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Rule 424(b)5
Registration Statement No. 33-51877
$250,000,000
CMS ENERGY CORPORATION
GENERAL TERM NOTES(R), SERIES A
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DUE FROM 9 MONTHS TO 25 YEARS FROM DATE OF ISSUE
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CMS Energy Corporation (the "Company" or "CMS Energy") may offer from time
to time up to $250,000,000 aggregate principal amount of its General Term
Notes(R), Series A (the "Notes"), subject to reduction as a result of the sale
from time to time, of Notes. As of September 30, 1995, $131,468,000 aggregate
principal amount of Notes were outstanding. Each Note will bear interest at a
fixed rate payable monthly, quarterly or semi-annually and will mature on a date
from 9 months to 25 years from the date of issue. The interest rate, issue
price, stated maturity, interest payment dates and certain other terms
(including a Survivor's Option, if applicable) with respect to each Note will be
established at the time of issuance and set forth in a pricing supplement to
this Prospectus (a "Pricing Supplement"). If provided in the applicable Pricing
Supplement with respect to any Note, such Note will be subject to redemption
prior to its stated maturity by the Company, in whole or in part, at redemption
prices declining from a specified premium, if any, to par, together with accrued
interest to the date of redemption. Notes will be issued only in denominations
of $1,000 or any amount in excess thereof which is an integral multiple of
$1,000. The Notes will be unsecured debt securities of the Company. See
"Description of General Term Notes(R)."
In the case of a Note that provides for monthly interest payments, interest
will be payable, in arrears, on the fifteenth day of each calendar month;
provided, however, that in the event such Note is issued between the first and
fifteenth day of a calendar month, interest otherwise payable on the fifteenth
day of such calendar month will be payable on the fifteenth day of the next
succeeding calendar month. In the case of a Note that provides for quarterly or
semi-annual interest payments, interest will be payable, in arrears, commencing
on the day that is either three months or six months, as appropriate, from (i)
the day on which such Note is issued, if such Note is issued on the fifteenth
day of a calendar month, or (ii) the fifteenth day of the calendar month prior
to the calendar month in which such Note is issued, if such Note is issued prior
to the fifteenth day of a calendar month, or (iii) the fifteenth day of the
calendar month in which such Note is issued, if such Note is issued after the
fifteenth day of a calendar month.
Each Note initially will be issued in book-entry form and will be
represented only by a global certificate (a "Global Note") registered in the
name of the nominee of The Depository Trust Company (as Depository). A
beneficial interest in a Global Note will be shown on, and transfers thereof
will be effected only through, records maintained by the Depository and its
participants. A beneficial interest in a Global Note will not be represented by
Notes in definitive form except under the limited circumstances described
herein. See "Description of General Term Notes(R) -- Book-Entry System" and "--
Certificated Notes."
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 REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO AGENT'S DISCOUNT PROCEEDS TO
PUBLIC(1) OR COMMISSION(2) COMPANY(2)(3)
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<S> <C> <C> <C>
Per Note........................... 100% Not to exceed 4% Not less than 96%
- ---------------------------------------------------------------------------------------------------------------
Not less than
Total.............................. $250,000,000 Not to exceed $10,000,000 $240,000,000
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, the price
to the public for each Note will be equal to 100% of the principal amount
thereof. See "Plan of Distribution."
(2) The Company will pay EVEREN Securities, Inc. (formerly Kemper Securities,
Inc.), J. W. Korth & Company, First of Michigan Corporation, Prudential
Securities Incorporated and Roney & Co. (each an "Agent," and collectively,
the "Agents") an underwriting discount or commission, not to exceed 4% of
the principal amount of any Note, which discount or commission shall be
disclosed in the applicable Pricing Supplement for the Note, depending upon
the maturity of the Note. The Company has agreed to indemnify the Agents
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended, or to contribute to payments that the Agents may be
required to make in respect thereof. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $500,000.
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Offers to purchase the Notes are being solicited from time to time by the
Agents on behalf of the Company. Each Agent has agreed to use its reasonable
best efforts to solicit purchases of the Notes. Following such solicitation,
Notes will be sold through one or more of the Agents, acting as principals. The
Notes are offered, subject to prior sale, when, as, and if issued to and
accepted by the Agents, and subject to the right of the Company and each Agent
to reject any order in whole or in part and to withdraw, cancel or modify the
offer made hereby without notice. The Notes will not be listed on any securities
exchange, and there can be no assurance that the Notes offered by this
Prospectus will be sold or that there will be a secondary market for the Notes.
See "Plan of Distribution."
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PRUDENTIAL SECURITIES INCORPORATED
EVEREN SECURITIES, INC.
FIRST OF MICHIGAN CORPORATION
RONEY & CO.
J. W. KORTH & COMPANY
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The date of this Prospectus is October 14, 1995.
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(R) Registered servicemark of J. W. Korth & Company.
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus or any Pricing Supplement, and any information or
representation not contained or incorporated herein must not be relied upon as
having been authorized by CMS Energy or any underwriter, dealer or agent. This
Prospectus and any Pricing Supplement do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which they relate or an offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus or any Pricing Supplement nor
any sale made hereunder or thereunder shall, under any circumstances, create any
implication that the information contained or incorporated herein or therein is
correct as of any time subsequent to the date of such information.
------------------------
AVAILABLE INFORMATION
CMS Energy is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and at 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The outstanding
Common Stock of CMS Energy is listed on the New York Stock Exchange and reports,
proxy statements and other information concerning CMS Energy may also be
inspected and copied at the offices of such exchange at 20 Broad Street, New
York, New York 10005.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by CMS Energy with the Commission (File No.
1-9513) pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus and shall be deemed to be a part hereof:
(1) CMS Energy's Annual Report on Form 10-K for the year ended December
31, 1994; and
(2) CMS Energy's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995; and
(3) CMS Energy's Current Reports on Form 8-K dated January 10, 1995,
February 2, 1995, and September 11, 1995.
All documents subsequently filed by CMS Energy pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the
offering made by this Prospectus shall be deemed to be incorporated by reference
herein and shall be deemed to be a part hereof from the date of filing of such
documents (such documents, and the documents enumerated above, being hereinafter
referred to as "Incorporated Documents").
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
CMS Energy undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon 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 in this Prospectus by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to CMS Energy Corporation at its principal executive offices located at Fairlane
Plaza South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126,
Attention: Office of the Secretary, telephone: (313) 436-9200.
Certain information contained in this Prospectus summarizes, is based upon,
or refers to information and financial statements contained in one or more
Incorporated Documents; accordingly, such information contained herein is
qualified in its entirety by reference to such documents and should be read in
conjunction therewith.
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the information appearing elsewhere in this
Prospectus and the Incorporated Documents.
THE COMPANY
CMS Energy is a holding company. Its two principal subsidiaries are
Consumers Power Company ("Consumers"), a public utility, and CMS Enterprises
Company ("CMS Enterprises"), which conducts CMS Energy's non-utility,
energy-related business. See "The Company."
CMS Energy's consolidated operating revenue in 1994 was derived
approximately 61 percent from sales of electric energy, approximately 32 percent
from gas operations, approximately 4 percent from gas transmission and
marketing, approximately 2 percent from oil and gas exploration and production
activities, and approximately 1 percent from independent power production
activities.
Consumers' consolidated operations in the electric and gas businesses
account for the major share of CMS Energy's total assets, revenue and income.
Consumers is a public utility serving almost six million of Michigan's nine
million residents in all 68 counties in Michigan's Lower Peninsula. Consumers
conducts its principal operations through two business segments: electric
operations and gas operations. Consumers' 1994 consolidated operating revenue
was derived approximately 65 percent from its electric utility business and
approximately 35 percent from its gas utility business.
THE OFFERING
Securities Offered............ $250,000,000 aggregate principal amount of
General Term Notes(R), Series A (the "Notes")
subject to reduction as a result of the sale
from time to time of the Notes. As of September
30, 1995, $131,468,000 aggregate principal
amount of Notes were outstanding.
Maturity Date................. The Notes will be offered at varying maturities
but in no event will any Note mature earlier
than 9 months from its date of issue or later
than 25 years from its date of issue. The
stated maturity of each Note will be set forth
in the applicable Pricing Supplement.
Interest Rate................. The interest rate on each Note will be a fixed
rate established at the time of issuance and
set forth in the applicable Pricing Supplement.
Issue Price................... The Issue Price with respect to each Note will
be 100% of the principal amount, unless
otherwise set forth in the applicable Pricing
Supplement.
Interest Payment Dates........ The interest payment dates with respect to each
Note will be set forth in the applicable
Pricing Supplement. The Pricing Supplement also
will state whether interest on the related Note
will be payable monthly, quarterly or
semi-annually. See "Description of General Term
Notes(R) -- Interest."
