Date, are offered by it to prime banks in the London
interbank market as of approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 that is representative for a single transaction in
such market at such time. If at least two such quotations are provided,
LIBOR for such LIBOR Determination Date will be the arithmetic mean of such
quotations as calculated by the Rate Agent. If fewer than two quotations
are provided, LIBOR for such LIBOR Determination Date will be the
arithmetic mean of the rates quoted as of approximately 11:00 a.m., New
York City time, on such LIBOR Determination Date by three major banks in
The City of New York selected by the Rate Agent (after consultation with
the Company) for loans in U.S. Dollars to leading European banks, of the
applicable Index Maturity commencing on the
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<PAGE> 33
second London Business Day immediately following such LIBOR Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Rate Agent are not quoting as mentioned in this sentence, LIBOR for
such LIBOR Determination Date will be LIBOR determined with respect to the
immediately preceding LIBOR Determination Date.
The Index Maturity applicable to Notes in the Floating Rate Interest Mode
will be, in the case of Notes paying (i) monthly, one month; (ii) quarterly,
three months; and (iii) semiannually, six months.
Fixed Rate Interest Mode. If the Notes are to be reset to the Fixed Rate
Interest Mode, as agreed to by the Company and the Reset Remarketing Agent on a
Duration/Interest Mode Determination Date, then the applicable Fixed Rate for
the corresponding Subsequent Spread Period will be determined by 1:00 p.m. on
the third Business Day preceding the Commencement Date for such Subsequent
Spread Period (the "Fixed Rate Determination Date"), in accordance with the
following provisions: the Fixed Rate will be a per annum rate and will be
determined by adding the applicable Spread (as agreed to by the Company and the
Reset Remarketing Agent on the preceding Spread Determination Date) to the yield
to maturity (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the applicable United
States Treasury security, selected by the Rate Agent or its agent after
consultation with the Reset Remarketing Agent, as having a maturity comparable
to the duration selected for the following Subsequent Spread Period, which would
be used in accordance with customary financial practice in pricing new issues of
corporate debt securities of comparable maturity to the duration selected for
the following Subsequent Spread Period.
Interest in the Fixed Rate Interest Mode will be computed on the basis of a
360-day year of twelve 30-day months. Such interest will be payable semiannually
in arrears on the Interest Payment Dates occurring on each June and December
at the applicable Fixed Rate, as determined by the Company and the Reset
Remarketing Agent on the Fixed Rate Determination Date, beginning on the
Commencement Date and for the duration of the relevant Subsequent Spread Period.
Interest on the Notes will accrue from and including each Interest Payment Date
to but excluding the next succeeding Interest Payment Date or maturity date, as
the case may be. See "-- Additional Terms of the Notes in Reset Mode" for other
provisions applicable to Notes in the Fixed Rate Interest Mode.
If any Interest Payment Date or any redemption date in the Fixed Rate
Interest Mode falls on a day that is not a Business Day (in either case, other
than any Interest Payment Date or redemption date that falls on a Commencement
Date, in which case each such date, including the Commencement Date, will be
postponed to the next day that is a Business Day), the related payment of
principal and interest will be made on the next succeeding Business Day as if it
were made on the date such payment was due, and no interest will accrue on the
amounts so payable for the period from and after such dates.
TENDERS
Mandatory Tender. The following description sets forth the terms and
conditions of the Mandatory Tender in the event the Mandatory Tender Remarketing
Agent elects to exercise the Remarketing Right and remarkets the Notes on the
First Remarketing Date.
Provided that the Mandatory Tender Remarketing Agent gives notice to the
Company and the Senior Trustee on a Business Day not later than 4:00 p.m. New
York City time on the eleventh Business Day prior to the First Remarketing Date
of its intention to exercise the Remarketing Right (the "Mandatory Tender
Notification Date"), the Notes will be automatically tendered, or deemed
tendered, to the Mandatory Tender Remarketing Agent for purchase on the First
Remarketing Date, except in the circumstances described under "-- Redemption of
the Notes" below. Thirty calender days prior to the First Remarketing Date, the
Company will request that DTC provide preliminary notification to its
Participants that, on the date that is ten Business Days prior to the First
Remarketing Date either (i) the Remarketing Right will have been exercised and
the Notes will be subject to mandatory tender on the First Remarketing Date or
(ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination
Date will occur on such date. If the Mandatory Tender Remarketing Agent provides
notification of its intention to exercise the Remarketing Right on the Mandatory
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<PAGE> 34
Tender Notification Date, on the date that is ten Business Days prior to the
First Remarketing Date, the Company will request that DTC notify its
Participants that the Notes are in Mandatory Tender Mode and are subject to
mandatory tender on the First Remarketing Date. The purchase price for the
tendered Notes to be paid by the Mandatory Tender Remarketing Agent will equal
100% of the principal amount thereof. When the Notes are tendered for
remarketing pursuant to the Remarketing Right, the Mandatory Tender Remarketing
Agent may remarket such Notes for its own account at varying prices to be
determined by the Mandatory Tender Remarketing Agent at the time of each sale.
If the Remarketing Right is exercised, from and after the First Remarketing
Date, such Notes will bear interest at the Interest Rate to Second Remarketing
Date. If the Mandatory Tender Remarketing Agent exercises the Remarketing Right,
the obligation of the Mandatory Tender Remarketing Agent to purchase such Notes
on the First Remarketing Date is subject, among other things, to the conditions
that, since the Mandatory Tender Notification Date, no material adverse change
in the condition of the Company and its subsidiaries, considered as one
enterprise, shall have occurred and that no Event of Default (as defined in the
Senior Indenture), or any event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, with respect to the Notes
shall have occurred and be continuing. If for any reason the Mandatory Tender
Remarketing Agent does not purchase all tendered Notes on the First Remarketing
Date after providing notice of its intention to exercise the Remarketing Right,
the Company will be required to repurchase such Notes from the Beneficial Owners
thereof at a price equal to the principal amount thereof plus all accrued and
unpaid interest, if any, on such Notes to the First Remarketing Date. If the
Mandatory Tender Remarketing Agent does not provide notice of its intention to
exercise the Remarketing Right on the Mandatory Tender Notification Date, the
Notes will be in Reset Mode ten business days prior to the First Remarketing
Date.
Provided that the Remarketing Right is exercised, the Interest Rate to
Second Remarketing Date for the Notes will be determined by the Mandatory Tender
Remarketing Agent by 3:30 p.m., New York City time, on the third Business Day
immediately preceding the First Remarketing Date (the "Mandatory Tender
Determination Date") to the nearest one hundred-thousandth of one percent
(0.00001) per annum and will be equal to % (the "Base Rate"), plus the
Applicable Spread for the Notes (as defined below).
The "Applicable Spread" for the Notes in Mandatory Tender Mode is the
lowest bid indication, expressed as a spread (in the form of a percentage or in
basis points) above the Base Rate for such Notes, obtained by the Mandatory
Tender Remarketing Agent on the Mandatory Tender Determination Date from the
bids quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of such Notes at the Dollar Price, but assuming (i)
an issue date equal to the First Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the Second Remarketing
Date, and (iii) a stated annual interest rate, payable semiannually on each
Interest Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer to the Second Remarketing Date. If fewer
than five Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such bid indications obtained as
described above. The Interest Rate to Second Remarketing Date announced by the
Mandatory Tender Remarketing Agent, absent manifest error, will be binding and
conclusive upon the Beneficial Owners and Holders of the Notes, the Company and
the Senior Trustee.
"Dollar Price" means, with respect to the Notes in Mandatory Tender Mode,
the present value determined by the Mandatory Tender Remarketing Agent, as of
the First Remarketing Date, of the Remaining Scheduled Payments (as defined
below) discounted to the First Remarketing Date, on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months), at the Treasury Rate (as
defined below).
"Reference Corporate Dealers" mean leading dealers of publicly traded debt
securities of the Company in The City of New York (which may include the
Mandatory Tender Remarketing Agent or one of its affiliates) selected by the
Mandatory Tender Remarketing Agent after consultation with the Company.
"Treasury Rate" means, with respect to the First Remarketing Date, the rate
per annum equal to the semiannual equivalent yield to maturity or interpolated
(on a day count basis) yield to maturity of the Comparable Treasury Issues (as
defined below), assuming a price for the Comparable Treasury Issues
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<PAGE> 35
(expressed as a percentage of its principal amount), equal to the Comparable
Treasury Price (as defined below) for the First Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Mandatory Tender Remarketing Agent as having an
actual or interpolated maturity or maturities comparable to the Second
Remarketing Date.
"Comparable Treasury Price" means, with respect to the First Remarketing
Date, (a) the offer prices for the Comparable Treasury Issues (expressed in each
case as a percentage of its principal amount) on the Mandatory Tender
Determination Date, as set forth on "Telerate Page 500" (or such other page as
may replace Telerate Page 500) or (b) if such page (or any successor page) is
not displayed or does not contain such offer prices on such Business Day, (i)
the average of the Reference Treasury Dealer Quotations for the First
Remarketing Date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations, or (ii) if the Mandatory Tender Remarketing Agent
obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations. "Telerate Page 500" means the
display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such
other page as may replace Telerate Page 500 on such service) or such other
service displaying the offer prices specified in (a) above as may replace or be
the successor to Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the First Remarketing Date, the offer prices for
the Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted to the Mandatory Tender Remarketing Agent by such
Reference Treasury Dealer by 3:30 p.m., New York City time, on the Mandatory
Tender Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or
their respective affiliates that are primary U.S. Government securities
dealers), and their respective successors; provided, however, that if any of the
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), the
Mandatory Tender Remarketing Agent shall substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the Notes, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the applicable Base Rate only, that would be due after the First
Remarketing Date to and including the Second Remarketing Date, as determined by
the Mandatory Tender Remarketing Agent. For purposes of this calculation only,
it shall be assumed that the Notes will mature on the Second Remarketing Date.
Provided the Remarketing Right has been exercised, the Mandatory Tender
Remarketing Agent will notify the Company, the Senior Trustee and DTC by
telephone, confirmed in writing, by 4:00 p.m., New York City time, on the
Mandatory Tender Determination Date, of the Interest Rate to Second Remarketing
Date. In such event, all of the tendered Notes of a series will be automatically
delivered to the account of the Senior Trustee, by book-entry through DTC
pending payment of the purchase price therefor, on the First Remarketing Date,
and the Mandatory Tender Remarketing Agent will make or cause the Senior Trustee
to make payment to the DTC Participant of each tendering Beneficial Owner of the
Notes, by book-entry through DTC by the close of business on the First
Remarketing Date against delivery through DTC of such Beneficial Owner's
tendered Notes, of 100% of the principal amount of such tendered Notes. The
transactions described above will be executed on the First Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the Notes delivered
by book entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of the Notes remarketed by the
Mandatory Tender Remarketing Agent on and after the First Remarketing Date will
settle in immediately available funds through DTC's Same-Day Funds Settlement
System. The tender and settlement procedures described above, including
provisions for payment by purchasers of the Notes in the remarketing or for
payment to selling Beneficial Owners of tendered Notes, may be modified to the
extent required by DTC or to the extent required to facilitate the tender and
remarketing of such series of Notes in certificated form, if the book-entry
system is no longer available for the Notes at the time of the remarketing. In
addition, the Mandatory Tender Remarketing Agent may, in
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accordance with the terms of the Senior Indenture, modify the tender and
settlement procedures set forth above in order to facilitate the tender and
settlement process.
Tender at Option of Beneficial Owners in Reset Mode. If the Remarketing
Right is not exercised with respect to the First Remarketing Date or ten
business days prior to the Second Remarketing Date, the Notes will be in Reset
Mode. If the Notes are in Reset Mode because the Remarketing Right is not
exercised on the First Remarketing Date, the Second Remarketing Date will have
no effect on such Notes and no remarketing will be required on the Second
Remarketing Date. When the Notes are in Reset Mode, if the Company and the Reset
Remarketing Agent agree on the Spread on the Spread Determination Date with
respect to any Subsequent Spread Period, the Company and the Reset Remarketing
Agent will enter into a Reset Remarketing Agreement Supplement (a "Reset
Remarketing Agreement Supplement") under which the Reset Remarketing Agent will
agree, subject to the terms and conditions set forth therein, to purchase from
tendering Holders on the Reset Tender Date all Notes with respect to which the
Reset Remarketing Agent receives a Reset Tender Notice as described below at
100% of the principal amount thereof (the "Purchase Price"). Except as otherwise
provided in the next succeeding paragraph, each Beneficial Owner of a Note may,
at such owner's option, upon giving notice as provided below (a "Reset Tender
Notice"), tender such Note for purchase by the Reset Remarketing Agent on the
Reset Tender Date with respect to a Subsequent Spread Period at the Purchase
Price. The Purchase Price will be paid by the Reset Remarketing Agent in
accordance with the standard procedures of DTC, which currently provide for
payments in same-day funds. Interest accrued on the Notes with respect to the
preceding interest period will be paid in the manner described under "--
Book-Entry Only -- The Depository Trust Company" and "-- Additional Terms of the
Notes in Reset Mode" below. If such Beneficial Owner has an account at the Reset
Remarketing Agent and tenders such Note through such account, such Beneficial
Owner will not be required to pay any fee or commission to the Reset Remarketing
Agent. If such Note is tendered through a broker, dealer, commercial bank, trust
company or other institution other than the Reset Remarketing Agent, such
Beneficial Owner may be required to pay fees or commissions to such other
institution. It is currently anticipated that Notes so purchased by the Reset
Remarketing Agent will be remarketed by it.
The Reset Tender Notice must be received by the Reset Remarketing Agent
during the period commencing at 3:00 p.m., New York City time, on the Spread
Determination Date and ending at 12:00 noon, New York City time, on the second
Business Day following such Spread Determination Date for such Subsequent Spread
Period (the "Notice Date"). In order to ensure that a Reset Tender Notice is
received on a particular day, the Beneficial Owner of Notes must direct his
broker or other designated Participant or Indirect Participant to give such
Reset Tender Notice before the broker's cut-off time for accepting instructions
for that day. Different firms may have different cut-off times for accepting
instructions from their customers. Accordingly, Beneficial Owners should consult
the brokers or other Participants or Indirect Participants through which they
own their interests in the Notes for the cut-off times for such brokers, other
Participants or Indirect Participants. See "-- Book-Entry Only -- The Depository
Trust Company" below. Except as otherwise provided below, a Reset Tender Notice
shall be irrevocable. If a Reset Tender Notice is not received for any reason by
the Reset Remarketing Agent with respect to any Note by 12:00 noon, New York
City time, on the Notice Date, the Beneficial Owner of such Note shall be deemed
to have elected not to tender such Note for purchase by the Reset Remarketing
Agent.
The Reset Remarketing Agent will attempt, on a best efforts basis, to
remarket the tendered Notes at a price equal to 100% of the aggregate principal
amount so tendered. There is no assurance that the Reset Remarketing Agent will
be able to remarket the entire principal amount of Notes tendered in a
remarketing. The Reset Remarketing Agent will also have the option, but not the
obligation, to purchase any tendered Notes at such price. The obligation of the
Reset Remarketing Agent to purchase tendered Notes from the tendering Holders
and to remarket such Notes will be subject to certain conditions and termination
events customary in the Company's public offerings, including a condition that
no material adverse change in the condition of the Company and its subsidiaries,
taken as a whole, shall have occurred since the Spread Determination Date. In
the event that the Reset Remarketing Agent is unable to remarket some or all of
the tendered Notes and chooses not to purchase such tendered Notes, the Company
is obligated unconditionally to purchase and retire on the Reset Tender Date the
remaining unsold tendered Notes at a price equal to 100%
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of the principal amount, plus accrued interest, if any, to the applicable Reset
Tender Date. If the Reset Remarketing Agent does not purchase all Notes tendered
for purchase on any Reset Tender Date, it will promptly notify the Company and
the Senior Trustee.
No Beneficial Owner of any Note will have any rights or claims under the
Reset Remarketing Agreement Supplement or against the Company or the Reset
Remarketing Agent as a result of the Reset Remarketing Agent's not purchasing
such Notes.
The term "Reset Remarketing Agent" means the nationally recognized
broker-dealer selected by the Company to act as Reset Remarketing Agent. The
term "Rate Agent" means the entity selected by the Company as its agent to
determine (i) LIBOR and the interest rate on the Notes for any Interest Period
and/or (ii) the yield to maturity on the applicable United States Treasury
security that is used in connection with the determination of the applicable
Fixed Rate, and the ensuing applicable Fixed Rate pursuant to the Reset
Remarketing Agreement. The Company, in its sole discretion, will appoint a Rate
Agent and may change the Reset Remarketing Agent and the Rate Agent for any
Subsequent Spread Period at any time on or prior to 3:00 p.m., New York City
time, on the Duration/Interest Mode Determination Date relating thereto.
ADDITIONAL TERMS OF THE NOTES IN RESET MODE
The Spread that will be applicable during each Subsequent Spread Period for
Notes in Reset Mode will be the percentage (a) recommended by the Reset
Remarketing Agent so as to result in a rate that, in the opinion of the Reset
Remarketing Agent, will enable tendered Notes to be remarketed by the Reset
Remarketing Agent at 100% of the principal amount thereof, as described under
"-- Tenders -- Tender at Option of Beneficial Owners in Reset Mode" above, and
(b) agreed to by the Company. The interest rate mode during each Subsequent
Spread Period shall be either the Floating Rate Interest Mode or the Fixed Rate
Interest Mode, as determined by the Company and the Reset Remarketing Agent.
Unless notice of redemption of the Notes as a whole has been given, the
duration, redemption dates, redemption type (i.e., par, premium or make-whole,
including in the case of make-whole, Reinvestment Spread), redemption prices (if
applicable), Commencement Date, Interest Payment Dates and interest rate mode
(i.e., Fixed Rate Interest Mode or Floating Rate Interest Mode) (and any other
relevant terms) for each Subsequent Spread Period will be established by 3:00
p.m., New York City time, on the tenth Business Day prior to the Commencement
Date of each Subsequent Spread Period (each a "Duration/Interest Mode
Determination Date"). In addition, the Spread for each Subsequent Spread Period
will be established by 1:00 p.m., New York City time, on the fifth Business Day
prior to the Commencement Date of such Subsequent Spread Period (each, a "Spread
Determination Date"). Thirty calender days prior to the First Remarketing Date,
the Company will request that DTC provide preliminary notification to its
Participants that, on the date that is ten Business Days prior to the First
Remarketing Date either (i) the Remarketing Right will have been exercised and
the Notes will be subject to mandatory tender on the First Remarketing Date or
(ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination
Date will occur on such date. If the Mandatory Tender Remarketing Agent does not
provide notification of its intention to exercise the Remarketing Right on the
Mandatory Tender Notification Date, on the date that is ten Business Days prior
to the First Remarketing Date, the Company will request that DTC notify its
Participants of the occurrence of a Duration/Interest Mode Determination Date
and of the procedures that must be followed if any Beneficial Owner of a Note
wishes to tender such Note as described under "Tenders -- Tender at Option of
Beneficial Owners in Reset Mode" above. With respect to all Subsequent Spread
Periods established after the First Remarketing Date, the Company will request
not later than five nor more than ten calendar days prior to any
Duration/Interest Mode Determination Date, that DTC notify its Participants of
such Duration/Interest Mode Determination Date and of the procedures that must
be followed if any Beneficial Owner of a Note wishes to tender such Note as
described under "Tenders -- Tender at Option of Beneficial Owners in Reset Mode"
above. In the event that DTC or its nominee is no longer the Holder of record of
the Notes, the Company will notify the Holders of such information within such
period of time. These will be the only notices given by the Company or the Reset
Remarketing Agent with respect to such Duration/Interest Mode Determination Date
and procedures for tendering Notes. The term "Business Day" means any day other
than a Saturday or Sunday or a day on which banking institutions in The City of
New York are required
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<PAGE> 38
or authorized to close and, in the case of Notes in the Floating Rate Interest
Mode, that is also a London Business Day.
In the event that the Company and the Reset Remarketing Agent do not agree
on the Spread for any Subsequent Spread Period, then the Company is required
unconditionally to repurchase and retire all of the Notes on the Reset Tender
Date at a price equal to 100% of the principal amount thereof, together with
accrued interest to the Reset Tender Date. In the event that the Reset
Remarketing Agent fails to purchase any Notes tendered on the Reset Tender Date,
then the Company is required unconditionally to repurchase and retire any Notes
tendered and not purchased by the Reset Remarketing Agent.
All percentages resulting from any calculation of any interest rate for the
Notes will be rounded, if necessary, to the nearest one hundred thousandth of a
percentage point, with five one millionths of a percentage point rounded upward
and all dollar amounts will be rounded to the nearest cent, with one-half cent
being rounded upward.
REPURCHASE OF THE NOTES
If the Notes are in Mandatory Tender Mode, in the event that (i) the
Mandatory Tender Remarketing Agent for any reason does not notify the Company of
the Interest Rate to Second Remarketing Date by 4:00 p.m., New York City time,
on the Mandatory Tender Determination Date, or (ii) prior to the First
Remarketing Date, the Mandatory Tender Remarketing Agent has resigned and no
successor has been appointed on or before the Mandatory Tender Determination
Date, or (iii) since the Mandatory Tender Notification Date, the Mandatory
Tender Remarketing Agent terminates the Mandatory Tender Remarketing Agreement
due to the occurrence of a material adverse change in the condition of the
Company and its subsidiaries, considered as one enterprise, shall have occurred
or an Event of Default, or any event which, with the giving of notice or passage
of time, or both, would constitute an Event of Default, with respect to the
Notes shall have occurred and be continuing, or any other event constituting a
termination event under the Mandatory Tender Remarketing Agreement shall have
occurred, or (iv) the Mandatory Tender Remarketing Agent for any reason does not
purchase all tendered Notes on the First Remarketing Date, the Company will
repurchase such Notes on the First Remarketing Date at a price equal to 100% of
the principal amount of such Notes plus all accrued and unpaid interest, if any,
to the First Remarketing Date.
If the Notes are in Reset Mode, in the event that (i) the Company and the
Reset Remarketing Agent fail for any reason to agree on a Spread for a
Subsequent Spread Period, or (ii) prior to any Commencement Date, the Reset
Remarketing Agent has resigned and no successor has been appointed on or before
the Duration/Interest Mode Determination Date, or (iii) since the Spread
Determination Date, the Reset Remarketing Agent terminates the Reset Remarketing
Agreement due to the occurrence of a material adverse change in the condition of
the Company and its subsidiaries, considered as one enterprise, shall have
occurred or an Event of Default, or any event which, with the giving of notice
or passage of time, or both, would constitute an Event of Default, with respect
to the Notes shall have occurred and be continuing, or any other event
constituting a termination event under the Reset Remarketing Agreement shall
have occurred, or (iv) the Reset Remarketing Agent for any reason does not
purchase any Notes tendered on the Reset Tender Date, the Company will
repurchase any such tendered but not purchased by the Reset Remarketing Agent
Notes on the First Remarketing Date at a price equal to 100% of the principal
amount of such Notes plus all accrued and unpaid interest, if any, to the
applicable Reset Tender Date.
REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to the First Remarketing Date. On that
date, if the Mandatory Tender Remarketing Agent exercises the Remarketing Right,
the Notes will be subject to mandatory tender to the Mandatory Tender
Remarketing Agent for remarketing on such date, subject to the conditions
described above under "-- Tenders -- Mandatory Tender" and to the Company's
right to redeem the Notes as described in the next sentence. The Company will
notify the Mandatory Tender Remarketing Agent and the Senior Trustee, not later
than the Business Day immediately preceding the Mandatory Tender Determination
Date, if the Company irrevocably elects to exercise its right to redeem the
Notes, in whole but not in part,
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<PAGE> 39
from the Mandatory Tender Remarketing Agent on the First Remarketing Date at the
Optional Redemption Price. If the Remarketing Right is exercised and the Notes
are remarketed, they then may not be redeemed prior to the Second Remarketing
Date.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the Notes and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon, as determined by the Mandatory Tender
Remarketing Agent, discounted to the First Remarketing Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate, plus in either case accrued and unpaid interest from the First
Remarketing Date on the principal amount being redeemed to the date of
redemption. If the Company elects to redeem the Notes, it shall pay the Option
Redemption Price therefor in same-day funds by wire transfer to an account
designated by the Mandatory Tender Remarketing Agent on the First Remarketing
Date.
If the Notes are in Reset Mode, on each Commencement Date and on those
Interest Payment Dates specified as redemption dates by the Company on the
Duration/Interest Mode Determination Date in connection with any Subsequent
Spread Period, the Notes may be redeemed, at the option of the Company, in whole
or in part, upon notice thereof given at any time during the 30-calendar-day
period ending on the tenth Business Day prior to the redemption date (provided
that notice of any partial redemption must be given at least 15 calendar days
prior to the redemption date), in accordance with the redemption type selected
on the Duration/Interest Mode Determination Date. In the event that less than
all of the outstanding Notes are to be so redeemed, the Notes to be redeemed
will be selected by such method as the Senior Trustee shall deem fair and
appropriate. So long as the Global Note is held by DTC, the Company will give
notice to DTC, whose nominee is the record holder of all of the Notes, and DTC
will determine the principal amount to be redeemed from the account of each
Participant. This will be the only notice given by the Company or the Reset
Remarketing Agent with respect to redemption of the Notes. A Participant may
determine to redeem from some Beneficial Owners (which may include a Participant
holding Notes for its own account) without redeeming from the accounts of other
Beneficial Owners.
The redemption type to be chosen by the Company and the Reset Remarketing
Agent on the Duration/Interest Mode Determination Date may be one of the
following as defined herein: (i) Par Redemption; (ii) Premium Redemption; or
(iii) Make-Whole Redemption. "Par Redemption" means redemption at a redemption
price equal to 100% of the principal amount thereof, plus accrued interest
thereon, if any, to the redemption date. "Premium Redemption" means redemption
at a redemption price or prices greater than 100% of the principal amount
thereof, plus accrued interest thereon, if any, to the redemption date, as
determined on the Duration/Interest Mode Determination Date. "Make-Whole
Redemption" means redemption at a redemption price equal to the Make-Whole
Amount (as defined below), if any, with respect to such Notes. Unless otherwise
specified by the Company on any Duration/Interest Mode Determination Date, the
redemption type will be a Par Redemption.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, an amount equal to the greater of (i) 100% of
the principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon from the redemption date to
the end of the applicable Subsequent Spread Period, computed by discounting such
payments, in each case, to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the applicable
Treasury Rate plus the Reinvestment Spread, plus accrued interest on the
principal amount thereof to the date of redemption.
"Reinvestment Spread" means, with respect to the Notes, a number, expressed
as a number of basis points or as a percentage, selected by the Company and
agreed to by the Reset Remarketing Agent on the Duration/Interest Mode
Determination Date.
BOOK-ENTRY ONLY -- THE DEPOSITORY TRUST COMPANY.
DTC will act as securities depositary for the Notes. The Notes will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global Note
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certificates, representing the total aggregate principal amount of the Notes,
will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Direct Participants and
Indirect Participants are on file with the Securities and Exchange Commission.
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each Beneficial Owner of Notes is in turn to be recorded
on the Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants through which the
Beneficial Owners purchased Notes. Transfers of ownership interests in the Notes
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Notes, except in the event that
use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all the Notes deposited by Direct
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, DTC's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Notes. Under its usual procedures, DTC would mail an Omnibus Proxy to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co. consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and such
payments will be the responsibility of such Participant and not of DTC or the
Company, subject to any statutory or regulatory requirements to the contrary
that may be in effect from time to time.
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Payment of principal and interest to DTC is the responsibility of the Company,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants.
Except as provided herein, a Beneficial Owner will not be entitled to
receive physical delivery of Notes. Accordingly, each Beneficial Owner must rely
on the procedures of DTC to exercise any rights under the Notes.
DTC may discontinue providing its services as securities depositary with
respect to the Notes at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Note certificates are required to be printed and delivered.
Additionally, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the Notes. In that event, certificates for the Notes will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company does not take responsibility for the accuracy thereof.
CONCERNING THE MANDATORY TENDER REMARKETING AGENT AND THE RESET REMARKETING
AGENT
Both of the Mandatory Tender Remarketing Agent and the Reset Remarketing
Agent, in their respective individual or any other capacities, may buy, sell,
hold and deal in any of the Notes and may exercise any vote or join in any
action which any Beneficial Owner of Notes may be entitled to exercise or take
with like effect as if it did not act in any capacity under the applicable
Remarketing Agreement. Both of the Mandatory Tender Remarketing Agent and the
Reset Remarketing Agent, in their respective individual capacities, either as
principal or agent, may also engage in or have an interest in any financial or
other transaction with the Company as freely as if it did not act in any
capacity under the applicable Remarketing Agreement.
No Holder or Beneficial Owner of the Notes shall have any rights or claims
under the Reset Remarketing Agreement or against the Reset Remarketing Agent as
a result of the Reset Remarketing Agent not purchasing such Notes. The Company
will agree to indemnify the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent against certain liabilities, including liabilities under the
Securities Act arising out of or in connection with its duties under the
applicable Remarketing Agreement. Salomon Brothers Inc is the Mandatory Tender
Remarketing Agent and will also serve as the initial Reset Remarketing Agent and
Rate Agent. The Mandatory Tender Remarketing Agent and the Reset Remarketing
Agent may resign at any time, such resignation to be effective 10 days after
delivery to the Company and the Senior Trustee of notice of such resignation. In
such case, it shall be the sole obligation of the Company to appoint a successor
Mandatory Tender Remarketing Agent or a Reset Remarketing Agent, as the case may
be. The Company, in its sole discretion may change the Reset Remarketing Agent
for any Subsequent Spread Period at any time on or prior to 3:00 p.m., New York
City time, on the Duration/Interest Mode Determination Date relating thereto.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations
promulgated under the Code (the "Treasury Regulations"), rulings and decisions
now in effect, all of which are subject to change (prospectively or
retroactively) or possible differing interpretations. The following discussion
deals only with Notes held as capital assets and does not purport to deal with
persons in special tax situations, such as financial institutions, banks,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional currency
is not the United States dollar. It also does not deal with holders other than
original purchasers (except where otherwise specifically noted). Persons
considering the purchase of the Notes should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences of the purchase, ownership and
disposition of the Notes arising under the laws of any other taxing
jurisdiction.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any state thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust. As used herein, the term "Non-U.S. Holder"
means a Beneficial Owner of a Note that is not a U.S. Holder.