Repayment Upon Death.......... If the Pricing Supplement relating to any Note
provides that the holder of such Note will have
the option (the "Survivor's Option") to elect
repayment of such Note prior to its stated
maturity in the event of the death of the
beneficial owner of such Note, the Company will
repay such Note (or portion thereof) properly
tendered for repayment by or on behalf of the
person that has authority to act on behalf of
the deceased owner of the beneficial interest
in such Note at a price equal to 100% of the
principal
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amount of the beneficial interest of the
deceased owner in such Note plus accrued
interest to the date of such repayment, subject
to an annual aggregate limitation and an
individual holder limitation on the dollar
amount of Notes that will be repaid in any year
under the Survivor's Option. See "Description
of General Term Notes(R) -- Repayment Upon
Death."
Redemption at Company's
Option...................... If it is so provided in the Pricing Supplement,
the Notes will be redeemable, in whole or in
part in increments of $1,000, at the option of
the Company, at any time after a specified
initial redemption date, on notice given by the
Company not more than 60 nor less than 30 days
prior to the date of redemption, at redemption
prices declining over a specified period from a
specified premium, if any, to par, together
with accrued interest to the date of
redemption. See "Description of General Term
Notes(R) -- Redemption."
Purchase at the Option of
Holder after a Change in
Control..................... On a date no earlier than 60 days nor later
than 90 days (the "Change in Control Purchase
Date") after the date on which the Company
mails written notice to the Holders of the
Notes of the occurrence of a Change in Control
at any time while any of the Notes are
outstanding, the Company will repurchase any
Note, at the option of its Holder, for a Change
in Control Purchase Price equal to 101% of the
aggregate outstanding principal amount of the
Notes to be repurchased plus accrued interest
thereon to the Change in Control Purchase Date.
See "Description of General Term Notes(R) --
Purchase of Notes Upon Change in Control" for a
summary of these provisions and the definition
of "Change in Control."
Mandatory Sinking Fund........ None.
Ranking....................... The Notes will be unsecured debt securities of
the Company. The Notes will rank on a parity in
right of payment with all other unsecured and
unsubordinated indebtedness of the Company. As
of June 30, 1995, the Company had no secured
indebtedness outstanding. However, the Company
has retained the right to pledge assets to
secure indebtedness in the future, subject to
certain limitations. See "Description of
General Term Notes(R) -- Certain Restrictive
Covenants -- Limitation on Liens."
Certain Covenants............. So long as any of the Notes are outstanding the
Company has agreed to: (a) limitations on the
issuance or incurrence of indebtedness by the
Company and certain of its Subsidiaries (other
than Consumers); (b) limitations on the
declaration or payment of dividends on, or the
redemption, retirement or other acquisition of,
the capital stock of the Company; (c)
limitations on the creation of liens or
security interests upon the stock of Consumers
and certain other Subsidiaries; (d) limitations
on transactions between the Company and its
affiliates; and (e) limitations on certain
mergers, consolidations and sales of assets.
See "Description of General Term Notes(R) --
Certain Restrictive Covenants."
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Use of Proceeds............... The net proceeds of the sale of the Notes will
be used to retire the Company's outstanding
Deferred Coupon Notes and for other general
corporate purposes. See "Use of Proceeds."
Liquidity..................... There is no active public trading market for
the Notes. Any Agent may make a market in the
Notes, but no Agent is obligated to do so and
any such market making so undertaken may be
discontinued without notice at any time. There
can be no assurance as to the liquidity of any
market that may develop for the Notes, the
ability of the Holders to sell their Notes, or
the price at which Holders would be able to
sell their Notes. If a trading market is not
developed or is not maintained, Holders of the
Notes may experience difficulty in reselling
them or may be unable to sell them at all. If a
market for the Notes develops, they may trade
at a discount from their Issue Price. Future
trading prices of the Notes will depend on many
factors, including prevailing interest rates,
the Company's operating results, and the market
for similar securities. The Company does not
intend to apply for listing of the Notes on any
securities exchange. Historically, and
particularly in recent periods, the market for
non-investment grade debt has been subject to
disruptions that have caused substantial
volatility in the prices of securities. There
can be no assurance that the market for the
Notes, if any, will not be subject to similar
disruptions.
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THE COMPANY
CMS Energy, incorporated in 1987, is the parent holding company of
Consumers and CMS Enterprises. Consumers, a combination electric and gas utility
company serving most of Michigan's Lower Peninsula, is CMS Energy's largest
subsidiary. Consumers' customer base includes a mix of residential, commercial
and diversified industrial customers, the largest of which is the automotive
industry. Enterprises is engaged in several non-utility energy-related
businesses including: (i) oil and gas exploration and production, (ii)
development and operation of independent power production facilities, (iii) gas
marketing services to utility, commercial and industrial customers and (iv)
transmission and storage of natural gas.
CMS Energy conducts its principal operations through the following five
business segments: (i) electric utility operations; (ii) natural gas utility
operations; (iii) gas transmission and marketing; (iv) oil and gas exploration
and production operations; and (v) independent power production. Consumers or
Consumers' subsidiaries are engaged in two segments: electric operations and gas
operations. Consumers' electric and gas businesses are principally regulated
utility operations.
CMS Energy's 1994 consolidated operating revenue was $3,619 million. This
consolidated operating revenue was derived from Consumers' sales of electric
energy (approximately 61% or $2,189 million), Consumers' gas operations
(approximately 32% or $1,151 million), gas transmission and marketing
(approximately 4% or $145 million), oil and gas exploration and production
activities (approximately 2% or $85 million) and independent power production
activities (approximately 1% or $45 million). Consumers' consolidated operations
in the electric and gas utility businesses account for the major share of CMS
Energy's total assets, revenue and income. CMS Energy's share of 1994
unconsolidated non-utility independent power production revenue was $385
million.
Consumers is a public utility serving almost six million of Michigan's nine
million residents in all of the 68 counties in Michigan's Lower Peninsula.
Industries in Consumers' service area include automotive, metal, chemical, food
and wood products and a diversified group of other industries. Consumers' 1994
consolidated operating revenue of $3,356 million was derived approximately 65%
($2,189 million) from its electric utility business and approximately 35%
($1,151 million) from its gas utility business. Consumers' rates and certain
other aspects of its business are subject to the jurisdiction of the Michigan
Public Service Commission and the Federal Energy Regulatory Commission.
The foregoing information concerning CMS Energy and its subsidiaries does
not purport to be comprehensive. For additional information concerning CMS
Energy and its subsidiaries' business and affairs, including their capital
requirements and external financing plans, pending legal and regulatory
proceedings and descriptions of certain laws and regulations to which those
companies are subject, prospective purchasers should refer to the Incorporated
Documents. See "Incorporation of Certain Documents by Reference."
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to retire the
Company's outstanding Deferred Coupon Notes and for other general corporate
purposes.
At September 30, 1995, there was outstanding approximately $172,000,000 of
Series A Senior Deferred Coupon Notes due 1997 and approximately $175,098,000 of
Series B Senior Deferred Coupon Notes due 1999. Interest is payable beginning
April 1, 1996 and semi-annually thereafter at the rate of 9.500% per annum in
the case of the Series A Deferred Coupon Notes and 9.875% in the case of the
Series B Deferred Coupon Notes.
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RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the six months ended June 30,
1995 and for each of the years ended December 31, 1990 through 1994 are as
follows:
<TABLE>
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SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------------
JUNE 30, 1995 1994 1993 1992 1991 1990
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(1) (2)(3) (4)
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.............. 2.35 2.12 1.92 -- -- --
</TABLE>
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(1) For the year ended December 31, 1992, fixed charges exceeded earnings by
$441 million. Earnings as defined include a $520 million pretax loss on the
settlement of MCV power purchases, $(15) million for potential customer
refunds and other reserves related to 1992 but recorded in 1991, and $6
million relating to CMS Generation Company's reduction in its investment in
The Oxford Energy Company. The ratio of earnings to fixed charges would
have been 1.34, excluding these amounts.
(2) Excludes an extraordinary after-tax loss of $14 million.
(3) For the year ended December 31, 1991, fixed charges exceeded earnings by
$356 million. Earnings as defined include pretax losses of $398 million for
write-downs and reserve amounts related to Consumers' abandonment of the
construction of a nuclear generating station in Midland, Michigan ("Midland
Construction"), $76 million for potential customer refunds and other
reserves, and $51 million relating to CMS Generation Company's reduction in
its investment in The Oxford Energy Company. The ratio of earnings to fixed
charges would have been 1.48, excluding these amounts.