The Notes should constitute variable rate debt instruments ("VRDI") and the
interest payments received should be considered "qualified stated interest"
under section 1.1275-5 of the Treasury Regulations. Based on this treatment, the
interest received will be taxable to a U.S. Holder as ordinary interest income
at the time such payments are accrued or received in accordance with the U.S.
Holder's regular method of tax accounting.
Based on the foregoing treatment, upon the sale, exchange or retirement of
a Note, a U.S. Holder generally will recognize taxable gain or loss in an amount
equal to the difference, if any, between the amount realized upon the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest which will be taxable as interest income) and such U.S. Holder's
adjusted tax basis in its Note. A U.S. Holder's adjusted tax basis in a Note is
generally equal to such U.S. Holder's initial investment in such Note. In the
case of a noncorporate U.S. Holder, any gain recognized upon the sale, exchange
or retirement of a Note generally will be taxable at a maximum rate of 20% if
the U.S. Holder's holding period for the Note is more than 18 months or at a
maximum rate of 28% if such holding period is more than one year but not more
than 18 months. The deduction of capital losses is subject to certain
limitations.
While the Company intends to treat the Notes as VRDI's issued without
original issue discount ("OID"), it is possible that the Internal Revenue
Service ("IRS") will take the position that the Notes are either (i) VRDI's
issued with OID, or (ii) contingent payment debt instruments. In the event the
IRS were successful in either assertion, Holders could experience U.S. federal
income tax consequences significantly different from those discussed herein. The
Treasury Regulations governing VRDI's issued with OID and contingent payment
debt instruments are complex, and prospective purchasers of Notes are urged to
consult their tax advisors as to the potential application of, and the
consequences of applying, those regulations.
In general, information reporting requirements will apply to certain
payments of principal and interest and to the proceeds of sales of Notes made to
U.S. Holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the U.S. Holder (i) fails
to provide a taxpayer identification number ("TIN"), (ii) furnishes an incorrect
TIN, (iii) is notified by the IRS that it has failed to properly report payments
of interest and dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
S-18
<PAGE> 43
notified by the IRS that it is subject to backup withholding. In the case of
interest paid after December 31, 1998, a U.S. Holder generally will be subject
to backup withholding at a 31% rate unless certain IRS certification procedures
are complied with directly or through an intermediary.
The Company will furnish annually to the IRS and to record holders of the
Notes (other than with respect to certain exempt holders) information relating
to the interest accruing and paid on the Notes during the calendar year.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such U.S. Holder's U.S. federal income tax
liability provided the required information is furnished to the IRS.
NON-U.S. HOLDERS
Subject to the discussion below concerning backup withholding, 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 on a
Note owned by a Non-U.S. Holder, provided that the Beneficial Owner (i) does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code, and the regulations thereunder, (ii) is not a
controlled foreign corporation related, directly or indirectly, to the Company
through stock ownership, (iii) is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code and (iv) satisfies the
statement requirement (described generally below) set forth in Section 871(h)
and Section 881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the Beneficial Owner
of such Note, or a financial institution holding the Note on behalf of such
owner, must provide, in accordance with specified procedures, the Company or its
paying agent with a statement to the effect that the Beneficial Owner is not a
U.S. person. These requirements will be met if (1) the Beneficial Owner provides
his name and address, and certifies, under penalties of perjury, that he is not
a U.S. person (which certification may be made on an IRS Form W-8 (or successor
form)) or (2) a financial institution holding the Note on behalf of the
Beneficial Owner certifies, under penalties of perjury, that such statement has
been received by it and furnishes a paying agent with a copy thereof.
In the event that any of the above requirements are not satisfied, the
Company will nonetheless not withhold federal income tax on interest paid to a
Non-U.S. Holder if it receives IRS Form 4224 (or, after December 31, 1998, a
Form W-8) from that Non-U.S. Holder, establishing that such income is
effectively connected with the conduct of a trade or business in the United
States, unless the Company has knowledge to the contrary. Interest or any
redemption premium paid to a Non-U.S. Holder (other than a partnership) that is
effectively connected with the conduct by the Holder of a trade or business in
the United States is generally taxed at the graduated rates that are applicable
to United States persons. In the case of a Non-U.S. Holder that is a
corporation, such effectively connected income may also be subject to the United
States federal branch profits tax (which is generally imposed on a foreign
corporation on the deemed repatriation from the United States of effectively
connected earnings and profits) at a 30% rate (unless the rate is reduced or
eliminated by an applicable income tax treaty and the Holder is a qualified
resident of the treaty country). In the case of a partnership that has foreign
partners (i.e., persons who would be Non-U.S. Holders if they held the Notes
directly), such effectively connected income allocable to the foreign partner
would generally be subject to United States federal withholding tax (regardless
of whether such income is, in fact, distributed to such foreign partner) at a
35% rate, if the foreign partner is a corporation, or at a 39.6% rate, if the
foreign partner is not a corporation. Any foreign partner of such a partnership
would be entitled to a credit against his United States federal income tax for
his share of the withholding tax paid by the partnership.
A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale, exchange, redemption or
other disposition of Notes unless (i) the gain is effectively connected with a
trade or business of the Non-U.S. Holder in the United States, (ii) in the case
of a Non-U.S. Holder who is an individual and holds the Notes as a capital
asset, such Holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
S-19
<PAGE> 44
met, or (iii) the Non-U.S. Holder is subject to tax pursuant to certain
provisions of the Code applicable to United States expatriates.
Gains derived by a Non-U.S. Holder (other than a partnership) from the sale
or other disposition of Notes that are effectively connected with the conduct by
the Holder of a trade or business in the United States are generally taxed at
the graduated rates that are applicable to United States persons. In the case of
a Non-U.S. Holder that is a corporation, such effectively connected income may
also be subject to the United States branch profits tax. In the case of a
partnership that has foreign partners (i.e., persons who would be Non-U.S.
Holders if they held the Notes directly), such effectively connected income
allocable to the foreign partner would generally be subject to United States
federal withholding tax (regardless of whether such income is, in fact,
distributed to such foreign partner) at a 35% rate, if the foreign partner is a
corporation, or at a 39.6% rate, if the foreign partner is not a corporation.
Any foreign partner of such a partnership would be entitled to a credit against
his United States federal income tax for his share of the withholding tax paid
by the partnership. If an individual Non-U.S. Holder falls under clause (ii)
above, he will be subject to a flat 30% tax on the gain derived from the sale or
other disposition, which may be offset by United States capital losses
recognized within the same taxable year as such sale or other disposition
(notwithstanding the fact that he is not considered a resident of the United
States).
A Note beneficially owned by an individual who at the time of death is a
Non-U.S. Holder will not be subject to United States federal estate tax as a
result of such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code and provided that the interest payments with
respect to such Note would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United States
trade or business by such individual.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-U.S. Holders
if a statement described in clause (iv) of the first paragraph hereunder has
been received and the payor does not have actual knowledge that the Beneficial
Owner is a United States person.
Information reporting and backup withholding will not apply if payments of
interest on a Note are paid or collected by a custodian, nominee, or agent on
behalf of the Beneficial Owner of such Note if such custodian, nominee, or agent
has documentary evidence in its records that the Beneficial Owner is not a U.S.
person and certain other conditions are met, or the Beneficial Owner otherwise
establishes an exemption.
Payments on the sale, exchange or other disposition of a Note made to or
through a foreign office of a broker generally will not be subject to backup
withholding. However, payments made by a broker that is a United States person,
a controlled foreign corporation for United States federal income tax purposes,
a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three year
period, or (with respect to payments after December 31, 1998) a foreign
partnership with certain connections to the United States, will be subject to
information reporting unless the broker has in its records documentary evidence
that the Beneficial Owner is not a United States person and certain other
conditions are met, or the Beneficial Owner otherwise establishes an exemption.
Backup withholding may apply to any payment that such broker is required to
report if the broker has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a broker will be
subject to information reporting and backup withholding unless the Holder
certifies, under penalties of perjury, that it is not a United States person or
otherwise establishes an exemption.
For payments made after December 31, 1998, with respect to Notes held by
foreign partnerships, IRS regulations require that the certification described
in clause (iv) of the first paragraph hereunder above be provided by the
partners, rather than by the foreign partnership, and that the partnership
provide certain information, including a United States TIN. A look-through rule
will apply in the case of tiered partnerships.
Non-U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedures for
obtaining such an exemption, if available. Any amounts withheld under the backup
withholding
S-20
<PAGE> 45
rules will be allowed as a refund or credit against the Non-U.S. Holder's U.S.
federal income tax liability and may entitle such Holder to a refund, provided
the required information is furnished to the IRS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary obligation requirements imposed
under ERISA, in the context of the plan's particular circumstances, before
authorizing an investment in the Notes with assets of the plan. Accordingly,
among other factors, the fiduciary should consider whether such an investment
would satisfy the prudence and diversification requirements of ERISA, whether
such an investment would constitute an unauthorized delegation of fiduciary
authority and whether such an investment would be consistent with the documents
and instruments governing the plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain employee
benefit plans, as well as individual retirement accounts and Keogh plans subject
to Section 4975 of the Code (collectively, "Plans") from engaging in a wide
range of transactions ("Prohibited Transactions") involving the assets of a Plan
and persons who have certain specified relationships to the Plan ("parties in
interest," as defined in Section 3(14) of ERISA ("Parties in Interest"), and
"disqualified persons," as defined in Section 4975(e) (2) of the Code
("Disqualified Persons")). A violation of the Prohibited Transaction rules may
cause Plan fiduciaries, Parties in Interest and/or Disqualified Persons to be
subject to excise taxes or to incur other liabilities under ERISA and/or Section
4975 of the Code.
The Company, the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent, because of their activities or the activities of their
respective affiliates, may be considered to be Parties in Interest or
Disqualified Persons with respect to certain Plans. If the Notes are acquired by
a Plan with respect to which the Company or the Remarketing Dealer is, or
subsequently becomes, a Party in Interest or Disqualified Person, the purchase,
holding and/or sale of the Notes to the Remarketing Dealer could be deemed to be
a direct or indirect violation of the Prohibited Transaction rules unless an
applicable statutory or administrative exemption from the Prohibited Transaction
rules was available. Consequently, before investing in the Notes, any Plan
fiduciary or other person who is using the assets of a Plan to acquire the Notes
should determine whether any of the Company, the Mandatory Tender Remarketing
Agent or the Reset Remarketing Agent is a Party in Interest or Disqualified
Person with respect to such Plan and, if so, whether exemptive relief from the
Prohibited Transaction rules is available. Included among the available
administrative exemptions from the Prohibited Transaction rules that may be
applicable are: U.S. Department of Labor Prohibited Transaction Class Exemption
("PTCE") 90-1, regarding transactions involving insurance company pooled
separate accounts: PTCE 91-38, regarding transactions involving bank collective
investment funds; PTCE 84-14, regarding transactions effected by qualified
professional asset managers; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 95-60, regarding transactions involving
insurance company general accounts. There can be no assurance, however, that any
of these exemptions, even if all of the conditions specified therein are
satisfied.
Insurance companies considering an investment in the Notes should note that
the Small Business Job Protection Act of 1996 added new Section 401(c) of ERISA
relating to the status of the assets of insurance company general accounts under
ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the Department
of Labor issued proposed regulations (the "Proposed General Account
Regulations") in December, 1997, with respect to insurance policies issued on or
before December 31, 1998 that are supported by an insurer's general account. The
Proposed General Account Regulations are intended to provide guidance on which
assets held by the insurer constitute "plan assets" of an ERISA Plan for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code. The "plan assets" status of insurance company separate accounts is
unaffected by new Section 401(c) of ERISA, and separate account assets continue
to be treated as the "plan assets" of an ERISA Plan invested in a separate
account.
The discussion herein of ERISA is general in nature and is not intended to
be complete. Any fiduciary of a Plan considering an investment in the Notes
should consult with its legal advisors regarding the consequences and
advisability of such an investment.
S-21
<PAGE> 46
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement"), between the Company and Salomon Brothers Inc and
A.G. Edwards & Sons, Inc. (the "Underwriters"), the Company has agreed to sell
to each of the Underwriters, and each of the Underwriters has severally agreed
to purchase from the Company, the respective principal amount of the Notes set
forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Salomon Brothers Inc........................................
A.G. Edwards & Sons, Inc. ..................................
--------
Total..................................................
========
</TABLE>
In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any Notes are purchased. The Underwriters have advised the Company
that the Underwriters propose to offer the Notes from time to time for sale in
negotiated transactions or otherwise, at prices relating to prevailing market
prices determined at the time of sale. The Underwriters may effect such
transactions by selling Notes to or through dealers and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters and any purchasers of Notes for whom they may act as
agent. The Underwriters and any dealers that participate with the Underwriters
in the distribution of the Notes may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of Notes
by them may be deemed to be underwriting compensation.
The Notes are new issues of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the Notes. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. If the Underwriters
create a short position in the notes in connection with the offering, i.e., if
they sell Notes in an aggregate principal amount exceeding that set forth on the
cover page of this Prospectus Supplement, the Underwriters may reduce that short
position by purchasing Notes in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor the Underwriters makes any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may in the future engage in investment banking and general
financing and banking transactions with the Company and certain of its
affiliates.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to make contribution to
certain payments in respect thereof.
S-22
<PAGE> 47
LEGAL OPINIONS
The validity of the Indentures and the Notes will be passed upon for the
Company by Ronald E. Christian, Vice President, General Counsel and Secretary of
MichCon. Certain matters will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom, LLP, New York, New York. Certain legal matters will be
passed upon for the Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, 125 West 55th
Street, New York, New York 10019-5389. LeBoeuf, Lamb, Greene & MacRae, L.L.P.
from time to time renders legal services to MichCon and its affiliates.
S-23
<PAGE> 48
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OF SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements........... S-3
Summary.............................. S-4
Use of Proceeds...................... S-6
Description of the Notes............. S-6
Certain Federal Income Tax
Considerations..................... S-18
Erisa Considerations................. S-21
Underwriting......................... S-22
Legal Opinions....................... S-23
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Forward-Looking Statements........... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Securities........................... 4
Description of the Senior Debt
Securities......................... 5
Description of the First Mortgage
Bonds.............................. 12
Plan of Distribution................. 15
Validity of Securities............... 16
Experts.............................. 16
</TABLE>
======================================================
======================================================
$
MICHIGAN CONSOLIDATED
GAS COMPANY
RESETABLE
MANDATORY PUTABLE/REMARKETABLE
SECURITIES ("MAPSSM")
DUE JUNE , 2038
------------------
PROSPECTUS SUPPLEMENT
JUNE , 1998
------------------
SALOMON SMITH BARNEY
A.G. EDWARDS & SONS, INC.
"MAPSSM" is a service mark of
Salomon Brothers Inc
======================================================
<PAGE> 49
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 15, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE , 1998)
$
MICHIGAN CONSOLIDATED GAS COMPANY
EXTENDABLE MANDATORY PAR PUT REMARKETED SECURITIESSM
("MOPPRSSM") DUE JUNE , 2038
------------------------
The Extendable MandatOry Par Put Remarketed SecuritiesSM("MOPPRSSM"), due
June , 2038 (the "Notes") offered hereby (the "Notes Offering") are being
issued by Michigan Consolidated Gas Company ("MichCon" or the "Company"). During
the period from and including June , 1998 to but excluding June , 2008 (the
"Initial Spread Period"), interest on the Notes will accrue at a per annum rate
equal to %. THE NOTES ARE SUBJECT TO MANDATORY OR OPTIONAL TENDER ON JUNE ,
2008 (THE "FIRST REMARKETING DATE").
(continued on next page)
UNTIL THE RELEASE DATE (AS DEFINED HEREIN), THE NOTES WILL BE SECURED BY
THE COMPANY'S FIRST MORTGAGE BONDS (THE "FIRST MORTGAGE BONDS") ISSUED AND
DELIVERED TO THE SENIOR TRUSTEE (AS DEFINED HEREIN) UNDER ITS MORTGAGE INDENTURE
(AS DEFINED HEREIN). ON THE RELEASE DATE, THE NOTES WILL CEASE TO BE SECURED BY
SUCH FIRST MORTGAGE BONDS AND, AT THE COMPANY'S OPTION, EITHER (i) WILL BECOME
UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (ii) WILL BE SECURED BY FIRST
MORTGAGE BONDS UNDER A SECURED MORTGAGE INDENTURE OTHER THAN THE MORTGAGE
INDENTURE. SEE "DESCRIPTION OF THE NOTES -- SECURITY; RELEASE DATE."
Concurrently with the Notes Offering, the Company is offering (the
"Separate Notes Offering"), pursuant to a separate Prospectus Supplement,
$ aggregate principal amount of its senior debt securities (the
"Separate Notes"). Consummation of the Notes Offering is not a condition to
consummation of the Separate Notes Offering, and consummation of the Separate
Notes Offering is not a condition to consummation of the Notes Offering.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Notes will be sold to the public at varying prices to be determined by
the Underwriters at the time of each sale. The net proceeds to the Company,
before deducting expenses payable by the Company (estimated to be $ ),
will be % of the principal amount of the Notes sold, and the aggregate net
proceeds will be $ . For further information with respect to the plan
of distribution and any discounts, commissions or profits on resales of Notes
that may be deemed underwriting discounts or commissions, see "Underwriting."
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued by the Company and delivered to and accepted by the Underwriters
and subject to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the Notes will be made through the book-entry
facilities of The Depository Trust Company ("DTC") on or about June , 1998.
------------------------
MERRILL LYNCH & CO. FIRST CHICAGO CAPITAL MARKETS, INC.
------------------------
The date of this Prospectus Supplement is June , 1998.
- ------------------------
"MandatOry Par Put Remarketed SecuritiesSM" and "MOPPRSSM" are service marks
owned by Merrill Lynch & Co., Inc.
<PAGE> 50
(continued from previous page)
If Merrill Lynch, Pierce, Fenner & Smith Incorporated, as mandatory tender
remarketing agent (the "Mandatory Tender Remarketing Agent"), has elected to
exercise its option to remarket the Notes (the "Remarketing Right") upon the
terms described herein, except in certain circumstances, (i) the Notes will be
subject to mandatory tender to the Mandatory Tender Remarketing Agent at 100% of
the principal amount thereof for remarketing on the First Remarketing Date and
(ii) the Notes will bear interest from and after the First Remarketing Date to
but excluding June , 2018 (the "Second Remarketing Date") at the rate
determined by the Mandatory Tender Remarketing Agent in accordance with the
procedures set forth herein. On the date of such an election by the Mandatory
Tender Remarketing Agent, the Notes will be deemed to be in "Mandatory Tender
Mode". If the Remarketing Right is exercised, but the Mandatory Tender
Remarketing Agent fails for any reason to purchase any or all of the tendered
Notes, the Company will be required to repurchase the entire aggregate principal
amount of such Notes from the beneficial owners (the "Beneficial Owners")
thereof, on the First Remarketing Date at 100% of the principal amount thereof
plus accrued interest, if any. From and after the earlier to occur of (i) the
First Remarketing Date in the event that the Mandatory Tender Remarketing Agent
elects not to remarket the Notes pursuant to the Remarketing Right and (ii) the
Second Remarketing Date, the character and duration of the interest rate on the
Notes will be determined by the Reset Remarketing Agent (as defined herein) and
agreed to by the Company on each applicable Duration/Interest Mode Determination
Date (as defined herein) and the spread will be as agreed to by the Company and
the Reset Remarketing Agent on the corresponding Spread Determination Date (as
defined herein), subject to certain limitations. The Notes will be deemed to be
in "Reset Mode" on the date that is ten business days prior to (i) the First
Remarketing Date in the event that the Mandatory Tender Remarketing Agent fails
to give notice of exercise of the Remarketing Right or (ii) the Second
Remarketing Date if the Remarketing Right is exercised. If the Company and the
Reset Remarketing Agent are unable to agree on the Spread for any Spread Period
either (i) if the Remarketing Rights not exercised, after the Initial Spread
Period or, (ii) if the Remarketing Right is exercised, after the Second
Remarketing Date (in either case, a "Subsequent Spread Period"), the Company
will be required unconditionally to repurchase and retire all of the Notes on
the date immediately following the end of the Initial Spread Period or the prior
Subsequent Spread Period, as the case may be (a "Reset Tender Date"), at a price
equal to 100% of the principal amount thereof, together with accrued interest to
the Reset Tender Date. In addition, if the Reset Remarketing Agent does not
purchase any of the Notes that are tendered on the Reset Tender Date, the
Company will be required unconditionally to repurchase and retire any such Notes
that are tendered but not purchased by the Reset Remarketing Agent on the Reset
Tender Date at a price equal to 100% of the principal amount thereof, together
with accrued interest to the Reset Tender Date. The initial Reset Remarketing
Agent shall be Merrill Lynch, Pierce, Fenner & Smith Incorporated.
During the Initial Spread Period, interest on the Notes will be payable
semiannually on June and December of each year commencing December , 1998.
If the Notes are in Mandatory Tender Mode, interest will be payable semiannually
on June and December of each year, commencing December , 2008. If the
Notes are in Reset Mode, interest on the Notes during each Subsequent Spread
Period will be payable, as applicable, either (i) at a floating interest rate
(such Notes being in the "Floating Rate Interest Mode", and such interest rate
being a "Floating Rate") or (ii) at a fixed interest rate (such Notes being in
the "Fixed Rate Interest Mode" and such interest rate being a "Fixed Rate"), in
each case as determined, on the applicable Duration/Interest Mode Determination
Date, by the Reset Remarketing Agent and the Company in accordance with a
remarketing agreement between the Reset Remarketing Agent and the Company (the
"Reset Remarketing Agreement"). In Reset Mode, the Spread used in determining
the interest rate for the Notes during each Subsequent Spread Period will be
determined on each subsequent Spread Determination Date which precedes the
beginning of the corresponding Subsequent Spread Period, pursuant to agreement
between the Company and the Reset Remarketing Agent (except as otherwise
provided below). In Reset Mode, (i) if the Notes are in the Floating Rate
Interest Mode, interest on the Notes will be payable in arrears, as specified on
the applicable Duration/Interest Mode Determination Date, either monthly,
quarterly or semi-annually, or (ii) if the Notes are in the Fixed Rate Interest
Mode, interest on the Notes will be payable semiannually in arrears on each June
and December during the applicable Subsequent Spread Period. "Interest
Payment Dates" as used herein shall mean each June and December except if
the Notes are in
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Reset Mode and the interest rate is a Floating Rate, in which case the Interest
Payment Dates shall be the first day of the month, quarter or semiannual period
established as interest payment dates on the applicable Duration/Interest Mode
Determination Date. See "Description of the Notes."
The Notes are not redeemable prior to the First Remarketing Date and, if
the Notes are remarketed pursuant to the Remarketing Right, they may not be
redeemed prior to the Second Remarketing Date; provided, however, that the Notes
may be redeemed, at the option of the Company, on the First Remarketing Date at
the Optional Redemption Price described herein. Thereafter, if the Notes are in
Reset Mode, they may be redeemable, at the option of the Company, on any date of
commencement of a Subsequent Spread Period and on those Interest Payment Dates
that are specified as redemption dates by the Company on the applicable
Duration/Interest Mode Determination Date, in whole or in part, upon notice
thereof given at any time during the 30 calendar day period ending on the tenth
Business Day prior to the redemption date (provided that notice of any partial
redemption must be given to the holders ("Holders") at least 15 Business Days
prior to the redemption date), in accordance with the redemption type selected
on the Duration/Interest Mode Determination Date. Unless previously redeemed or
repurchased, the Notes will mature on June , 2038. See "Description of the
Notes -- Redemption of the Notes".
The obligations of the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent to purchase the Notes on the relevant tender date are each
subject to certain conditions and termination events customary in the Company's
public offerings. No Beneficial Owner of any Note shall have any rights or
claims against the Company or the Reset Remarketing Agent as a result of the
Reset Remarketing Agent not purchasing such Notes. The Company will agree to
indemnify the Mandatory Tender Remarketing Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
arising out of or in connection with its duties under the Mandatory Tender
Remarketing Agreement (as defined below). See "Description of the Notes --
Tender at Option of Beneficial Owners in Reset Mode," "-- Mandatory Tender" and
"-- Concerning the Mandatory Tender Remarketing Agent and the Reset Remarketing
Agent".
The Notes will be represented by a single Global Note registered in the
name of DTC or its nominee. Beneficial interests in the Global Note will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Except as described herein, Notes in
definitive form will not be issued.
-------------------------
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT MAINTAIN OR OTHERWISE
AFFECT THE PRICE OF THE NOTES. SUCH TRANSACTIONS MAY INCLUDE OVERALLOTMENT
TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER THE UNDERWRITERS' SHORT
POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
FORWARD-LOOKING STATEMENTS
Statements contained in or incorporated by reference into this Prospectus
Supplement or the accompanying Prospectus include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements involve certain risks and uncertainties that may cause future results
to differ materially from those contemplated, projected, estimated or budgeted
in such forward-looking statements. Factors that may impact forward-looking
statements include, but are not limited to, the following: (i) the effects of
weather and other natural phenomena; (ii) increased competition from other
energy suppliers as well as alternative forms of energy; (iii) the capital
intensive nature of the Company's businesses; (iv) economic climate and growth
in the geographic areas in which the Company does business; (v) the uncertainty
of gas and oil reserve estimates; (vi) the timing and extent of changes in
commodity prices for natural gas, electricity and crude oil; (vii) conditions of
capital markets and equity markets; and (viii) the effects of changes in
governmental policies and regulatory actions, including income taxes,
environmental compliance and authorized rates.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus, and by the more detailed information and the financial
statements and notes appearing in the incorporated documents.
THE COMPANY
MichCon is a Michigan corporation that was organized in 1898 and, with its
predecessors, has been in business for nearly 150 years. MichCon is a natural
gas utility primarily engaged in the distribution and transmission of natural
gas in the state of Michigan. MichCon also has subsidiaries involved in the
gathering and transmission of natural gas in northern Michigan. MichCon operates
one of the largest natural gas distribution and transmission systems in the
United States and the largest in Michigan.
MichCon serves 1.2 million customers in the Detroit, Grand Rapids, Ann
Arbor, Traverse City and Muskegon metropolitan areas and in various other
communities throughout the state of Michigan. The following services are
provided by MichCon:
- Gas Sales -- Includes the sale and delivery of natural gas to
residential and small-volume commercial customers.
- End User Transportation -- Through this service, large-volume
commercial and industrial customers that purchase natural gas
directly from producers or brokerage companies utilize the Company's
network to transport the gas to their facilities.
- Intermediate Transportation -- Provides transportation service
through the Company's gathering and high pressure transmission
system to producers, brokers and other local distribution companies
that own the natural gas, but are not the ultimate consumer.
MichCon is a wholly-owned subsidiary of MCN Energy Group, Inc. ("MCN"), a
New York Stock Exchange-listed company (ticker symbol: MCN). MCN's other
principal operating subsidiary is MCN Investment Corporation, a subsidiary
holding company for various diversified energy businesses.
THE NOTES OFFERING
SECURITIES OFFERED............ $ aggregate principal amount of
Extendable MOPPRS due June , 2038.
MATURITY DATE................. The stated maturity of the Notes is June ,
2038.
INITIAL SPREAD PERIOD......... The Notes offered hereby will initially bear
interest at a per annum rate of % for the
period from and including June , 1998, to but
excluding June , 2008.
MANDATORY TENDER MODE AND
MANDATORY TENDER............ On the First Remarketing Date, the Mandatory
Tender Remarketing Agent will have the option,
if elected, to purchase the Notes following a
mandatory tender at 100% of the principal
amount thereof for subsequent remarketing. If
the Remarketing Right is exercised, such Notes
will be in "Mandatory Tender Mode" and will,
except in certain circumstances, bear interest
at a rate determined in accordance with the
procedures set forth herein from the First
Remarketing Date to but excluding the Second
Remarketing Date.
RESET MODE AND OPTIONAL
TENDER........................ Upon the earlier to occur of ten business days
prior to (i) the First Remarketing Date if the
Mandatory Tender Remarketing Agent does not
exercise the Remarketing Right and (ii) the
Second
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Remarketing Date, the Notes will be in Reset
Mode commencing on such date. While in Reset
Mode, the Notes will be subject to optional
tender by the Holders thereof at the end of
each Spread period following the Initial Spread
Period, if the Remarketing Right is not
exercised or the Second Remarketing Date, if
the Remarketing Right is exercised, and in each
case, thereafter following each Subsequent
Spread Period. If the Company and the Reset
Remarketing Agent agree on a subsequent Spread,
except in certain circumstances the Notes will
bear interest either in a Floating Rate
Interest Mode or a Fixed Rate Interest Mode, as
determined by the Company and the Reset
Remarketing Agent.
REDEMPTION AND REPURCHASE..... The Notes may not be redeemed prior to the
First Remarketing Date and, if the Notes are
remarketed pursuant to the Remarketing Right,
they may not be redeemed prior to the Second
Remarketing Date. The Notes will be subject to
optional redemption by the Company (i) on the
First Remarketing Date at the Optional
Redemption Price or (ii) if the Notes are in
Reset Mode, on each Commencement Date and such
other dates as established by the Company on
the applicable Duration/Interest Mode
Determination Date. In the event that (i) the
Mandatory Tender Remarketing Agent fails for
any reason to purchase the Notes in Mandatory
Tender Mode following exercise of the
Remarketing Right, (ii) the Company and the
Reset Remarketing Agent fail for any reason to
agree on a Subsequent Spread for Reset Mode
Notes or (iii) the Reset Remarketing Agent
fails for any reason to purchase any Notes in
Reset Mode that are tendered on the Reset
Tender Date, the Company is required to
repurchase and retire any such Notes that were
tendered but not purchased by the Mandatory
Tender Remarketing Agent or the Reset
Remarketing Agent, as the case may be, at 100%
of the principal amount thereof plus accrued
interest.