(4) For the year ended December 31, 1990, fixed charges exceeded earnings by
$500 million. Earnings as defined include pretax losses of $847 million for
write-downs and reserve amounts related to the abandonment of the Midland
Construction. The ratio of earnings to fixed charges would have been 2.01,
excluding these amounts.
For the purpose of computing such ratios, earnings represent net income
before income taxes, net interest charges and the estimated interest portion of
lease rentals.
DESCRIPTION OF GENERAL TERM NOTES(R)
The Notes have been and will be issued as a series of debt securities under
an Indenture, dated as of January 15, 1994 (such Indenture as amended or
supplemented from time to time by one or more supplemental indentures thereto,
including a supplemental indenture relating to the Notes, being referred to
herein as the "Indenture" and all debt securities hereafter issued under such
Indenture being collectively referred to herein as "Securities"), between the
Company and The Chase Manhattan Bank (National Association), as trustee (the
"Trustee"). The Company is not limited by the Indenture as to the aggregate
principal amount of Securities it may issue. The descriptions of the Notes and
the Indenture in this Prospectus are brief summaries of the provisions contained
in such documents and do not purport to be complete. The form of the Indenture
is filed as an exhibit to the Registration Statement of which this Prospectus is
a part, and reference is made thereto for the definitive provisions of such
Indenture. The descriptions herein are qualified in their entirety by such
reference. Certain capitalized terms used herein without definition shall have
the meanings respectively set forth in the Indenture.
GENERAL
The Notes will be offered pursuant to this Prospectus on a continuing
basis. Each Note will mature from 9 months to 25 years from its date of issue.
The Notes will be issued without coupons in registered form only and in
denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000. As of September 30, 1995, $131,468,000 aggregate principal
amount of Notes were outstanding.
CMS Energy is a holding company and its assets consist primarily of
investment in its subsidiaries. The Securities (including the Notes) will be
obligations exclusively of the Company. The Company's ability to
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service its indebtedness, including the Securities, is dependent primarily upon
the earnings of its subsidiaries and the distribution or other payment of such
earnings to the Company in the form of dividends, loans or advances, and
repayment of loans and advances from the Company. The subsidiaries are separate
and distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the Securities or to make any funds available
therefor, whether by dividends, loans or other payments.
A substantial portion of the consolidated liabilities of the Company have
been incurred by its subsidiaries. Therefore, the Company's rights and the
rights of its creditors, including holders of Securities, to participate in the
distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including trade creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary (in which case the claims
of the Company would still be subject to the prior claims of any secured
creditor of such subsidiary and of any holder of indebtedness of such subsidiary
that is senior to that held by CMS Energy). As of June 30, 1995, the Company's
subsidiaries had total indebtedness for borrowed money (excluding intercompany
indebtedness) of approximately $2.5 billion.
The Notes will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company. As of June 30, 1995, the Company had no secured
indebtedness outstanding. The Company has retained the right to secure
indebtedness, subject to certain limitations. See "Certain Restrictive Covenants
- -- Limitation on Liens."
Notes will be represented by a Global Note registered in the name of the
nominee of the Depository, except under the limited circumstances described
below under "Certificated Notes." A single Global Note will represent all Notes
issued on the same day and having the same terms, including, but not limited to,
the same Interest Payment Dates, rate of interest, stated maturity and
repurchase and redemption provisions (if any). A beneficial interest in a Global
Note will be shown on, and transfers thereof will be effected only through,
records maintained by the Depository (with respect to interests of its
participants) and its participants (with respect to interests of persons other
than its participants).
Unless the applicable Pricing Supplement provides otherwise, the price at
which each Note will be issued (the "Issue Price") will be 100% of the principal
amount of the Note. Notes will not be issued as discounted securities, at prices
below stated principal amounts, or having an original issue discount for U.S.
federal income tax purposes, unless the applicable Pricing Supplement so
provides and, if applicable, describes potential U.S. federal income tax
consequences.
The Pricing Supplement relating to a Note will set forth, among other
things, the following terms: (i) the date on which such Note will be issued;
(ii) the Issue Price; (iii) the stated maturity date of such Note; (iv) the rate
per annum at which such Note will bear interest; (v) the Interest Payment Dates
for such Note; (vi) whether the holder of such Note will have the Survivor's
Option; (vii) whether and the terms on which such Note will be subject to
redemption by the Company prior to its stated maturity; and (viii) any other
terms not inconsistent with the provisions of the Indenture.
INTEREST
Each Note will bear interest from the date of issue at the fixed rate per
annum specified therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable either monthly, quarterly or semi-annually on each Interest Payment Date
and at Maturity. Interest will be payable to the person in whose name a Note is
registered at the close of business on the Regular Record Date next preceding
each Interest Payment Date; provided, however, interest payable at Maturity will
be payable to the person to whom principal shall be payable. Unless otherwise
indicated in the applicable Pricing Supplement, interest will be paid in arrears
and shall be the amount of interest accrued to, but excluding, the Interest
Payment Date. Interest on the Notes will be computed on the basis of a 360-day
year of twelve 30-day months.
The Interest Payment Dates for a Note that provides for monthly interest
payments shall be the fifteenth day of each calendar month; provided, however,
that in the case of a Note issued between the first
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and fifteenth day of a calendar month, interest otherwise payable on the
fifteenth day of such calendar month will be payable on the fifteenth day of the
next succeeding calendar month. In the case of a Note that provides for
quarterly interest payments, the Interest Payment Dates shall be the fifteenth
day of each of the months specified in the Pricing Supplement, commencing on the
day that is three months from (i) the day on which such Note is issued, if such
Note is issued on the fifteenth day of a calendar month, or (ii) the fifteenth
day of the calendar month immediately preceding the calendar month in which such
Note is issued, if such Note is issued prior to the fifteenth day of a calendar
month, or (iii) the fifteenth day of the calendar month in which such Note is
issued, if such Note is issued after the fifteenth day of a calendar month. In
the case of a Note that provides for semi-annual interest payments, the Interest
Payment Dates shall be the fifteenth day of each of the months specified in the
Pricing Supplement, commencing on the day that is six months from (i) the day on
which such Note is issued, if such Note is issued on the fifteenth day of a
calendar month, (ii) the fifteenth day of the calendar month immediately
preceding the calendar month in which such Note is issued, if such Note is
issued prior to the fifteenth day of a calendar month, or (iii) the fifteenth
day of the calendar month in which such Note is issued, if such Note is issued
after the fifteenth day of a calendar month. The Regular Record Date with
respect to any Interest Payment Date (other than at Maturity) shall be the first
day (whether or not a Business Day) of the calendar month in which such Interest
Payment Date occurs, and, in the case of interest payable at Maturity, the
Regular Record Date shall be the date of Maturity.
Interest on the Notes that is not punctually paid or duly provided for on
any Interest Payment Date ("defaulted interest") shall cease to be payable to
the Holder thereof on the relevant Regular Record Date and may be paid by the
Company to Holders of Notes (i) at the close of business on a Special Record
Date for the payment of such defaulted interest fixed by the Trustee and not
more than 15 nor less than 10 days prior to the date of the proposed payment,
provided that the Company shall have notified the Trustee in writing of the
amount of such defaulted interest, deposited with the Trustee funds equal to the
amount of the proposed payment or made arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, or (ii) in such
other lawful manner which is not inconsistent with the requirements of any
securities exchange on which the Notes are listed for trading.
REDEMPTION
A Note is not subject to redemption at the option of the Company prior to
the date, if any, fixed at the time of sale and designated as the "Initial
Redemption Date" on the face of such Note and in the applicable Pricing
Supplement hereto. If no Initial Redemption Date is indicated with respect to a
Note, such Note is not subject to redemption at the option of the Company prior
to Stated Maturity. If so specified in the applicable Pricing Supplement, on and
after the Initial Redemption Date, the related Note will be redeemable in whole
or in part in increments of $1,000, at the option of the Company, at redemption
prices declining from a specified premium, if any, to par, together with accrued
interest to the date of redemption, on notice given by the Company not more than
60 nor less than 30 days prior to the date of redemption. If less than all of
the Notes with like tenor and terms are to be redeemed, the Notes to be redeemed
will be selected by the Trustee by such method as the Trustee shall deem fair
and appropriate. Notwithstanding the foregoing however, the Company may at any
time purchase Notes at any price in the open market or otherwise. Notes so
purchased by the Company may, at the discretion of the Company, be held or
resold or surrendered to the Trustee for cancellation. The Notes will not have a
sinking fund. See "Purchase of Notes Upon Change in Control" and "Repayment Upon
Death."
With respect to any Note redeemable at the option of the Company, the
applicable Pricing Supplement will specify if the Company would be prohibited
from redeeming such Note as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an effective interest cost to the Company of less than the effective interest
cost to the Company of such Note.