SECURITY...................... Until the Release Date, the Notes will be
secured by the Company's First Mortgage Bonds
and thereafter will either (i) become unsecured
general obligations of the Company or (ii) be
secured by Substituted Mortgage Bonds.
USE OF PROCEEDS............... Proceeds from the sale of the Notes, in respect
of which this Prospectus Supplement is being
delivered, will be used to repay short-term
debt used for the retirement of First Mortgage
Bonds pursuant to a fixed-spread tender offer,
to fund capital expenditures and for general
corporate purposes.
SEPARATE NOTES OFFERING....... Concurrently with the Notes Offering, the
Company is offering $ aggregate
principal amount of the Separate Notes.
Consummation of the Notes Offering is not a
condition to consummation of the Separate Notes
Offering, and consummation of the Separate
Notes Offering is not a condition to the
consummation of the Notes Offering.
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USE OF PROCEEDS
Proceeds from the sale of the Notes, in respect of which this Prospectus
Supplement is being delivered, will be used to repay short-term debt used for
the retirement of First Mortgage Bonds pursuant to a fixed-spread tender offer,
to fund capital expenditures and for general corporate purposes.
DESCRIPTION OF THE NOTES
The following information concerning the Notes supplements and, to the
extent inconsistent, replaces the description of the general terms and
provisions of Senior Debt Securities set forth in the accompanying Prospectus.
Reference is also made to the remarketing agreement between the Company and the
Mandatory Tender Remarketing Agent (the "Mandatory Tender Remarketing
Agreement"), the Reset Remarketing Agreement and any Reset Remarketing Agreement
Supplement, as defined below. The forms of Reset Remarketing Agreement and any
Reset Remarketing Agreement Supplement are or will be filed with the Commission
and incorporated into the Registration Statement of which the Prospectus forms a
part. The Mandatory Tender Remarketing Agreement and the Reset Remarketing
Agreement, as it may be supplemented, are referred jointly herein as the
"Remarketing Agreements". Wherever a defined term is referred to and not herein
defined, the definition thereof is contained in the accompanying Prospectus or
the Indenture referred to therein.
GENERAL
The Notes will be issued as a new series of Senior Debt Securities under an
Indenture, dated as of June 1, 1998 (the "Senior Indenture"), between the
Company and Citibank, N.A., as trustee (the "Senior Trustee"), which is more
fully described in the accompanying Prospectus.
MATURITY
The Notes will mature on June 1, 2038 (the "Stated Maturity Date") unless
previously redeemed and will be issued only in fully registered, book-entry
form. See "-- Book-Entry Only -- The Depository Trust Company" below. If the
maturity date of the Notes falls on a day that is not a Business Day, the
related payment of principal and interest will be made on the next succeeding
Business Day as if it were made on the date such payment was due, and no
interest will accrue on the amounts so payable for the period from and after
such date.
SECURITY; RELEASE DATE
Upon the issuance of the Notes, the Company will simultaneously issue and
deliver to the Senior Trustee, as security for such Notes, First Mortgage Bonds,
Collateral Series A (the "Collateral Bonds"), under the Twenty-Ninth
Supplemental Indenture dated as of July 15, 1989, providing for the restatement
of the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between
the Company and Citibank, N.A. ("Citibank" or the "Mortgage Trustee") and Robert
T. Kirchner (the "Individual Trustee" and, together with Citibank, the "Secured
Trustees"), as supplemented by the Thirty-Fifth Supplemental Indenture to be
entered into relating to the Collateral Bonds (as so supplemented, the "Mortgage
Indenture") in an aggregate principal amount of $ . The Company has agreed
to issue the Collateral Bonds in the name of the Senior Trustee in its capacity
as trustee under the Senior Indenture and the Senior Trustee has agreed to hold
the Collateral Bonds in such capacity under all circumstances and not transfer
the Collateral Bonds until the earlier of the Release Date or the prior
retirement of the Notes through redemption, repurchase or otherwise. The
interest rates, Interest Payment Dates, method of paying interest, stated
maturity date and redemption provisions for the Collateral Bonds will
automatically mirror those of the Notes.
Prior to the Release Date, the Company shall make payments of the principal
of, and premium or interest on, the Collateral Bonds to the Senior Trustee,
which payments shall be applied by the Senior Trustee to satisfaction of all
obligations then due on the related Notes.
Reference is made to "Description of Senior Debt Securities -- Security;
Release Date" in the accompanying Prospectus for a description of the
circumstances under which all or part of the Collateral
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Bonds will cease to be held by the Senior Trustee as security for the Notes. As
explained in the Prospectus, the Notes will cease to be secured by the
Collateral Bonds on the Release Date and, at the option of the Company either
(i) will become unsecured general obligations of the Company or (ii) will be
secured by first mortgage bonds issued under a mortgage indenture other than the
Mortgage Indenture (the "Substituted Pledged Bonds"). If the Company does not
elect to have the Notes become unsecured on the Release Date, upon the issuance
of any of the Notes on or after the Release Date, the Company will
simultaneously issue and deliver to the Senior Trustee, as security for such
Notes, Substituted Pledged Bonds. The Substituted Pledged Bonds will have the
same interest rate, interest payment dates, Stated Maturity Date and redemption
provisions, and will be in the same aggregate principal amount, as the Notes
then issued. The Company will be required to give notice to the Holders, the
Mandatory Tender Remarketing Agent and the Reset Remarketing Agent of the
occurrence of the Release Date.
In the event the Company elects to have the Notes become unsecured on the
Release Date, the Company's ability to create, assume or incur certain liens or
to enter into certain financing transactions will be restricted as described in
"Description of the Senior Debt Securities -- Restrictions" in the accompanying
Prospectus.
INITIAL INTEREST PERIOD
For the period from and including June , 1998 to but excluding June ,
2008 (the "Initial Spread Period"), interest on the Notes will accrue at a per
annum rate equal to % (computed on the basis of a 360-day year of twelve 30-day
months) and will be payable semiannually on June and December of each year
commencing December , 1998, to the persons in whose names the Notes are
registered at the close of business on the fifteenth calendar day (whether or
not a Business Day) immediately preceding the related Interest Payment Date. If
any Interest Payment Date during the Initial Spread Period falls on a day that
is not a Business Day, the payment shall be made on the next Business Day with
the same force and effect as if it were on the date such payment was due and no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date.
MANDATORY TENDER MODE INTEREST
If the Remarketing Right is exercised by the Mandatory Tender Remarketing
Agent, the Notes will bear interest from the First Remarketing Date to but
excluding the Second Remarketing Date at the rate determined by the Mandatory
Tender Remarketing Agent in accordance with the procedures set forth below
("Interest Rate to Second Remarketing"), except in certain circumstances. See
"-- Tenders -- Mandatory Tender". Such Interest Rate to Second Remarketing shall
be payable semiannually on June and December of each year, commencing
December , 2008, to the persons in whose name the Mandatory Tender Mode Notes
are registered on the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date. Interest on such Notes
will be computed on the basis of a 360-day year of twelve 30-day months. If any
Interest Payment Date or date of redemption or repurchase of the Notes in
Mandatory Tender Mode falls on a day that is not a Business Day, the payment
shall be made on the next Business Day with the same force and effect as if it
were on the date such payment was due and no interest shall accrue on the amount
so payable for the period from and after such Interest Payment Date or date of
earlier redemption or repurchase, as the case may be.
RESET MODE INTEREST
The Notes will be in Reset Mode on the date that is ten business days prior
to (i) the First Remarketing Date in the event the Mandatory Tender Remarketing
Agent fails to give notice of exercise of the Remarketing Right and (ii) the
Second Remarketing Date if the Remarketing Right is exercised. If the Notes are
in Reset Mode, the interest rate will be determined in the manner described
below for each Subsequent Spread Period which will be a period of at least six
months and not extending beyond the maturity date, designated by the Company.
Each Subsequent Spread Period will commence on a June or December , as
applicable (a "Commencement Date"), and will end on or before June , 2038.
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Floating Rate Interest Mode. During the Floating Rate Interest Mode,
interest on the Reset Mode Notes for each Subsequent Spread Period will be
payable either monthly, quarterly, or semiannually, as specified by the Company
on each Duration/Interest Mode Determination Date. With respect to Notes in the
Floating Rate Interest Mode, interest will be payable, in arrears, in the case
of Notes which pay: (i) monthly, on the first day of each month; (ii) quarterly,
on the first day of each March, June, September and December; and (iii)
semiannually, on the first day of each June and December. During any Subsequent
Spread Period during which the Reset Mode Notes are in the Floating Rate
Interest Mode, the interest rate on the Notes will be reset either monthly,
quarterly or semiannually, and the Notes will bear interest at a per annum rate
(computed on the basis of the actual number of days elapsed over a 360-day year)
equal to LIBOR (as defined below) for the applicable Interest Period (as defined
below), plus the applicable Spread. Interest on the Notes will accrue from and
including each Interest Payment Date to but excluding the next succeeding
Interest Payment Date or maturity date, as the case may be. Each interest period
during any Subsequent Spread Period (each, an "Interest Period") will be from
and including the most recent Interest Payment Date on which interest has been
paid to but excluding the next Interest Payment Date. The first day of an
Interest Period is referred to herein as an "Interest Reset Date".
If any Interest Payment Date (other than at maturity), redemption date,
Interest Reset Date, Duration/Interest Mode Determination Date, Spread
Determination Date (as defined below), Commencement Date or Reset Tender Date
would otherwise be a day that is not a Business Day, such Interest Payment Date,
redemption date, Interest Reset Date, Duration/Interest Mode Determination Date,
Spread Determination Date, Commencement Date or Reset Tender Date will be
postponed to the next succeeding day that is a Business Day.
LIBOR applicable for an Interest Period will be determined by the Rate
Agent (as defined under "-- Tenders -- Tender at Option of Beneficial Owners in
Reset Mode" below) as of the second London Business Day (as defined below)
preceding each Interest Reset Date (a "LIBOR Determination Date") in accordance
with the following provisions:
(i) LIBOR will be determined on the basis of the offered rate for
deposits in U.S. Dollars of the applicable Index Maturity commencing on the
second London Business Day immediately following such LIBOR Determination
Date, which appears on Telerate Page 3750 (as defined below) as of
approximately 11:00 a.m., London time, on such LIBOR Determination Date.
"Telerate Page 3750" means the display designated on page "3750" on Dow
Jones Markets Limited or any successor thereto (or such other page as may
replace the 3750 page on that service or such other service or services as
may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. Dollar deposits). If no
such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR
Determination Date will be determined in accordance with the provisions of
paragraph (ii) below. The term "London Business Day" means any day on which
dealings in deposits in U.S. Dollars are transacted in the London interbank
market.
(ii) With respect to a LIBOR Determination Date on which no rate
appears on Telerate Page 3750 as of approximately 11:00 a.m., London time,
on such LIBOR Determination Date, the Rate Agent shall request the
principal London offices of each of four major reference banks in the
London interbank market selected by the Rate Agent (after consultation with
the Company) to provide the Rate Agent with a quotation of the rate at
which deposits in U.S. Dollars of the applicable Index Maturity commencing
on the second London Business Day immediately following such LIBOR
Determination Date, are offered by it to prime banks in the London
interbank market as of approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an amount of not less
than U.S. $1,000,000 that is representative for a single transaction in
such market at such time. If at least two such quotations are provided,
LIBOR for such LIBOR Determination Date will be the arithmetic mean of such
quotations as calculated by the Rate Agent. If fewer than two quotations
are provided, LIBOR for such LIBOR Determination Date will be the
arithmetic mean of the rates quoted as of approximately 11:00 a.m., New
York City time, on such LIBOR Determination Date by three major banks in
The City of New York selected by the Rate Agent (after consultation with
the Company) for loans in U.S. Dollars to leading European banks, of the
applicable Index Maturity commencing on the
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second London Business Day immediately following such LIBOR Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Rate Agent are not quoting as mentioned in this sentence, LIBOR for
such LIBOR Determination Date will be LIBOR determined with respect to the
immediately preceding LIBOR Determination Date.
The Index Maturity applicable to Notes in the Floating Rate Interest Mode
will be, in the case of Notes paying (i) monthly, one month; (ii) quarterly,
three months; and (iii) semiannually, six months.
Fixed Rate Interest Mode. If the Notes are to be reset to the Fixed Rate
Interest Mode, as agreed to by the Company and the Reset Remarketing Agent on a
Duration/Interest Mode Determination Date, then the applicable Fixed Rate for
the corresponding Subsequent Spread Period will be determined by 1:00 p.m. on
the third Business Day preceding the Commencement Date for such Subsequent
Spread Period (the "Fixed Rate Determination Date"), in accordance with the
following provisions: the Fixed Rate will be a per annum rate and will be
determined by adding the applicable Spread (as agreed to by the Company and the
Reset Remarketing Agent on the preceding Spread Determination Date) to the yield
to maturity (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the applicable United
States Treasury security, selected by the Rate Agent or its agent after
consultation with the Reset Remarketing Agent, as having a maturity comparable
to the duration selected for the following Subsequent Spread Period, which would
be used in accordance with customary financial practice in pricing new issues of
corporate debt securities of comparable maturity to the duration selected for
the following Subsequent Spread Period.
Interest in the Fixed Rate Interest Mode will be computed on the basis of a
360-day year of twelve 30-day months. Such interest will be payable semiannually
in arrears on the Interest Payment Dates occurring on each June and December
at the applicable Fixed Rate, as determined by the Company and the Reset
Remarketing Agent on the Fixed Rate Determination Date, beginning on the
Commencement Date and for the duration of the relevant Subsequent Spread Period.
Interest on the Notes will accrue from and including each Interest Payment Date
to but excluding the next succeeding Interest Payment Date or maturity date, as
the case may be. See "-- Additional Terms of the Notes in Reset Mode" for other
provisions applicable to Notes in the Fixed Rate Interest Mode.
If any Interest Payment Date or any redemption date in the Fixed Rate
Interest Mode falls on a day that is not a Business Day (in either case, other
than any Interest Payment Date or redemption date that falls on a Commencement
Date, in which case each such date including the Commencement Date will be
postponed to the next day that is a Business Day), the related payment of
principal and interest will be made on the next succeeding Business Day as if it
were made on the date such payment was due, and no interest will accrue on the
amounts so payable for the period from and after such dates.
TENDERS
Mandatory Tender. The following description sets forth the terms and
conditions of the Mandatory Tender in the event the Mandatory Tender Remarketing
Agent elects to exercise the Remarketing Right and remarkets the Notes on the
First Remarketing Date.
Provided that the Mandatory Tender Remarketing Agent gives notice to the
Company and the Senior Trustee on a Business Day not later than 4:00 p.m. New
York City time on the eleventh Business Day prior to the First Remarketing Date
of its intention to exercise the Remarketing Right (the "Mandatory Tender
Notification Date"), the Notes will be automatically tendered, or deemed
tendered, to the Mandatory Tender Remarketing Agent for purchase on the First
Remarketing Date, except in the circumstances described under "-- Redemption of
the Notes" below. Thirty calender days prior to the First Remarketing Date, the
Company will request that DTC provide preliminary notification to its
Participants that, on the date that is ten Business Days prior to the First
Remarketing Date either (i) the Remarketing Right will have been exercised and
the Notes will be subject to mandatory tender on the First Remarketing Date or
(ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination
Date will occur on such date. If the Mandatory Tender Remarketing Agent provides
notification of its intention to exercise the Remarketing Right on the Mandatory
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Tender Notification Date, on the date that is ten Business Days prior to the
First Remarketing Date, the Company will request that DTC notify its
Participants that the Notes are in Mandatory Tender Mode and are subject to
mandatory tender on the First Remarketing Date. The purchase price for the
tendered Notes to be paid by the Mandatory Tender Remarketing Agent will equal
100% of the principal amount thereof. When the Notes are tendered for
remarketing pursuant to the Remarketing Right, the Mandatory Tender Remarketing
Agent may remarket such Notes for its own account at varying prices to be
determined by the Mandatory Tender Remarketing Agent at the time of each sale.
If the Remarketing Right is exercised, from and after the First Remarketing
Date, such Notes will bear interest at the Interest Rate to Second Remarketing
Date. If the Mandatory Tender Remarketing Agent exercises the Remarketing Right,
the obligation of the Mandatory Tender Remarketing Agent to purchase such Notes
on the First Remarketing Date is subject, among other things, to the conditions
that, since the Mandatory Tender Notification Date, no material adverse change
in the condition of the Company and its subsidiaries, considered as one
enterprise, shall have occurred and that no Event of Default (as defined in the
Senior Indenture), or any event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, with respect to the Notes
shall have occurred and be continuing. If for any reason the Mandatory Tender
Remarketing Agent does not purchase all tendered Notes on the First Remarketing
Date after providing notice of its intention to exercise the Remarketing Right,
the Company will be required to repurchase such Notes from the Beneficial Owners
thereof at a price equal to the principal amount thereof plus all accrued and
unpaid interest, if any, on such Notes to the First Remarketing Date. If the
Mandatory Tender Remarketing Agent does not provide notice of its intention to
exercise the Remarketing Right on the Mandatory Tender Notification Date, the
Notes will be in Reset Mode ten business days prior to the First Remarketing
Date.
Provided that the Remarketing Right is exercised, the Interest Rate to
Second Remarketing Date for the Notes will be determined by the Mandatory Tender
Remarketing Agent by 3:30 p.m., New York City time, on the third Business Day
immediately preceding the First Remarketing Date (the "Mandatory Tender
Determination Date") to the nearest one hundred-thousandth of one percent
(0.00001) per annum and will be equal to % (the "Base Rate"), plus the
Applicable Spread for the Notes (as defined below).
The "Applicable Spread" for the Notes in Mandatory Tender Mode is the
lowest bid indication, expressed as a spread (in the form of a percentage or in
basis points) above the Base Rate for such Notes, obtained by the Mandatory
Tender Remarketing Agent on the Mandatory Tender Determination Date from the
bids quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of such Notes at the Dollar Price, but assuming (i)
an issue date equal to the First Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the Second Remarketing
Date, and (iii) a stated annual interest rate, payable semiannually on each
Interest Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer to the Second Remarketing Date. If fewer
than five Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such bid indications obtained as
described above. The Interest Rate to Second Remarketing Date announced by the
Mandatory Tender Remarketing Agent, absent manifest error, will be binding and
conclusive upon the Beneficial Owners and Holders of the Notes, the Company and
the Senior Trustee.
"Dollar Price" means, with respect to the Notes in Mandatory Tender Mode,
the present value determined by the Mandatory Tender Remarketing Agent, as of
the First Remarketing Date, of the Remaining Scheduled Payments (as defined
below) discounted to the First Remarketing Date, on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months), at the Treasury Rate (as
defined below).
"Reference Corporate Dealers" mean leading dealers of publicly traded debt
securities of the Company in The City of New York (which may include the
Mandatory Tender Remarketing Agent or one of its affiliates) selected by the
Mandatory Tender Remarketing Agent after consultation with the Company.
"Treasury Rate" means, with respect to the First Remarketing Date, the rate
per annum equal to the semiannual equivalent yield to maturity or interpolated
(on a day count basis) yield to maturity of the Comparable Treasury Issues (as
defined below), assuming a price for the Comparable Treasury Issues
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(expressed as a percentage of its principal amount), equal to the Comparable
Treasury Price (as defined below) for the First Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Mandatory Tender Remarketing Agent as having an
actual or interpolaed maturity or maturities comparable to the Second
Remarketing Date.
"Comparable Treasury Price" means, with respect to the First Remarketing
Date, (a) the offer prices for the Comparable Treasury Issues (expressed in each
case as a percentage of its principal amount) on the Mandatory Tender
Determination Date, as set forth on "Telerate Page 500" (or such other page as
may replace Telerate Page 500) or (b) if such page (or any successor page) is
not displayed or does not contain such offer prices on such Business Day, (i)
the average of the Reference Treasury Dealer Quotations for the First
Remarketing Date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations, or (ii) if the Mandatory Tender Remarketing Agent
obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations. "Telerate Page 500" means the
display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such
other page as may replace Telerate Page 500 on such service) or such other
service displaying the offer prices specified in (a) above as may replace or be
the successor to Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the First Remarketing Date, the offer prices for
the Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted to the Mandatory Tender Remarketing Agent by such
Reference Treasury Dealer by 3:30 p.m., New York City time, on the Mandatory
Tender Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or
their respective affiliates that are primary U.S. Government securities
dealers), and their respective successors; provided, however, that if any of the
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), the
Mandatory Tender Remarketing Agent shall substitute therefor another Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the Notes, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the applicable Base Rate only, that would be due after the First
Remarketing Date to and including the Second Remarketing Date, as determined by
the Mandatory Tender Remarketing Agent. For purposes of this calculation only,
it shall be assumed that the Notes will mature on the Second Remarketing Date.
Provided the Remarketing Right has been exercised, the Mandatory Tender
Remarketing Agent will notify the Company, the Senior Trustee and DTC by
telephone, confirmed in writing, by 4:00 p.m., New York City time, on the
Mandatory Tender Determination Date, of the Interest Rate to Second Remarketing
Date. In such event, all of the tendered Notes of a series will be automatically
delivered to the account of the Senior Trustee, by book-entry through DTC
pending payment of the purchase price therefor, on the First Remarketing Date,
and the Mandatory Tender Remarketing Agent will make or cause the Senior Trustee
to make payment to the DTC Participant of each tendering Beneficial Owner of the
Notes, by book-entry through DTC by the close of business on the First
Remarketing Date against delivery through DTC of such Beneficial Owner's
tendered Notes, of 100% of the principal amount of such tendered Notes. The
transactions described above will be executed on the First Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the Notes delivered
by book entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of the Notes remarketed by the
Mandatory Tender Remarketing Agent on and after the First Remarketing Date will
settle in immediately available funds through DTC's Same-Day Funds Settlement
System. The tender and settlement procedures described above, including
provisions for payment by purchasers of the Notes in the remarketing or for
payment to selling Beneficial Owners of tendered Notes, may be modified to the
extent required by DTC or to the extent required to facilitate the tender and
remarketing of such series of Notes in certificated form, if the book-entry
system is no longer available for the Notes at the time of the remarketing. In
addition, the Mandatory Tender Remarketing Agent may, in
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accordance with the terms of the Senior Indenture, modify the tender and
settlement procedures set forth above in order to facilitate the tender and
settlement process.
Tender at Option of Beneficial Owners in Reset Mode. If the Remarketing
Right is not exercised with respect to the First Remarketing Date or ten
business days prior to the Second Remarketing Date, the Notes will be in Reset
Mode. If the Notes are in Reset Mode because the Remarketing Right is not
exercised on the First Remarketing Date, the Second Remarketing Date will have
no effect on such Reset Mode Notes and no remarketing will be required on the
Second Remarketing Date. When the Notes are in Reset Mode, if the Company and
the Reset Remarketing Agent agree on the Spread on the Spread Determination Date
with respect to any Subsequent Spread Period, the Company and the Reset
Remarketing Agent will enter into a Reset Remarketing Agreement Supplement (a
"Reset Remarketing Agreement Supplement") under which the Reset Remarketing
Agent will agree, subject to the terms and conditions set forth therein, to
purchase from tendering Holders on the Reset Tender Date all Notes with respect
to which the Reset Remarketing Agent receives a Reset Tender Notice as described
below at 100% of the principal amount thereof (the "Purchase Price"). Except as
otherwise provided in the next succeeding paragraph, each Beneficial Owner of a
Note may, at such owner's option, upon giving notice as provided below (a "Reset
Tender Notice"), tender such Note for purchase by the Reset Remarketing Agent on
the Reset Tender Date with respect to a Subsequent Spread Period at the Purchase
Price. The Purchase Price will be paid by the Reset Remarketing Agent in
accordance with the standard procedures of DTC, which currently provide for
payments in same-day funds. Interest accrued on the Notes with respect to the
preceding interest period will be paid in the manner described under "--
Book-Entry Only -- The Depository Trust Company" and "-- Additional Terms of the
Notes in Reset Mode" below. If such Beneficial Owner has an account at the Reset
Remarketing Agent and tenders such Note through such account, such Beneficial
Owner will not be required to pay any fee or commission to the Reset Remarketing
Agent. If such Note is tendered through a broker, dealer, commercial bank, trust
company or other institution other than the Reset Remarketing Agent, such
Beneficial Owner may be required to pay fees or commissions to such other
institution. It is currently anticipated that Notes so purchased by the Reset
Remarketing Agent will be remarketed by it.
The Reset Tender Notice must be received by the Reset Remarketing Agent
during the period commencing at 3:00 p.m., New York City time, on the Spread
Determination Date and ending at 12:00 noon, New York City time, on the second
Business Day following such Spread Determination Date for such Subsequent Spread
Period (the "Notice Date"). In order to ensure that a Reset Tender Notice is
received on a particular day, the Beneficial Owner of Notes must direct his
broker or other designated Participant or Indirect Participant to give such
Reset Tender Notice before the broker's cut-off time for accepting instructions
for that day. Different firms may have different cut-off times for accepting
instructions from their customers. Accordingly, Beneficial Owners should consult
the brokers or other Participants or Indirect Participants through which they
own their interests in the Notes for the cut-off times for such brokers, other
Participants or Indirect Participants. See "-- Book-Entry Only -- The Depository
Trust Company" below. Except as otherwise provided below, a Reset Tender Notice
shall be irrevocable. If a Reset Tender Notice is not received for any reason by
the Reset Remarketing Agent with respect to any Note by 12:00 noon, New York
City time, on the Notice Date, the Beneficial Owner of such Note shall be deemed
to have elected not to tender such Note for purchase by the Reset Remarketing
Agent.
The Reset Remarketing Agent will attempt, on a best efforts basis, to
remarket the tendered Notes at a price equal to 100% of the aggregate principal
amount so tendered. There is no assurance that the Reset Remarketing Agent will
be able to remarket the entire principal amount of Notes tendered in a
remarketing. The Reset Remarketing Agent will also have the option, but not the
obligation, to purchase any tendered Notes at such price. The obligation of the
Reset Remarketing Agent to purchase tendered Notes from the tendering Holders
and to remarket such Notes will be subject to certain conditions and termination
events customary in the Company's public offerings, including a condition that
no material adverse change in the condition of the Company and its subsidiaries,
taken as a whole, shall have occurred since the Spread Determination Date. In
the event that the Reset Remarketing Agent is unable to remarket some or all of
the tendered Notes and chooses not to purchase such tendered Notes, the Company
is obligated unconditionally to purchase and retire on the Reset Tender Date the
remaining unsold tendered Notes at a price equal to 100%
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of the principal amount, plus accrued interest, if any, to the applicable Reset
Tender Date. If the Reset Remarketing Agent does not purchase all Notes tendered
for purchase on any Reset Tender Date, it will promptly notify the Company and
the Senior Trustee.
No Beneficial Owner of any Note will have any rights or claims under the
Reset Remarketing Agreement Supplement or against the Company or the Reset
Remarketing Agent as a result of the Reset Remarketing Agent's not purchasing
such Notes.
The term "Reset Remarketing Agent" means the nationally recognized
broker-dealer selected by the Company to act as Reset Remarketing Agent. The
term "Rate Agent" means the entity selected by the Company as its agent to
determine (i) LIBOR and the interest rate on the Notes for any Interest Period
and/or (ii) the yield to maturity on the applicable United States Treasury
security that is used in connection with the determination of the applicable
Fixed Rate, and the ensuing applicable Fixed Rate pursuant to the Reset
Remarketing Agreement. The Company, in its sole discretion, will appoint a Rate
Agent and may change the Reset Remarketing Agent and the Rate Agent for any
Subsequent Spread Period at any time on or prior to 3:00 p.m., New York City
time, on the Duration/Interest Mode Determination Date relating thereto.
ADDITIONAL TERMS OF THE NOTES IN RESET MODE
The Spread that will be applicable during each Subsequent Spread Period for
Notes in Reset Mode will be the percentage (a) recommended by the Reset
Remarketing Agent so as to result in a rate that, in the opinion of the Reset
Remarketing Agent, will enable tendered Notes to be remarketed by the Reset
Remarketing Agent at 100% of the principal amount thereof, as described under
"-- Tenders -- Tender at Option of Beneficial Owners in Reset Mode" above, and
(b) agreed to by the Company. The interest rate mode during each Subsequent
Spread Period shall be either the Floating Rate Interest Mode or the Fixed Rate
Interest Mode, as determined by the Company and the Reset Remarketing Agent.