PURCHASE OF NOTES UPON CHANGE IN CONTROL
In the event of any Change in Control (as defined below) each Holder of a
Note will have the right, at such Holder's option, subject to the terms and
conditions of the Indenture, to require the Company to repurchase all or any
part of such Holder's Note on a date selected by the Company that is no earlier
than
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<PAGE> 10
60 days nor later than 90 days (the "Change in Control Purchase Date") after the
mailing of written notice by the Company of the occurrence of such Change in
Control at a repurchase price payable in cash equal to 101% of the principal
amount of such Notes plus accrued interest to the Change in Control Purchase
Date (the "Change in Control Purchase Price").
Within 30 days after the Change in Control, the Company is obligated to
mail to each Holder of a Note a notice regarding the Change in Control, which
notice shall state, among other things: (i) that a Change in Control has
occurred and that each such Holder has the right to require the Company to
repurchase all or any part of such Holder's Notes at the Change in Control
Purchase Price; (ii) the Change in Control Purchase Price; (iii) the Change in
Control Purchase Date, (iv) the name and address of the Paying Agent and (v) the
procedures that Holders must follow to cause the Notes to be repurchased.
To exercise this right, a Holder must deliver a Change in Control Purchase
Notice to the Paying Agent at its office in The City of New York, or any other
office of the Paying Agent maintained for such purposes, not later than 30 days
prior to the Change in Control Purchase Date. The Change in Control Purchase
Notice shall state (i) the portion of the principal amount of any Notes to be
repurchased, which must be $1,000 or an integral multiple thereof, (ii) that
such Notes are to be repurchased by the Company pursuant to the applicable
change-in-control provisions of the Indenture, and (iii) unless the Notes are
represented by one or more Global Notes, the certificate numbers of the Notes to
be repurchased.
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent not later than three
Business Days prior to the Change in Control Purchase Date. The notice of
withdrawal shall state the principal amount and, if applicable, the certificate
numbers of the Notes as to which the withdrawal notice relates and the principal
amount, if any, which remains subject to a Change in Control Purchase Notice.
If a Note is represented by a Global Note, the Depository or its nominee
will be the holder of such Note and therefore will be the only entity that can
require the Company to repurchase Notes upon a Change in Control. To obtain
repayment with respect to such Note upon a Change in Control, the beneficial
owner of such Note must provide to the broker or other entity through which it
holds the beneficial interest in such Note (i) a Change in Control Purchase
Notice signed by such beneficial owner, and such signature must be guaranteed by
a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust
company having an office or correspondent in the United States and (ii)
instructions to such broker or other entity to notify the Depository of such
beneficial owner's desire to cause the Company to repurchase such Notes. Such
broker or other entity will provide to the Paying Agent (i) a Change in Control
Purchase Notice received from such beneficial owner and (ii) a certificate
satisfactory to the Paying Agent from such broker or other entity that it
represents such beneficial owner. Such broker or other entity will be
responsible for disbursing any payments it receives upon the repurchase of such
Notes by the Company.
Payment of the Change in Control Purchase Price for a Note in certificated
form (a "Certificated Note") for which a Change in Control Purchase Notice has
been delivered and not withdrawn is conditioned upon delivery of such Note
(together with necessary endorsements) to the Paying Agent at its office in The
City of New York, or any other office of the Paying Agent maintained for such
purpose, at any time (whether prior to, on or after the Change in Control
Purchase Date) after the delivery of such Change in Control Purchase Notice.
Payment of the Change in Control Purchase Price for such Note will be made
promptly following the later of the Change in Control Purchase Date or the time
of delivery of such Note.
If the Paying Agent holds, in accordance with the terms of the Indenture,
money sufficient to pay the Change in Control Purchase Price of a Note on the
Business Day following the Change in Control Purchase Date for such Note, then,
on and after such date, interest on such Note will cease to accrue, whether or
not such Note is delivered to the Paying Agent, and all other rights of the
Holder shall terminate (other than the right to receive the Change in Control
Purchase Price upon delivery of the Note).
Under the Indenture, a "Change in Control" means an event or series of
events by which (i) CMS Energy ceases to beneficially own, directly or
indirectly, at least 80% of the total voting power of all classes of
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<PAGE> 11
Capital Stock then outstanding of Consumers (whether arising from issuance of
securities of the Company or Consumers, any direct or indirect transfer of
securities by CMS Energy or Consumers, any merger, consolidation, liquidation or
dissolution of CMS Energy or Consumers or otherwise); or (ii) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person or group shall be deemed to have
"beneficial ownership" of all shares that such person or group has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 30% of the Voting Stock of CMS
Energy; or (iii) CMS Energy consolidates with or merges into another corporation
or directly or indirectly conveys, transfers or leases all or substantially all
of its assets to any person, or any corporation consolidates with or merges into
CMS Energy, in either event pursuant to a transaction in which the outstanding
Voting Stock of CMS Energy is changed into or exchanged for cash, securities, or
other property, other than any such transaction where (A) the outstanding Voting
Stock of CMS Energy is changed into or exchanged for Voting Stock of the
surviving corporation and (B) the holders of the Voting Stock of CMS Energy
immediately prior to such transaction retain, directly or indirectly,
substantially proportionate ownership of the Voting Stock of the surviving
corporation immediately after such transaction.
The Indenture requires CMS Energy to comply with the provisions of Rule
13e-4 and any other tender offer rules under the Exchange Act which may then be
applicable and file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by CMS Energy to repurchase Notes at the option of
Holders upon a Change in Control. The Change in Control purchase feature of the
Notes may in certain circumstances make more difficult or discourage a takeover
of CMS Energy and, thus, the removal of incumbent management. The Change in
Control purchase feature, however, is not the result of management's knowledge
of any specific effort to accumulate shares of its common stock or to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the Change in Control purchase feature is a customary term
contained in similar debt offerings and the terms of such feature result from
negotiations between CMS Energy and the Agents. Management has no present
intention to propose any anti-takeover measures although it is possible that CMS
Energy could decide to do so in the future.
No Note may be repurchased by the Company as a result of a Change of
Control if there has occurred and is continuing an Event of Default described
under "Events of Default; Notice and Waiver" below (other than a default in the
payment of the Change in Control Purchase Price with respect to the Notes). In
addition, the Company's ability to purchase Notes may be limited by its
financial resources and its inability to raise the required funds because of
restrictions on issuance of securities contained in other contractual
arrangements.
REPAYMENT UPON DEATH
The Pricing Supplement relating to any Note will indicate whether the
holder of such Note will have the Survivor's Option. SEE THE PRICING SUPPLEMENT
TO DETERMINE WHETHER THE SURVIVOR'S OPTION APPLIES TO ANY PARTICULAR NOTE.
Pursuant to exercise of the Survivor's Option, if applicable, the Company
will repay any Note (or portion thereof) properly tendered for repayment by or
on behalf of the person (the "Representative") that has authority to act on
behalf of the deceased owner of the beneficial interest in such Note under the
laws of the appropriate jurisdiction (including, without limitation, the
personal representative, executor, surviving joint tenant or surviving tenant by
the entirety of such deceased beneficial owner) at a price equal to 100% of the
principal amount of the beneficial interest of the deceased owner in such Note
plus accrued interest to the date of such repayment, subject to the following
limitations. The Company may, in its sole discretion, limit the aggregate
principal amount of Notes as to which exercises of the Survivor's Option will be
accepted in any calendar year (the "Annual Put Limitation") to one percent (1%)
of the outstanding principal amount of the Notes as of the end of the most
recent fiscal year, but not less than $500,000 in any such calendar year, or
such greater amount as the Company in its sole discretion may determine for any
calendar year, and may limit to $100,000, or such greater amount as the Company
in its sole discretion may determine for any calendar year, the aggregate
principal amount of Notes (or portions thereof) as to which exercise of the
Survivor's Option will be accepted in such calendar year with respect to any
individual deceased owner of beneficial interests in
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such Notes (the "Individual Put Limitation"). Moreover, the Company will not
make principal repayments pursuant to exercise of the Survivor's Option in
amounts that are less than $1,000, and, in the event that the limitations
described in the preceding sentence would result in the partial repayment of any
Note, the principal amount of such Note remaining outstanding after repayment
must be at least $1,000 (the minimum authorized denomination of the Notes). Any
Note (or portion thereof) tendered pursuant to exercise of the Survivor's Option
may be withdrawn by a written request by the Representative of the deceased
owner received by the Trustee prior to its repayment.