Unless notice of redemption of the Notes as a whole has been given, the
duration, redemption dates, redemption type (i.e., par, premium or make-whole,
including in the case of make-whole, Reinvestment Spread), redemption prices (if
applicable), Commencement Date, Interest Payment Dates and interest rate mode
(i.e., Fixed Rate Interest Mode or Floating Rate Interest Mode) (and any other
relevant terms) for each Subsequent Spread Period will be established by 3:00
p.m., New York City time, on the tenth Business Day prior to the Commencement
Date of each Subsequent Spread Period (each a "Duration/Interest Mode
Determination Date"). In addition, the Spread for each Subsequent Spread Period
will be established by 1:00 p.m., New York City time, on the fifth Business Day
prior to the Commencement Date of such Subsequent Spread Period (each, a "Spread
Determination Date"). Thirty calender days prior to the First Remarketing Date,
the Company will request that DTC provide preliminary notification to its
Participants that, on the date that is ten Business Days prior to the First
Remarketing Date either (i) the Remarketing Right will have been exercised and
the Notes will be subject to mandatory tender on the First Remarketing Date or
(ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination
Date will occur on such date. If the Mandatory Tender Remarketing Agent does not
provide notification of its intention to exercise the Remarketing Right on the
Mandatory Tender Notification Date, on the date that is ten Business Days prior
to the First Remarketing Date, the Company will request that DTC notify its
Participants of the occurrence of a Duration/Interest Mode Determination Date
and of the procedures that must be followed if any Beneficial Owner of a Note
wishes to tender such Note as described under "Tenders -- Tender at Option of
Beneficial Owners in Reset Mode" above. With respect to all Subsequent Spread
Periods established after the First Remarketing Date, the Company will request
not later than five nor more than ten calendar days prior to any
Duration/Interest Mode Determination Date, that DTC notify its Participants of
such Duration/Interest Mode Determination Date and of the procedures that must
be followed if any Beneficial Owner of a Note wishes to tender such Note as
described under "Tenders -- Tender at Option of Beneficial Owners in Reset Mode"
above. In the event that DTC or its nominee is no longer the Holder of record of
the Notes, the Company will notify the Holders of such information within such
period of time. These will be the only notices given by the Company or the Reset
Remarketing Agent with respect to such Duration/Interest Mode Determination Date
and procedures for tendering Notes. The term "Business Day" means any day other
than a Saturday or Sunday or a day on which banking institutions in The City of
New York are required
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or authorized to close and, in the case of Notes in the Floating Rate Interest
Mode, that is also a London Business Day.
In the event that the Company and the Reset Remarketing Agent do not agree
on the Spread for any Subsequent Spread Period, then the Company is required
unconditionally to repurchase and retire all of the Notes on the Reset Tender
Date at a price equal to 100% of the principal amount thereof, together with
accrued interest to the Reset Tender Date. In the event that the Reset
Remarketing Agent fails to purchase any Notes tendered on the Reset Tender Date,
then the Company is required unconditionally to repurchase and retire any Notes
tendered and not purchased by the Reset Remarketing Agent.
All percentages resulting from any calculation of any interest rate for the
Notes will be rounded, if necessary, to the nearest one hundred thousandth of a
percentage point, with five one millionths of a percentage point rounded upward
and all dollar amounts will be rounded to the nearest cent, with one-half cent
being rounded upward.
REPURCHASE OF THE NOTES
If the Notes are in Mandatory Tender Mode, in the event that (i) the
Mandatory Tender Remarketing Agent for any reason does not notify the Company of
the Interest Rate to Second Remarketing Date by 4:00 p.m., New York City time,
on the Mandatory Tender Determination Date, or (ii) prior to the First
Remarketing Date, the Mandatory Tender Remarketing Agent has resigned and no
successor has been appointed on or before the Mandatory Tender Determination
Date, or (iii) since the Mandatory Tender Notification Date, the Mandatory
Tender Remarketing Agent terminates the Mandatory Tender Remarketing Agreement
due to the occurrence of a material adverse change in the condition of the
Company and its subsidiaries, considered as one enterprise, shall have occurred
or an Event of Default, or any event which, with the giving of notice or passage
of time, or both, would constitute an Event of Default, with respect to the
Notes shall have occurred and be continuing, or any other event constituting a
termination event under the Mandatory Tender Remarketing Agreement shall have
occurred, or (iv) the Mandatory Tender Remarketing Agent for any reason does not
purchase all tendered Notes on the First Remarketing Date, the Company will
repurchase such Notes on the First Remarketing Date at a price equal to 100% of
the principal amount of such Notes plus all accrued and unpaid interest, if any,
to the First Remarketing Date.
If the Notes are in Reset Mode, in the event that (i) the Company and the
Reset Remarketing Agent fail for any reason to agree on a Spread for a
Subsequent Spread Period, or (ii) prior to any Commencement Date, the Reset
Remarketing Agent has resigned and no successor has been appointed on or before
the Duration/ Interest Mode Determination Date, or (iii) since the Spread
Determination Date, the Reset Remarketing Agent terminates the Reset Remarketing
Agreement due to the occurrence of a material adverse change in the condition of
the Company and its subsidiaries, considered as one enterprise, shall have
occurred or an Event of Default, or any event which, with the giving of notice
or passage of time, or both, would constitute an Event of Default, with respect
to the Notes shall have occurred and be continuing, or any other event
constituting a termination event under the Reset Remarketing Agreement shall
have occurred, or (iv) the Reset Remarketing Agent for any reason does not
purchase any Notes tendered on the Reset Tender Date, the Company will
repurchase any such Notes tendered but not purchased by the Reset Remarketing
Agent on the First Remarketing Date at a price equal to 100% of the principal
amount of such Notes plus all accrued and unpaid interest, if any, to the
applicable Reset Tender Date.
REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to the First Remarketing Date. On that
date, if the Mandatory Tender Remarketing Agent exercises the Remarketing Right,
the Notes will be subject to mandatory tender to the Mandatory Tender
Remarketing Agent for remarketing on such date, subject to the conditions
described above under "-- Tenders -- Mandatory Tender" and to the Company's
right to redeem the Notes as described in the next sentence. The Company will
notify the Mandatory Tender Remarketing Agent and the Senior Trustee, not later
than the Business Day immediately preceding the Mandatory Tender Determination
Date, if the Company irrevocably elects to exercise its right to redeem the
Notes, in whole but not in part,
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from the Mandatory Tender Remarketing Agent on the First Remarketing Date at the
Optional Redemption Price. If the Remarketing Right is exercised and the Notes
are remarketed, they then may not be redeemed prior to the Second Remarketing
Date.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the Notes and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon, as determined by the Mandatory Tender
Remarketing Agent, discounted to the First Remarketing Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate, plus in either case accrued and unpaid interest from the First
Remarketing Date on the principal amount being redeemed to the date of
redemption. If the Company elects to redeem the Notes, it shall pay the Option
Redemption Price therefor in same-day funds by wire transfer to an account
designated by the Mandatory Tender Remarketing Agent on the First Remarketing
Date.
If the Notes are in Reset Mode, on each Commencement Date and on those
Interest Payment Dates specified as redemption dates by the Company on the
Duration/Interest Mode Determination Date in connection with any Subsequent
Spread Period, the Notes may be redeemed, at the option of the Company, in whole
or in part, upon notice thereof given at any time during the 30-calendar-day
period ending on the tenth Business Day prior to the redemption date (provided
that notice of any partial redemption must be given at least 15 calendar days
prior to the redemption date), in accordance with the redemption type selected
on the Duration/Interest Mode Determination Date. In the event that less than
all of the outstanding Notes are to be so redeemed, the Notes to be redeemed
will be selected by such method as the Senior Trustee shall deem fair and
appropriate. So long as the Global Note is held by DTC, the Company will give
notice to DTC, whose nominee is the record holder of all of the Notes, and DTC
will determine the principal amount to be redeemed from the account of each
Participant. This will be the only notice given by the Company or the Reset
Remarketing Agent with respect to redemption of the Notes. A Participant may
determine to redeem from some Beneficial Owners (which may include a Participant
holding Notes for its own account) without redeeming from the accounts of other
Beneficial Owners.
The redemption type to be chosen by the Company and the Reset Remarketing
Agent on the Duration/Interest Mode Determination Date may be one of the
following as defined herein: (i) Par Redemption; (ii) Premium Redemption; or
(iii) Make-Whole Redemption. "Par Redemption" means redemption at a redemption
price equal to 100% of the principal amount thereof, plus accrued interest
thereon, if any, to the redemption date. "Premium Redemption" means redemption
at a redemption price or prices greater than 100% of the principal amount
thereof, plus accrued interest thereon, if any, to the redemption date, as
determined on the Duration/Interest Mode Determination Date. "Make-Whole
Redemption" means redemption at a redemption price equal to the Make-Whole
Amount (as defined below), if any, with respect to such Notes. Unless otherwise
specified by the Company on any Duration/Interest Mode Determination Date, the
redemption type will be a Par Redemption.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, an amount equal to the greater of (i) 100% of
the principal amount and (ii) the sum of the present values of the remaining
scheduled payments of principal and interest thereon from the redemption date to
the end of the applicable Subsequent Spread Period, computed by discounting such
payments, in each case, to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the applicable
Treasury Rate plus the Reinvestment Spread, plus accrued interest on the
principal amount thereof to the date of redemption.
"Reinvestment Spread" means, with respect to the Notes, a number, expressed
as a number of basis points or as a percentage, selected by the Company and
agreed to by the Reset Remarketing Agent on the Duration/Interest Mode
Determination Date.
BOOK-ENTRY ONLY -- THE DEPOSITORY TRUST COMPANY.
DTC will act as securities depositary for the Notes. The Notes will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global Note
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certificates, representing the total aggregate principal amount of the Notes,
will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Direct Participants and
Indirect Participants are on file with the Securities and Exchange Commission.
Purchases of Notes within the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each Beneficial Owner of Notes is in turn to be recorded
on the Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Participants through which the
Beneficial Owners purchased Notes. Transfers of ownership interests in the Notes
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Notes, except in the event that
use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all the Notes deposited by Direct
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, DTC's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Notes. Under its usual procedures, DTC would mail an Omnibus Proxy to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co. consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and such
payments will be the responsibility of such Participant and not of DTC or the
Company, subject to any statutory or regulatory requirements to the contrary
that may be in effect from time to time.
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Payment of principal and interest to DTC is the responsibility of the Company,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants.
Except as provided herein, a Beneficial Owner will not be entitled to
receive physical delivery of Notes. Accordingly, each Beneficial Owner must rely
on the procedures of DTC to exercise any rights under the Notes.
DTC may discontinue providing its services as securities depositary with
respect to the Notes at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Note certificates are required to be printed and delivered.
Additionally, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the Notes. In that event, certificates for the Notes will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company does not take responsibility for the accuracy thereof.
CONCERNING THE MANDATORY TENDER REMARKETING AGENT AND THE RESET REMARKETING
AGENT
Both of the Mandatory Tender Remarketing Agent and the Reset Remarketing
Agent, in their respective individual or any other capacities, may buy, sell,
hold and deal in any of the Notes and may exercise any vote or join in any
action which any Beneficial Owner of Notes may be entitled to exercise or take
with like effect as if it did not act in any capacity under the applicable
Remarketing Agreement. Both of the Mandatory Tender Remarketing Agent and the
Reset Remarketing Agent, in their respective individual capacities, either as
principal or agent, may also engage in or have an interest in any financial or
other transaction with the Company as freely as if it did not act in any
capacity under the applicable Remarketing Agreement.
No Holder or Beneficial Owner of the Notes shall have any rights or claims
under the Reset Remarketing Agreement or against the Reset Remarketing Agent as
a result of the Reset Remarketing Agent not purchasing such Notes. The Company
will agree to indemnify the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent against certain liabilities, including liabilities under the
Securities Act arising out of or in connection with its duties under the
applicable Remarketing Agreement. Merrill Lynch, Pierce, Fenner & Smith
Incorporated is the Mandatory Tender Remarketing Agent and will also serve as
the initial Reset Remarketing Agent and Rate Agent. The Mandatory Tender
Remarketing Agent and the Reset Remarketing Agent may resign at any time, such
resignation to be effective 10 days after delivery to the Company and the Senior
Trustee of notice of such resignation. In such case, it shall be the sole
obligation of the Company to appoint a successor Mandatory Tender Remarketing
Agent or a Reset Remarketing Agent, as the case may be. The Company, in its sole
discretion may change the Reset Remarketing Agent for any Subsequent Spread
Period at any time on or prior to 3:00 p.m., New York City time, on the
Duration/Interest Mode Determination Date relating thereto.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations
promulgated under the Code (the "Treasury Regulations"), rulings and decisions
now in effect, all of which are subject to change (prospectively or
retroactively) or possible differing interpretations. The following discussion
deals only with Notes held as capital assets and does not purport to deal with
persons in special tax situations, such as financial institutions, banks,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional currency
is not the United States dollar. It also does not deal with holders other than
original purchasers (except where otherwise specifically noted). Persons
considering the purchase of the Notes should consult their own tax advisors
concerning the application of United States federal income tax laws to their
particular situations as well as any consequences of the purchase, ownership and
disposition of the Notes arising under the laws of any other taxing
jurisdiction.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any state thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust. As used herein, the term "Non-U.S. Holder"
means a Beneficial Owner of a Note that is not a U.S. Holder.
The Notes should constitute variable rate debt instruments ("VRDI") and the
interest payments received should be considered "qualified stated interest"
under section 1.1275-5 of the Treasury Regulations. Based on this treatment, the
interest received will be taxable to a U.S. Holder as ordinary interest income
at the time such payments are accrued or received in accordance with the U.S.
Holder's regular method of tax accounting.
Based on the foregoing treatment, upon the sale, exchange or retirement of
a Note, a U.S. Holder generally will recognize taxable gain or loss in an amount
equal to the difference, if any, between the amount realized upon the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest which will be taxable as interest income) and such U.S. Holder's
adjusted tax basis in its Note. A U.S. Holder's adjusted tax basis in a Note is
generally equal to such U.S. Holder's initial investment in such Note. In the
case of a noncorporate U.S. Holder, any gain recognized upon the sale, exchange
or retirement of a Note generally will be taxable at a maximum rate of 20% if
the U.S. Holder's holding period for the Note is more than 18 months or at a
maximum rate of 28% if such holding period is more than one year but not more
than 18 months. The deduction of capital losses is subject to certain
limitations.
While the Company intends to treat the Notes as VRDI's issued without
original issue discount ("OID"), it is possible that the Internal Revenue
Service ("IRS") will take the position that the Notes are either (i) VRDI's
issued with OID, or (ii) contingent payment debt instruments. In the event the
IRS were successful in either assertion, Holders could experience U.S. federal
income tax consequences significantly different from those discussed herein. The
Treasury Regulations governing VRDI's issued with OID and contingent payment
debt instruments are complex, and prospective purchasers of Notes are urged to
consult their tax advisors as to the potential application of, and the
consequences of applying, those regulations.
In general, information reporting requirements will apply to certain
payments of principal and interest and to the proceeds of sales of Notes made to
U.S. Holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the U.S. Holder (i) fails
to provide a taxpayer identification number ("TIN"), (ii) furnishes an incorrect
TIN, (iii) is notified by the IRS that it has failed to properly report payments
of interest and dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
S-18
<PAGE> 67
notified by the IRS that it is subject to backup withholding. In the case of
interest paid after December 31, 1998, a U.S. Holder generally will be subject
to backup withholding at a 31% rate unless certain IRS certification procedures
are complied with directly or through an intermediary.
The Company will furnish annually to the IRS and to record holders of the
Notes (other than with respect to certain exempt holders) information relating
to the interest accruing and paid on the Notes during the calendar year.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such U.S. Holder's U.S. federal income tax
liability provided the required information is furnished to the IRS.