Each Note (or portion thereof) that is tendered pursuant to valid exercise
of the Survivor's Option will be accepted promptly in the order all such Notes
are tendered, except for any Note (or portion thereof) the acceptance of which
would contravene (i) the Annual Put Limitation, if applied, or (ii) the
Individual Put Limitation, if applied, with respect to the relevant individual
deceased owner of beneficial interests therein. If, as of the end of any
calendar year, the aggregate principal amount of Notes (or portions thereof)
that have been accepted pursuant to exercise of the Survivor's Option for such
year, has not exceeded the Annual Put Limitation, if applied, for such year, any
exercise(s) of the Survivor's Option with respect to Notes (or portions thereof)
not accepted during such calendar year because such acceptance would have
contravened the Individual Put Limitation, if applied, with respect to an
individual deceased owner of beneficial interests therein will be accepted in
the order all such Notes (or portions thereof) were tendered, to the extent that
any such exercise would not exceed the Annual Put Limitation for such calendar
year. Any Note (or portion thereof) accepted for repayment pursuant to exercise
of the Survivor's Option will be repaid no later than the first Interest Payment
Date that occurs 20 or more calendar days after the date of such acceptance.
Each Note (or any portion thereof) tendered for repayment that is not accepted
in any calendar year due to the application of the Annual Put Limitation will be
deemed to be tendered in the following calendar year in the order in which all
such Notes (or portions thereof) were originally tendered, unless any such Note
(or portion thereof) is withdrawn by the Representative for the deceased owner
prior to its repayment. In the event that a Note (or any portion thereof)
tendered for repayment pursuant to valid exercise of the Survivor's Option is
not accepted, the Trustee will deliver a notice by first-class mail to the
registered Holder thereof at its last known address as indicated in the Security
Register that states the reasons such Note (or portion thereof) has not been
accepted for repayment.
Subject to the foregoing, in order for a Survivor's Option to be validly
exercised with respect to any Note (or portion thereof), the Trustee must
receive from the Representative of the deceased owner (i) a written request for
repayment signed by the Representative, and such signature must be guaranteed by
a member firm of a registered national securities exchange or of the NASD or a
commercial bank or trust company having an office or correspondent in the United
States, (ii) if such Note is not represented by a Global Note as described
below, tender of the Note (or portion thereof) to be repaid, (iii) appropriate
evidence satisfactory to the Company and the Trustee that (A) the Representative
has authority to act on behalf of the deceased beneficial owner, (B) the death
of such beneficial owner has occurred and (C) the deceased was the owner of a
beneficial interest in such Note at the time of death, (iv) if applicable, a
properly executed assignment or endorsement, and (v) if the beneficial interest
in such Note is held by a nominee of the deceased beneficial owner, a
certificate satisfactory to the Trustee from such nominee attesting to the
deceased's ownership of a beneficial interest in such Note. All questions as to
the eligibility or validity of any exercise of the Survivor's Option will be
determined by the Company, in its sole discretion, which determinations will be
final and binding on all parties.
If a Note is represented by a Global Note, the Depository or its nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise the Survivor's Option for such Note. To obtain repayment pursuant to
exercise of the Survivor's Option with respect to such Note, the Representative
must provide to the broker or other entity through which the beneficial interest
in such Note is held by the deceased owner (i) the documents described in
clauses (i) and (iii) of the preceding paragraph and (ii) instructions to such
broker or other entity to notify the Depository of such Representative's desire
to obtain repayment pursuant to exercise of the Survivor's Option. Such broker
or other entity will provide to the Trustee (i) the documents received from the
Representative referred to in clause (i) of the preceding sentence and (ii) a
certificate satisfactory to the Trustee from such broker or other entity stating
that it represents the deceased
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beneficial owner. Such broker or other entity will be responsible for disbursing
any payments it receives pursuant to exercise of the Survivor's Option to the
appropriate Representative. See "Book-Entry System."
A REPRESENTATIVE MAY OBTAIN THE FORMS USED TO EXERCISE THE SURVIVOR'S
OPTION FROM THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), THE TRUSTEE, AT 4
CHASE METROTECH CENTER, BROOKLYN, NEW YORK 11245, ATTENTION: CORPORATE TRUST
ADMINISTRATION DIVISION, DURING NORMAL BUSINESS HOURS.
PAYMENT AND PAYING AGENTS
Payments of principal, premium, if any, and interest on Notes represented
by a Global Note will be made to the Depository through such Paying Agent or
Paying Agents in The City of New York as the Company may designate from time to
time or by wire transfer to the Depository. See "Book-Entry System." Payments of
principal, premium, if any, and interest on Certificated Notes will be made upon
surrender of such Notes at the office of such Paying Agent or Paying Agents in
The City of New York as the Company may designate from time to time, except that
at the option of the Company, payment of any interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The principal corporate trust office of The Chase Manhattan Bank (National
Association), located at 4 Chase MetroTech Center, Brooklyn, New York 11245, has
been designated as the Company's sole Paying Agent for payments with respect to
the Notes. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that the Company will be required to
maintain a Paying Agent in each Place of Payment for the Notes.
All moneys paid by the Company to a Paying Agent for the payment of the
principal, premium, if any, or interest on any Note which remain unclaimed at
the end of two years after such principal, premium, if any, or interest shall
have become due and payable will be repaid to the Company and the Holder of such
Note will thereafter look only to the Company for payment thereof.
BOOK-ENTRY SYSTEM
The Notes will be issued initially in the form of one or more Global Notes
that will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York ("DTC"), which will act as securities depository for the Notes.
The Notes will be issued as fully-registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). DTC and any other depository which
may replace DTC as depository for the Notes are sometimes referred to herein as
the "Depository."
Upon issuance, all Notes having the same issue date, interest rate,
redemption provisions, provisions for repurchase at the option of the Holder,
stated maturity and other provisions will be represented by one or more Global
Notes. Except under the limited circumstances described below, Notes represented
by Global Notes will not be exchangeable for Certificated Notes.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, such Depository or such nominee, as the case may be, will be
considered the sole registered holder of the individual Notes represented by
such Global Note for all purposes under the Indenture. Payments of principal of
and premium, if any, and any interest on individual Notes represented by a
Global Note will be made to the Depository or its nominee, as the case may be,
as the registered holder of such Global Note. Except as set forth below, owners
of beneficial interests in a Global Note will not be entitled to have any of the
individual Notes represented by such Global Note registered in their names, will
not receive or be entitled to receive physical delivery of any such Note and
will not be considered the registered holder thereof under the Indenture,
including, without limitation, for purposes of consenting to any amendment
thereof or supplement thereto as described in this Prospectus.
The following is based upon information furnished by 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
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System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that
its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants ("Direct Participants") include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the NASD. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's
records. The ownership interest of each actual purchaser of each Note
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Notes, except in the event that
use of the book-entry system for one or more Notes is discontinued.
To facilitate subsequent transfers, all Global Notes deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Global 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
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
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 consent or vote with respect to Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to 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 payable
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on the
payable 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 accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC, any Agents, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the
Company, disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
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DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving 90 days' notice to the
Company or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered in exchange for the Notes represented
by the Global Notes held by DTC. See "Certificated Notes."
In addition, the Company may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor securities depository).
In that event, Certificated Notes will be printed and delivered in exchange
for the Notes represented by the Global Notes held by DTC. See
"Certificated Notes."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. The Company believes such information to be
reliable, but the Company takes no responsibility for the accuracy thereof.
Neither the Company, the Agents, the Trustee, any paying agent nor the
registrar for the Notes will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
CERTIFICATED NOTES
If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company by the
earlier of (i) 90 days from the date the Company receives notice to the effect
that the Depository is unwilling or unable to act, or the Company determines
that the Depository is unable to act or (ii) the effectiveness of the
Depository's resignation or failure to fulfill its duties as Depository, the
Company will issue Certificated Notes in exchange for the Notes represented by
the Global Notes held by the Depository. In addition, the Company may at any
time and in its sole discretion determine not to have Notes represented by a
Global Note and, in such event, will issue individual Certificated Notes in
exchange for the Notes represented by the Global Note. In either instance, the
owner of a beneficial interest in a Note represented by a Global Note will be
entitled to have such Note registered in its name and will be entitled to
physical delivery of such Note in certificated form. Individual Certificated
Notes so issued will be issued in fully registered form, without coupons, in one
or more authorized denominations as described above under "General."
Certificated Notes will be exchangeable for other Certificated Notes of any
authorized denominations and of a like aggregate principal amount and tenor.
Certificated Notes may be presented for exchange as provided above, and may
be presented for registration of transfer (duly endorsed, or accompanied by a
duly executed written instrument of transfer), at the office of The Chase
Manhattan Bank (National Association), the Trustee, in The City of New York (the
"Security Registrar") or at the office of any other transfer agent designated by
the Company for such purpose with respect to the Notes and referred to in the
applicable Pricing Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected upon the Security Registrar or such other
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. If a Pricing Supplement refers to
any transfer agents (in addition to the Security Registrar) designated by the
Company with respect to the Notes, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each Place of Payment for the Notes.
The Company may at any time designate additional transfer agents with respect to
the Notes.
The Company will not be required to (i) issue, register the transfer of or
exchange Certificated Notes during a period beginning at the opening of business
15 days before the selection of Notes to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; or (ii)
register the
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transfer of or exchange any Certificated Note, or portion thereof, called for
redemption, except the unredeemed portion of any Certificated Note being
redeemed in part.
If a Certificated Note is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the Trustee in The City of
New York upon payment by the Holder of such expenses as may be incurred by the
Company and the Trustee in connection therewith and the furnishing of such
evidence and indemnity as the Company and the Trustee may require. Mutilated
Notes must be surrendered before new Notes will be issued.
CERTAIN RESTRICTIVE COVENANTS
The Indenture contains, among others, the covenants described below.
Certain capitalized terms used below are defined herein under the heading
"Certain Definitions."
Limitation on Consolidated Indebtedness. The Indenture provides that so
long as any of the Notes are Outstanding, the Company shall not, and shall not
permit any Restricted Subsidiary to, issue, create, assume, guarantee, incur or
otherwise become liable for (collectively, "issue"), directly or indirectly, any
Indebtedness unless (a) the Consolidated Coverage Ratio of the Company and its
Consolidated Subsidiaries for the four consecutive fiscal quarters immediately
preceding the issuance of such Indebtedness (as shown by a pro forma
consolidated income statement of the Company and its Consolidated Subsidiaries
for the four most recent fiscal quarters ending at least 30 days prior to the
issuance of such Indebtedness after giving effect to (i) the issuance of such
Indebtedness and (if applicable) the application of the net proceeds thereof to
refinance other Indebtedness as if such Indebtedness was issued at the beginning
of the period, (ii) the issuance and retirement of any other Indebtedness since
the first day of the period as if such Indebtedness was issued or retired at the
beginning of the period and (iii) the acquisition of any company or business
acquired by the Company or any Subsidiary of the Company since the first day of
the period (including giving effect to the pro forma historical earnings of such
company or business), including any acquisition which will be consummated
contemporaneously with the issuance of such Indebtedness, as if in each case
such acquisition occurred at the beginning of the period) exceeds a ratio of 1.6
to 1.0 and (b) immediately after giving effect to the issuance of such
Indebtedness and (if applicable) the application of the net proceeds thereof to
refinance other Indebtedness, the Consolidated Leverage Ratio shall not exceed a
ratio of 0.75 to 1.0.
The foregoing limitation is subject to exceptions for certain revolving
Indebtedness to banks provided that the aggregate outstanding principal amount
of such revolving Indebtedness shall not exceed $220,000,000, Indebtedness
outstanding on the date of the Indenture, certain refinancings and Indebtedness
of the Company to a Subsidiary or by a Subsidiary to the Company.
Limitation upon Restricted Payments. The Indenture provides that, so long
as any of the Notes are Outstanding and are rated below BBB- by Standard &
Poor's or by Duff & Phelps, the Company will not, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to, (i) declare or pay any
dividend or make any distribution on the Capital Stock of the Company to the
direct or indirect holders of the Company's Capital Stock (except dividends or
distributions payable solely in Non-Convertible Capital Stock of the Company or
in options, warrants or other rights to purchase such Non-Convertible Capital
Stock and except dividends or distributions payable to the Company or a
Subsidiary) or (ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company (any such dividend, distribution, purchase,
redemption, repurchase, other acquisition or retirement, being hereinafter
referred to as a "Restricted Payment") if at any time the Company or such
Subsidiary makes such Restricted Payment: (1) an Event of Default, or an event
that with the lapse of time or the giving of notice or both would constitute an
Event of Default, shall have occurred and be continuing (or would result
therefrom); or (2) the aggregate amount of such Restricted Payment and all other
Restricted Payments made since September 30, 1993, would exceed the sum of: (a)
$120,000,000 plus 100% of Consolidated Net Income from September 30, 1993 to the
end of the most recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment (or, in case such sum shall be a deficit, minus 100%
of the deficit) and (b) the aggregate Net Proceeds received by the Company from
the issue or sale of or contribution with respect to its Capital Stock after
September 30, 1993.
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The foregoing provisions will not prohibit: (i) dividends or other
distributions paid in respect of any class of Capital Stock issued by the
Company in connection with the acquisition of any business or assets by the
Company or a Restricted Subsidiary where the dividends or other distributions
with respect to such Capital Stock are payable solely from the net earnings of
such business or assets; (ii) any purchase or redemption of Capital Stock of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or
Exchangeable Stock); (iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividends would have
complied with this covenant; or (iv) payments pursuant to the Tax Sharing
Agreement.
Limitations on Certain Liens. The Indenture provides that so long as any of
the Notes are outstanding, the Company shall not create, incur, assume or suffer
to exist any lien, mortgage, pledge, security interest, conditional sale, title
retention agreement or other charge or encumbrance of any kind intended to or
having the effect of conferring upon a creditor of the Company or any Subsidiary
of the Company a preferential interest upon or with respect to the Capital Stock
of Consumers, CMS Enterprises or CMS NOMECO Oil & Gas Co. ("NOMECO") without
making effective provision whereby the Notes shall be (so long as such creditor
shall be so secured) equally and ratably secured. The foregoing does not apply
to (a) Liens securing Indebtedness of the Company, provided that on the date
such Liens are created, and after giving effect to such Indebtedness, the
aggregate principal amount at maturity of all of the secured Indebtedness of the
Company shall not exceed 10% of Consolidated Assets on such date or (b) certain
liens for taxes, pledges to secure workman's compensation and other statutory
obligations, certain materialmen's, mechanic's and similar liens and certain
purchase money liens.
The foregoing limitations regarding Consolidated Indebtedness, Restricted
Payments and Liens do not apply to Consumers, the Company's largest Subsidiary.
In addition, they do not currently limit transactions by any of the Company's
other Subsidiaries because none of such Subsidiaries would currently fall under
the definition of Restricted Subsidiaries.
Limitation on Transactions with Affiliates. The Indenture provides that so
long as any of the Notes are Outstanding, the Company may not, directly or
indirectly, conduct any business or enter into any transaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with an Affiliate unless the terms of
such business, transaction or series of transactions are as favorable to the
Company as terms that could be obtainable at the time for a comparable
transaction or series of related transactions in arm's-length dealings with an
unrelated third person. This covenant shall not apply to (i) any compensation
paid to officers and directors of the Company which has been approved by the
Board of Directors of the Company or (ii) loans to the Company or an Affiliate
pursuant to a global cash management program, which loans mature within one year
from the date thereof.
Limitation on Consolidation, Merger, Sale or Conveyance. The Indenture
provides that so long as any of the Notes are Outstanding the Company shall not
consolidate with or merge into any other person or sell, lease or convey its
property as an entirety or substantially as an entirety unless, upon any such
consolidation, merger, sale, lease or conveyance, and after giving effect
thereto, (i) the person formed by such consolidation or into which the Company
shall have been merged or which shall have acquired such property (the
"Continuing Entity") shall be a corporation and shall have expressly assumed all
of the Company's obligations under the Notes and the Indenture, (ii) no Event of
Default, or an event that, with the lapse of time or the giving of notice or
both, would become an Event of Default under the Indenture shall have happened
and be continuing, (iii) the Consolidated Net Worth of the Continuing Entity
shall be at least equal to the Consolidated Net Worth of the Company immediately
prior to the transaction and (iv) the Continuing Entity would be entitled to
incur at least $1 of additional Indebtedness (other than revolving Indebtedness
to banks) without violating the restriction set forth in "-- Limitations on
Consolidated Indebtedness" above.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made thereto for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
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"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amortization Expense" means, for any period, amounts recognized during
such period as amortization of capital leases, depletion, nuclear fuel, goodwill
and assets classified as intangible assets in accordance with generally accepted
accounting principles.
"Capital Lease Obligations" of a person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; the stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty; and
such obligation shall be deemed secured by a Lien on any property or assets to
which such lease relates.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interest in
(however designated) corporate stock, including any Preferred Stock.
"Consolidated Assets" means, at any date of determination, the aggregate
assets of the Company and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Capital" means, at any date of determination, the sum of (a)
Consolidated Indebtedness, (b) consolidated equity of the common stockholders of
the Company and the Consolidated Subsidiaries, (c) consolidated equity of the
preference stockholders of the Company and the Consolidated Subsidiaries and (d)
consolidated equity of the preferred stockholders of the Company and the
Consolidated Subsidiaries, in each case determined at such date in accordance
with generally accepted accounting principles.