NON-U.S. HOLDERS
Subject to the discussion below concerning backup withholding, 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 on a
Note owned by a Non-U.S. Holder, provided that the Beneficial Owner (i) does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code, and the regulations thereunder, (ii) is not a
controlled foreign corporation related, directly or indirectly, to the Company
through stock ownership, (iii) is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code and (iv) satisfies the
statement requirement (described generally below) set forth in Section 871(h)
and Section 881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the Beneficial Owner
of such Note, or a financial institution holding the Note on behalf of such
owner, must provide, in accordance with specified procedures, the Company or its
paying agent with a statement to the effect that the Beneficial Owner is not a
U.S. person. These requirements will be met if (1) the Beneficial Owner provides
his name and address, and certifies, under penalties of perjury, that he is not
a U.S. person (which certification may be made on an IRS Form W-8 (or successor
form)) or (2) a financial institution holding the Note on behalf of the
Beneficial Owner certifies, under penalties of perjury, that such statement has
been received by it and furnishes a paying agent with a copy thereof.
In the event that any of the above requirements are not satisfied, the
Company will nonetheless not withhold federal income tax on interest paid to a
Non-U.S. Holder if it receives IRS Form 4224 (or, after December 31, 1998, a
Form W-8) from that Non-U.S. Holder, establishing that such income is
effectively connected with the conduct of a trade or business in the United
States, unless the Company has knowledge to the contrary. Interest or any
redemption premium paid to a Non-U.S. Holder (other than a partnership) that is
effectively connected with the conduct by the Holder of a trade or business in
the United States is generally taxed at the graduated rates that are applicable
to United States persons. In the case of a Non-U.S. Holder that is a
corporation, such effectively connected income may also be subject to the United
States federal branch profits tax (which is generally imposed on a foreign
corporation on the deemed repatriation from the United States of effectively
connected earnings and profits) at a 30% rate (unless the rate is reduced or
eliminated by an applicable income tax treaty and the Holder is a qualified
resident of the treaty country). In the case of a partnership that has foreign
partners (i.e., persons who would be Non-U.S. Holders if they held the Notes
directly), such effectively connected income allocable to the foreign partner
would generally be subject to United States federal withholding tax (regardless
of whether such income is, in fact, distributed to such foreign partner) at a
35% rate, if the foreign partner is a corporation, or at a 39.6% rate, if the
foreign partner is not a corporation. Any foreign partner of such a partnership
would be entitled to a credit against his United States federal income tax for
his share of the withholding tax paid by the partnership.
A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale, exchange, redemption or
other disposition of Notes unless (i) the gain is effectively connected with a
trade or business of the Non-U.S. Holder in the United States, (ii) in the case
of a Non-U.S. Holder who is an individual and holds the Notes as a capital
asset, such Holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
S-19
<PAGE> 68
met, or (iii) the Non-U.S. Holder is subject to tax pursuant to certain
provisions of the Code applicable to United States expatriates.
Gains derived by a Non-U.S. Holder (other than a partnership) from the sale
or other disposition of Notes that are effectively connected with the conduct by
the Holder of a trade or business in the United States are generally taxed at
the graduated rates that are applicable to United States persons. In the case of
a Non-U.S. Holder that is a corporation, such effectively connected income may
also be subject to the United States branch profits tax. In the case of a
partnership that has foreign partners (i.e., persons who would be Non-U.S.
Holders if they held the Notes directly), such effectively connected income
allocable to the foreign partner would generally be subject to United States
federal withholding tax (regardless of whether such income is, in fact,
distributed to such foreign partner) at a 35% rate, if the foreign partner is a
corporation, or at a 39.6% rate, if the foreign partner is not a corporation.
Any foreign partner of such a partnership would be entitled to a credit against
his United States federal income tax for his share of the withholding tax paid
by the partnership. If an individual Non-U.S. Holder falls under clause (ii)
above, he will be subject to a flat 30% tax on the gain derived from the sale or
other disposition, which may be offset by United States capital losses
recognized within the same taxable year as such sale or other disposition
(notwithstanding the fact that he is not considered a resident of the United
States).
A Note beneficially owned by an individual who at the time of death is a
Non-U.S. Holder will not be subject to United States federal estate tax as a
result of such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code and provided that the interest payments with
respect to such Note would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United States
trade or business by such individual.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-U.S. Holders
if a statement described in clause (iv) of the first paragraph hereunder has
been received and the payor does not have actual knowledge that the Beneficial
Owner is a United States person.
Information reporting and backup withholding will not apply if payments of
interest on a Note are paid or collected by a custodian, nominee, or agent on
behalf of the Beneficial Owner of such Note if such custodian, nominee, or agent
has documentary evidence in its records that the Beneficial Owner is not a U.S.
person and certain other conditions are met, or the Beneficial Owner otherwise
establishes an exemption.
Payments on the sale, exchange or other disposition of a Note made to or
through a foreign office of a broker generally will not be subject to backup
withholding. However, payments made by a broker that is a United States person,
a controlled foreign corporation for United States federal income tax purposes,
a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three year
period, or (with respect to payments after December 31, 1998) a foreign
partnership with certain connections to the United States, will be subject to
information reporting unless the broker has in its records documentary evidence
that the Beneficial Owner is not a United States person and certain other
conditions are met, or the Beneficial Owner otherwise establishes an exemption.
Backup withholding may apply to any payment that such broker is required to
report if the broker has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a broker will be
subject to information reporting and backup withholding unless the Holder
certifies, under penalties of perjury, that it is not a United States person or
otherwise establishes an exemption.
For payments made after December 31, 1998, with respect to Notes held by
foreign partnerships, IRS regulations require that the certification described
in clause (iv) of the first paragraph hereunder above be provided by the
partners, rather than by the foreign partnership, and that the partnership
provide certain information, including a United States TIN. A look-through rule
will apply in the case of tiered partnerships.
Non-U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedures for
obtaining such an exemption, if available. Any amounts withheld under the backup
withholding
S-20
<PAGE> 69
rules will be allowed as a refund or credit against the Non-U.S. Holder's U.S.
federal income tax liability and may entitle such Holder to a refund, provided
the required information is furnished to the IRS.
ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary obligation requirements imposed
under ERISA, in the context of the plan's particular circumstances, before
authorizing an investment in the Notes with assets of the plan. Accordingly,
among other factors, the fiduciary should consider whether such an investment
would satisfy the prudence and diversification requirements of ERISA, whether
such an investment would constitute an unauthorized delegation of fiduciary
authority and whether such an investment would be consistent with the documents
and instruments governing the plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain employee
benefit plans, as well as individual retirement accounts and Keogh plans subject
to Section 4975 of the Code (collectively, "Plans") from engaging in a wide
range of transactions ("Prohibited Transactions") involving the assets of a Plan
and persons who have certain specified relationships to the Plan ("parties in
interest," as defined in Section 3(14) of ERISA ("Parties in Interest"), and
"disqualified persons," as defined in Section 4975(e) (2) of the Code
("Disqualified Persons")). A violation of the Prohibited Transaction rules may
cause Plan fiduciaries, Parties in Interest and/or Disqualified Persons to be
subject to excise taxes or to incur other liabilities under ERISA and/or Section
4975 of the Code.
The Company, the Mandatory Tender Remarketing Agent and the Reset
Remarketing Agent, because of their activities or the activities of their
respective affiliates, may be considered to be Parties in Interest or
Disqualified Persons with respect to certain Plans. If the Notes are acquired by
a Plan with respect to which the Company or the Remarketing Dealer is, or
subsequently becomes, a Party in Interest or Disqualified Person, the purchase,
holding and/or sale of the Notes to the Remarketing Dealer could be deemed to be
a direct or indirect violation of the Prohibited Transaction rules unless an
applicable statutory or administrative exemption from the Prohibited Transaction
rules was available. Consequently, before investing in the Notes, any Plan
fiduciary or other person who is using the assets of a Plan to acquire the Notes
should determine whether any of the Company, the Mandatory Tender Remarketing
Agent or the Reset Remarketing Agent is a Party in Interest or Disqualified
Person with respect to such Plan and, if so, whether exemptive relief from the
Prohibited Transaction rules is available. Included among the available
administrative exemptions from the Prohibited Transaction rules that may be
applicable are: U.S. Department of Labor Prohibited Transaction Class Exemption
("PTCE") 90-1, regarding transactions involving insurance company pooled
separate accounts: PTCE 91-38, regarding transactions involving bank collective
investment funds; PTCE 84-14, regarding transactions effected by qualified
professional asset managers; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 95-60, regarding transactions involving
insurance company general accounts. There can be no assurance, however, that any
of these exemptions, even if all of the conditions specified therein are
satisfied.
Insurance companies considering an investment in the Notes should note that
the Small Business Job Protection Act of 1996 added new Section 401(c) of ERISA
relating to the status of the assets of insurance company general accounts under
ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the Department
of Labor issued proposed regulations (the "Proposed General Account
Regulations") in December, 1997, with respect to insurance policies issued on or
before December 31, 1998 that are supported by an insurer's general account. The
Proposed General Account Regulations are intended to provide guidance on which
assets held by the insurer constitute "plan assets" of an ERISA Plan for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code. The "plan assets" status of insurance company separate accounts is
unaffected by new Section 401(c) of ERISA, and separate account assets continue
to be treated as the "plan assets" of an ERISA Plan invested in a separate
account.
The discussion herein of ERISA is general in nature and is not intended to
be complete. Any fiduciary of a Plan considering an investment in the Notes
should consult with its legal advisors regarding the consequences and
advisability of such an investment.
S-21
<PAGE> 70
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement"), between the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated and First Chicago Capital Markets, Inc. (the
"Underwriters"), the Company has agreed to sell to each of the Underwriters, and
each of the Underwriters has severally agreed to purchase from the Company, the
respective principal amount of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
First Chicago Capital Markets, Inc. ........................
--------
Total.......................................... $
========
</TABLE>
In the Purchase Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any Notes are purchased. The Underwriters have advised the Company
that the Underwriters propose to offer the Notes from time to time for sale in
negotiated transactions or otherwise, at prices relating to prevailing market
prices determined at the time of sale. The Underwriters may effect such
transactions by selling Notes to or through dealers and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters and any purchasers of Notes for whom they may act as
agent. The Underwriters and any dealers that participate with the Underwriters
in the distribution of the Notes may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of Notes
by them may be deemed to be underwriting compensation.
The Notes are new issues of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the Notes. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. If the Underwriters
create a short position in the notes in connection with the offering, i.e., if
they sell Notes in an aggregate principal amount exceeding that set forth on the
cover page of this Prospectus Supplement, the Underwriters may reduce that short
position by purchasing Notes in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor the Underwriters makes any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may in the future engage in investment banking and general
financing and banking transactions with the Company and certain of its
affiliates.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Act, or to make contribution to
certain payments in respect thereof.
S-22
<PAGE> 71
LEGAL OPINIONS
The validity of the Indentures and the Notes will be passed upon for the
Company by Ronald E. Christian, Vice President, General Counsel and Secretary of
MichCon. Certain matters will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom, LLP, New York, New York. Certain legal matters will be
passed upon for the Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a
limited liability partnership including professional corporations, 125 West 55th
Street, New York, New York 10019-5389. LeBoeuf, Lamb, Greene & MacRae, L.L.P.
from time to time renders legal services to MichCon and its affiliates.
S-23
<PAGE> 72
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OF SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements........... S-3
Summary.............................. S-4
Use of Proceeds...................... S-6
Description of the Notes............. S-6
Certain Federal Income Tax
Considerations..................... S-18
Erisa Considerations................. S-21
Underwriting......................... S-22
Legal Opinions....................... S-23
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Forward-Looking Statements........... 3
The Company.......................... 4
Use of Proceeds...................... 4
Ratio of Earnings to Fixed Charges... 4
Securities........................... 4
Description of the Senior Debt
Securities......................... 5
Description of the First Mortgage
Bonds.............................. 12
Plan of Distribution................. 15
Validity of Securities............... 16
Experts.............................. 16
</TABLE>
======================================================
======================================================
$
MICHIGAN CONSOLIDATED
GAS COMPANY
EXTENDABLE MANDATORY PAR PUT
REMARKETED SECURITIESSM
("MOPPRSSM"),
DUE JUNE , 2038
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
FIRST CHICAGO CAPITAL
MARKETS, INC.
JUNE , 1998
"MANDATORY PAR PUT REMARKETED SECURITIESSM" AND "MOPPRSSM" ARE SERVICE MARKS
OWNED BY MERRILL LYNCH & CO., INC.
======================================================
<PAGE> 1
EXHIBIT 8.1
June 15, 1998
Michigan Consolidated Gas Company
500 Griswold Street
Detroit, Michigan 48226
Re: Registration Statement on Form S-3
Registration No. 333-56333
Ladies and gentlemen:
We have acted as tax counsel to Michigan Consolidated Gas Company, a
corporation organized under the laws of the State of Michigan (the "Company"),
in connection with the offering of Extendable MandatOry Par Put Remarketed
Securities(sm) ("MOPPRS(sm)") due June 1, 2038, and Resetable MAndatory
Putable/remarketable Securities ("MAPS(sm)"), due June 1, 2038 (the "Notes")
described in the applicable Prospectus Supplements to the above-captioned
registration statement on Form S-3 (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") on June 15, 1998 (the
"Prospectus Supplements").
In rendering our opinion, we have participated in the preparation of
the Registration Statement and the Prospectus Supplements. Our opinion is condi
tioned on, among other things, the initial and continuing accuracy of the facts,
information, covenants and representations set forth in the Registration
Statement, the Prospectus Supplements and certain other documents and statements
made by officers of the Company. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such documents.
<PAGE> 2
Michigan Consolidated Gas Company
June 15, 1998
Page 2
In rendering our opinion, we have considered the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, judicial decisions and Internal Revenue Service rulings,
all of which are subject to change, which changes may be retroactively applied.
A change in the authorities upon which our opinion is based could affect our
conclusions. There can be no assurance, moreover, that any of the opinions
expressed herein will be accepted by the Internal Revenue Service or, if
challenged, by a court.
Based solely upon the foregoing, we are of the opinion that, under
current United States federal income tax law, although the discussion set forth
in the Prospectus Supplements under the heading "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS" does not purport to discuss all possible United States federal
income tax consequences of the purchase, ownership and disposition of the Notes,
such discussion constitutes, in all material respects, a fair and accurate
summary of the United States federal income tax consequences of the purchase,
ownership and disposition of the Notes.
Except as set forth above, we express no opinion to any party as to
the tax consequences, whether federal, state, local or foreign, of the issuance
of the Notes or of any transaction related to or contemplated by such issuance.
This opinion is furnished to you solely for your benefit in connection with the
offering of the Notes and is not to be used, circulated, quoted or otherwise
referred to for any other purpose or relied upon by any other person without our
prior written consent. We consent to the use of our name under the heading
"Legal Matters" in the Prospectus Supplements. We hereby consent to the filing
of this opinion with the Commission as Exhibit 8 to the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 or the rules and regulations of the Commission promulgated thereunder. This
opinion is expressed as of the date hereof, unless otherwise expressly stated,
and we disclaim any undertaking to advise you of any subsequent changes of the
facts stated or assumed herein or any subse quent changes in applicable law.
<PAGE> 3
Michigan Consolidated Gas Company
June 15, 1998
Page 3
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