"Consolidated Coverage Ratio" with respect to any period means the ratio of
(i) the aggregate amount of Operating Cash Flow for such period to (ii) the
aggregate amount of Consolidated Interest Expense for such period.
"Consolidated Indebtedness" means, at any date of determination, the
aggregate Indebtedness of the Company and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Interest Expense" means, for any period, the total interest
expense in respect of Indebtedness of the Company and its Consolidated
Subsidiaries, including, without duplication, (i) interest expense attributable
to capital leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) cash and noncash interest payments, (v) commissions, discounts
and other fees and charges owed with respect to letters of credit and banker's
acceptance financing, (vi) net costs under Interest Rate Protection Agreements
(including amortization of discount) and (vii) interest expense in respect of
obligations of other persons deemed to be Indebtedness of the Company or any
Consolidated Subsidiaries under clause (v) or (vi) of the definition of
Indebtedness, provided, however, that Consolidated Interest Expense shall
exclude any costs otherwise included in interest expense recognized on early
retirement of debt.
"Consolidated Leverage Ratio" means, at any date of determination, the
ratio of Consolidated Indebtedness to Consolidated Capital.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income of any person if such person is not a Subsidiary, except that (A) the
Company's equity in the net income of any such person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such person during such period to the Company or a
Consolidated Subsidiary as a
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dividend or other distribution and (B) the Company's equity in a net loss of any
such person for such period shall be included in determining such Consolidated
Net Income; (ii) any net income of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; and (iii) any gain or loss realized upon the sale or
other disposition of any property, plant or equipment of the Company or its
Consolidated Subsidiaries which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any person.
"Consolidated Net Worth" of any person means the total of the amounts shown
on the consolidated balance sheet of such person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, as of any date selected by such person not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made (and adjusted for any material events since such
date), as (i) the par or stated value of all outstanding Capital Stock plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock and (C) any amounts attributable to
Exchangeable Stock.
"Consolidated Subsidiary" means, any Subsidiary whose accounts are or are
required to be consolidated with the accounts of the Company in accordance with
generally accepted accounting principles.
"Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than Capital Stock of
such corporation that is neither Exchangeable Stock nor Redeemable Stock).
"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 Capital 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.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Subsidiary against
fluctuations in interest rates.
"Lien" means any lien, mortgage, pledge, security interest, conditional
sale, title retention agreement or other charge or encumbrance of any kind.
"Net Proceeds" means, with respect to any issuance or sale or contribution
in respect of Capital Stock, the aggregate proceeds of such issuance, sale or
contribution, including the fair market value (as determined by the Board of
Directors and net of any associated debt and of any consideration other than
Capital Stock received in return) of property other than cash received by the
Company, net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof, provided, however, that if such fair market
value as determined by the Board of Directors of property
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other than cash is greater than $25 million, the value thereof shall be based
upon an opinion from an independent nationally recognized firm experienced in
the appraisal or similar review of similar types of transactions.
"Non-Convertible Capital Stock" means, with respect to any corporation, any
non-convertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into non-convertible Capital Stock other than
Preferred Stock of such corporation; provided, however, that Non-Convertible
Capital Stock shall not include any Redeemable Stock or Exchangeable Stock.
"Operating Cash Flow" means for any period, with respect to the Company and
its Consolidated Subsidiaries, the aggregate amount of Consolidated Net Income
after adding thereto Consolidated Interest Expense (adjusted to include costs
recognized on early retirement of debt), income taxes, depreciation expense,
Amortization Expense, any noncash amortization of debt issuance costs, any
nonrecurring, noncash charges to earnings and any negative accretion
recognition.
"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed prior to the first anniversary of the Maturity of any
Outstanding Notes or is redeemable at the option of the holder thereof at any
time prior to the first anniversary of the Maturity of any Outstanding Notes.
"Restricted Subsidiary" means any Subsidiary (other than Consumers and its
subsidiaries) of the Company which at the time of determination had assets
which, as of the date of the Company's most recent quarterly consolidated
balance sheet, constituted at least 10% of the total Consolidated Assets of the
Company and its Consolidated Subsidiaries and any other Subsidiary which from
time to time is designated a Restricted Subsidiary by the Board of Directors of
the Company, provided that no Subsidiary may be designated a Restricted
Subsidiary if, immediately after giving effect thereto, an Event of Default, or
an event that, with the lapse of time or the giving of notice or both, would
constitute an Event of Default, would exist or the Company and its Restricted
Subsidiaries could not incur at least $1 of additional Indebtedness under the
restriction set forth under "-- Limitations on Consolidated Indebtedness" above
and (i) any such Subsidiary so designated as a Restricted Subsidiary must be
organized under the laws of the United States or any state thereof; (ii) more
than 80% of the Voting Stock of such Subsidiary must be owned of record and
beneficially by the Company or a Restricted Subsidiary; (iii) such Restricted
Subsidiary must be a Consolidated Subsidiary; and (iv) such Subsidiary must not
theretofore have been designated as a Restricted Subsidiary.
"subsidiary" means any corporation of which more than 50% of the Voting
Stock is owned, of record and beneficially, by the parent company and/or one or
more companies which are themselves subsidiaries of such parent company.
"Subsidiary" means a subsidiary of the Company.
"Tax Sharing Agreement" means the Agreement for the Allocation of Income
Tax Liabilities and Benefits, dated as of January 1, 1990, as amended or
supplemented from time to time, by and among the Company, each of the members of
the Consolidated Group (as defined therein), and each of the corporations that
become members of the Consolidated Group.
"Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
corporate directors (or persons performing similar functions).
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
the Notes: (a) default in the payment of interest upon any Note when such
interest becomes due and payable and continuance of such default for 30 days;
(b) default in the payment of all or any part of the principal of (or premium,
if any, on)
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any Note when it becomes due and payable at its Maturity; (c) default in the
performance of any covenants of the Company in the Indenture, continued for 60
days after written notice as provided in the Indenture; (d) a default or event
of default in respect of any Indebtedness of the Company shall occur which
results in the acceleration of $25,000,000 or more of the principal amount of
such Indebtedness or Indebtedness of the Company in excess of $25,000,000 shall
not be paid at maturity thereof, which default shall not have been waived by the
holder or holders of such Indebtedness within 30 days of such default; (e) entry
of final judgments against the Company aggregating in excess of $25,000,000
which remain undischarged or unbonded for a period (during which execution shall
not be effectively stayed) of 60 days; (f) certain events in bankruptcy,
insolvency or reorganization involving the Company. Subject to the provisions of
the Indenture relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders of Notes, unless such Holders shall have offered
to the Trustee reasonable indemnity.
If an Event of Default with respect to the Notes shall occur and be
continuing, (i) either the Trustee or the Holders of at least a majority in
aggregate principal amount of the Outstanding Notes may accelerate the maturity
of the Outstanding Notes and (ii) the Holders of not less than a majority of the
aggregate outstanding principal amount of the Outstanding Notes, may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee; provided,
however, that after any such acceleration, but before a judgment or decree for
payment of the money due has been obtained, the Holders of not less than a
majority in aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
Events of Default, other than the nonpayment of accelerated principal, have been
cured or waived as provided in the Indenture. For information as to waiver of
defaults, see "Modification of the Indenture."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a Holder of
a Note for the enforcement of payment of the principal of or interest on such
Note on or after the respective due dates expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION OF THE INDENTURE
Modification and amendment of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities affected thereby,
provided that no such modification or amendment may, without the consent of the
Holder of each Outstanding Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal or interest on,
any Outstanding Security, or reduce the principal amount thereof or rate of
interest thereon, or change the Redemption Price applicable to any Security; (b)
change the place or currency of payment of principal of or premium, if any, or
interest on any Security; (c) impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity (or in the case
of redemption or repayment at the option of the Holder, on or after the
Redemption Date or Repayment Date) thereof; (d) reduce the above-stated
percentage of Outstanding Securities necessary to modify or amend the Indenture
or the consent of whose Holders is required for any waiver or reduce the
percentage required for quorum or voting; or (e) modify the foregoing
requirements. The Holders of at least a majority in aggregate principal amount
of the Outstanding Securities of a series may waive past defaults with respect
to such series except payment defaults and the Holders of at least a majority in
aggregate principal amount of all Outstanding Securities may waive compliance by
the Company with certain covenants.
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Modification and amendment of the Indenture may be made by the Company and
the Trustee without the consent of any Holder, for any of the following
purposes: (a) to evidence the succession of another corporation to the Company;
(b) to add to the covenants of the Company for the benefit of the Holders of all
or any series of Securities; (c) to add additional Events of Default for the
benefit of the Holders of all or any series of Securities; (d) to change any
provision of the Indenture to facilitate the issuance of Securities in bearer
form; (e) to change or eliminate any provision of the Indenture, provided no
Security Outstanding of any series is entitled to the benefit of such provision;
(f) to secure the Securities; (g) to establish the form or terms of Securities;
(h) to provide for the acceptance of appointment by a successor Trustee; (i) to
cure any ambiguity, defect or inconsistency in the Indenture provided such
action does not adversely affect the interests of Holders of Securities; or (j)
to supplement provisions of the Indenture to permit or facilitate the defeasance
or discharge of a series of Securities provided that such action shall not
adversely affect the interests of Holders of Securities of such Series.
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The Indenture provides that the Company may elect (A) to defease and be
discharged from all of its obligations with respect to the Securities or any
series thereof (except for the obligations to register the transfer or exchange
of such Securities, to replace temporary or mutilated, destroyed, lost or stolen
Securities, to maintain an office or agency in respect of such Securities, to
hold monies for repayment in trust and certain other obligations), and that the
provisions of the Indenture will no longer be in effect with respect to such
Securities (except as aforesaid) ("defeasance") or (B) to be released from its
covenants set forth in the Indenture with respect to, among other things,
limitation on Consolidated Indebtedness, limitation on Restricted Payments,
limitation on transactions with Affiliates, limitation on Liens, limitation on
consolidation, merger, sale or conveyance, repurchase obligations on Change in
Control, ("covenant defeasance") with respect to such Securities, upon in the
case of (A) or (B) the deposit with the Trustee (or other qualifying trustee),
in trust for such purpose, of money and/or Government Obligations which, without
any reinvestment, but through the scheduled payment of principal and interest in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on the Notes on the
scheduled due dates therefor. Such a trust may only be established, if, among
other things, (x) such defeasance or covenant defeasance will not result
(whether immediately or with notice or lapse of time or both) in a breach or
violation of, or constitute a default under, any material agreement to which the
Company is party or by which it is bound and (y) the Company has delivered to
the Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the Holders of such Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred. Such Opinion of Counsel, in the case of
defeasance under clause (A) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the Indenture.
The Company may obtain a discharge of the Indenture with respect to all
Securities then Outstanding (except for certain obligations to register the
transfer or exchange of such Securities, to replace temporary or mutilated,
destroyed, lost or stolen Securities, to maintain an office or agency in respect
of such Securities, to hold monies for repayment in trust and certain other
obligations) when all Securities theretofore authenticated and delivered have,
with certain exceptions, been delivered to the Trustee for cancellation or by
irrevocably depositing in trust with the Trustee money, and/or Government
Obligations which, without any reinvestment but through the scheduled payment of
principal and interest in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of (and premium, if any) and interest
on the Securities on the Stated Maturities or redemption dates thereof, provided
that such Securities are by their terms due and payable, or are to be called for
redemption, within one year and the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such discharge and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
discharge had not occurred.
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In the event the Company exercises its option to terminate its obligations
under the Indenture with respect to the Securities of any series as described in
either of the preceding paragraphs and such Securities of such series are
declared due and payable because of the occurrence of any Event of Default, the
amount of money and Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Securities of such series at the time of
the Stated Maturity thereof but may not be sufficient to pay amounts due on the
Securities of such series at the time of the acceleration resulting from such
Event of Default. However, the Company will remain liable for such payments.
THE TRUSTEE UNDER THE INDENTURE
The Chase Manhattan Bank (National Association) is the Trustee under the
Indenture. The Company maintains banking and borrowing relations with The Chase
Manhattan Bank (National Association).
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in a distribution agreement
(the "Distribution Agreement") among the Company and the Agents, offers to
purchase the Notes are being solicited from time to time by the Agents on behalf
of the Company. Each Agent has agreed to use its reasonable best efforts to
solicit purchases of the Notes. Following such solicitation, the Agents,
severally and not jointly, may purchase Notes from the Company, for their own
account, from time to time. Notes acquired by any Agent will be offered either
directly to the public or to certain dealers that will then reoffer the Notes to
the public. Sales by an Agent to any dealer will be made pursuant to an
agreement between such Agent and dealer (each a "Dealer Agreement").
A Pricing Supplement with respect to each offering of Notes by the Company
will set forth, among other things, the name of each Agent participating in the
distribution of such Notes, the price to the public of such Notes and the
proceeds to the Company from such sale, any underwriting discounts or
commissions and other items constituting Agent's compensation, and any discounts
or concessions allowed, reallowed or paid to dealers. After any initial public
offering of Notes pursuant to a Pricing Supplement, the price to the public of
such Notes, and the related underwriting discount and selling concession may be
changed.
The Agents have advised the Company that all initial offers by the Agents
and by any dealers, unless otherwise set forth in the applicable Pricing
Supplement, are proposed to be made at prices equal to 100% of the principal
amount of the Notes being sold, less, in the case of an offer by an Agent to a
dealer, a price concession not in excess of the amount set forth in the
applicable Pricing Supplement. Offers and sales by Agents or dealers subsequent
to the initial offering may be at varying prices determined at the time of sale.
The Notes will not be listed on any securities exchange and will not be
traded, when issued, on any other established trading market. Any Agent may make
a market in the Notes, but no Agent is obligated to do so. Any market-making so
undertaken may be discontinued at any time without notice. There can thus be no
assurance that a secondary market for the Notes will exist or as to the
liquidity or continuation of any such market. Moreover, the Company reserves the
right to withdraw, cancel or modify the offer made hereby at any time without
notice, and any such withdrawal, cancellation or modification also may adversely
affect the liquidity of the Notes.
The Distribution Agreement provides, and the terms of each Dealer Agreement
will provide, that the obligations of any Agent or dealer to purchase Notes will
be subject to certain conditions precedent. The nature of the Agent's
obligations under the Distribution Agreement is such that an Agent will be
obligated to purchase all of the Notes offered by any Pricing Supplement naming
such Agent if any of such Notes are purchased. The Company, or any Agent with
respect to itself, may terminate the Distribution Agreement at any time upon
written notice.
The Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments that the Agents may be required
to make in respect thereof.
23
<PAGE> 24
LEGAL OPINIONS
Opinions as to the legality of the Notes have been rendered for CMS Energy
by Sidley & Austin, Chicago, Illinois, counsel to CMS Energy, Rodger A.
Kershner, Deputy General Counsel and Denise M. Sturdy, Assistant General Counsel
for the Company. Certain legal matters with respect to the Notes have been
passed upon by Reid & Priest LLP, New York, New York, counsel for the Agents.
As of March 24, 1995, Mr. Kershner may be deemed to have a beneficial
interest in 12,283 shares of CMS Energy Common Stock. Mr. Kershner is employed
by CMS Energy as Deputy General Counsel and Assistant Secretary, and by its
subsidiary, CMS Enterprises, as Vice President, General Counsel and Assistant
Secretary, and is an officer and/or General Counsel of various of CMS Energy's
and CMS Enterprises' subsidiaries.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994 incorporated by reference in this Prospectus, have been
audited by Arthur Andersen LLP (formerly Arthur Andersen & Co.), independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
With respect to the unaudited interim consolidated financial information
for the periods ended March 31 and June 30, 1994 and 1995, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report thereon states that
they did not audit and they did not express an opinion on that interim
consolidated financial information. Accordingly, the degree of reliance on their
report on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act, for their
report on the unaudited interim consolidated financial information because that
report is not a "report" or "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
Future consolidated financial statements of CMS Energy and the reports
thereon of Arthur Andersen LLP also will be incorporated by reference in this
Prospectus in reliance upon the authority of that firm as experts in giving
those reports to the extent that said firm has audited said consolidated
financial statements and consented to the use of their reports thereon.
24
<PAGE> 25
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR ANY PRICING SUPPLEMENT IN CONNECTION WITH THE OFFERINGS COVERED BY
THIS PROSPECTUS AND ANY PRICING SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE AGENTS. NEITHER THIS PROSPECTUS NOR ANY PRICING SUPPLEMENT
CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES TO WHICH THIS PROSPECTUS AND ANY PRICING SUPPLEMENT RELATE IN ANY
JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PRICING SUPPLEMENT
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
The Company.......................... 6
Use of Proceeds...................... 6
Ratio of Earnings to Fixed Charges... 7
Description of General Term
Notes(R)........................... 7
Plan of Distribution................. 23
Legal Opinions....................... 24
Experts.............................. 24
</TABLE>
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$250,000,000
CMS ENERGY
CORPORATION
GENERAL TERM NOTES(R),
SERIES A
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PROSPECTUS
OCTOBER 14, 1995
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PRUDENTIAL SECURITIES INCORPORATED
EVEREN SECURITIES, INC.
FIRST OF MICHIGAN
CORPORATION
RONEY & CO.
J. W. KORTH & COMPANY
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