<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997
REGISTRATION NO. 333-41395
333-41395-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3 AND FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
CMS ENERGY CORPORATION CMS ENERGY X-TRAS(SM) PASS-THROUGH TRUST I
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its Trust Agreement)
MICHIGAN DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
38-2726431 38-3382222
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
Fairlane Plaza South, Suite 1100 c/o Wilmington Trust Company
330 Town Center Drive Rodney Square North
Dearborn, Michigan 48126 1100 North Market Street
313-436-9200 Wilmington, DE 19890-0001
(Address, including zip code, and telephone 302-651-1000
number, (Address, including zip code, and telephone number,
including area code, of registrant's including area code, of registrant's
principal executive offices) principal executive offices)
</TABLE>
------------------------
ALAN M. WRIGHT
Senior Vice President, Chief Financial Officer and Treasurer
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
313-436-9200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
<TABLE>
<S> <C>
MICHAEL D. VAN HEMERT, ESQ. JOEL S. KLAPERMAN, ESQ.
CMS Energy Corporation Shearman & Sterling
Fairlane Plaza South, Suite 1100 599 Lexington Avenue
330 Town Center Drive New York, New York 10022
Dearborn, Michigan 48126 (212) 848-4000
(313) 436-9200
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS (Subject to Completion)
Issued December 23, 1997
$150,000,000
[CMS ENERGY LOGO]
CMS ENERGY X-TRAS(SM*)
Pass-Through Trust I
PASS-THROUGH CERTIFICATES DUE , 2005
------------------------
Distributions payable and
------------------------
Each Pass-Through Certificate (collectively, the "Certificates") due
, 2005 will represent a fractional undivided beneficial interest in
the CMS Energy X-TRAS(SM) Pass-Through Trust I (the "Pass-Through Trust"), a
statutory business trust created under the Delaware Business Trust Act, formed
pursuant to a trust agreement dated as of November 21, 1997, between CMS Energy
Corporation ("CMS Energy" or the "Company") and Wilmington Trust Company, as
pass-through trustee (the "Trustee") (as to be amended and restated on the date
of issue of the Certificates, the "Trust Agreement"). The sole assets of the
Pass-Through Trust from which holders of the Certificates ("Certificateholders")
will receive any distributions on the Certificates will be $150,000,000 in
aggregate principal amount of % Extendible Tenor Rate-Adjusted Securities due
, 2005 (collectively, "X-TRAS(SM)" or the "Notes") issued by the
Company. The Trustee will issue the Certificates to the Underwriters at a price
equal to the initial public offering price specified below and will use the
proceeds thereof, together with amounts payable to it under a certain ISDA
Master Agreement (as defined), to purchase the Notes from the Company at the par
value thereof. The ability of the Pass-Through Trust to make distributions under
the Certificates will depend on whether the Company meets its obligations on the
Notes. Interest paid on the Notes will be passed through to the
Certificateholders on and of each year, commencing
, 1998, at % per annum and continuing until , 2005, the
date on which the principal amount of the Notes will be distributed (the "Final
Distribution Date"). The Notes are redeemable at the option of the Company, in
whole or in part, at any time or from time to time, on not less than 30 days'
prior notice, at the redemption prices determined as described herein, together
with accrued interest to the date fixed for redemption. The Trustee will
distribute amounts received with respect to the Notes pursuant to any such
redemption to the Certificateholders on a Special Distribution Date (as
defined).
------------------------
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
FINAL PRINCIPAL INTEREST PRICE TO
PASS-THROUGH CERTIFICATES DISTRIBUTION DATE AMOUNT RATE PUBLIC(1)(2)
------------------------- ----------------- --------- -------- ------------
<S> <C> <C> <C> <C>
CMS ENERGY X-TRAS(SM) Pass-Through Trust
I......................................... , 2005 $ % %
</TABLE>
- ------------
(1) Plus accrued interest, if any, from , 1998.
(2) The underwriting commission aggregates $ , which
constitutes % of the principal amount of the Certificates. The
underwriting commission and certain other expenses relating to the
offering estimated at $ will be paid by the Company, which will
receive proceeds from the sale of the Notes to the Trust equal to the
par value thereof. The Company has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
------------------------
The Certificates are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters by
Shearman & Sterling and Reid & Priest LLP, both of which are acting as counsel
for the Underwriters. It is expected that delivery of the Certificates in
book-entry form will be made on or about , 1998 through the
book-entry facilities of The Depository Trust Company ("DTC"), against payment
therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
, 1998
- ------------
* "X-TRAS(SM)" is a servicemark of Morgan Stanley, Dean Witter, Discover & Co.
<PAGE> 3
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS (THIS "PROSPECTUS") AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE CERTIFICATES DESCRIBED IN THIS PROSPECTUS OR AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER DOES
NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE ON WHICH SUCH INFORMATION IS GIVEN.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Incorporation of Certain Documents by Reference............. 3
Prospectus Summary.......................................... 4
The Company................................................. 10
Selected Consolidated Financial Data........................ 12
Ratio of Earnings to Fixed Charges.......................... 13
Use of Proceeds............................................. 13
Capitalization.............................................. 14
Formation of the Pass-Through Trust......................... 15
Description of Certificates................................. 15
Description of the Trust Agreement.......................... 22
Description of Notes........................................ 25
Certain Federal Income Tax Considerations................... 39
State and Local Tax Considerations.......................... 43
ERISA Considerations........................................ 43
Underwriters................................................ 46
Transfer Restrictions....................................... 47
Legal Matters............................................... 47
Experts..................................................... 48
Available Information....................................... 48
</TABLE>
-------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE THE CERTIFICATES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITERS."
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<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") by the Company (File No. 001-9513) are incorporated by
reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1997; and
(c) the Company's Current Reports on Form 8-K dated March 7, April 24,
May 1, June 5, June 11, July 1, August 21, and December 23, 1997.
All documents and reports filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") subsequent to the date of this Prospectus and prior
to the termination of the offering of the Certificates shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents (such documents, and the documents enumerated
above, being hereinafter referred to as "Incorporated Documents").
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
Incorporated Documents, other than certain exhibits to such Documents. Requests
should be directed to CMS Energy 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.
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent any
statement contained herein or in any subsequently filed document, which is also
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
Certain information contained in this Prospectus summarizes, is based upon
or refers to information and financial statements contained in one or more
Incorporated Documents; accordingly, such information contained herein is
qualified in its entirety by reference to such documents and should be read in
conjunction therewith.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by reference to the detailed information appearing elsewhere
herein, including under the headings "Description of Certificates," "Description
of the Trust Agreement" and "Description of Notes." Certain capitalized terms
used herein are defined elsewhere in this Prospectus.
PASS-THROUGH TRUST............ CMS Energy X-TRAS(SM) Pass-Through Trust I (the
"Pass-Through Trust") is a statutory business
trust formed under the Delaware Business Trust
Act pursuant to (i) a trust agreement dated as
of November 21, 1997, between the Company and
Wilmington Trust Company, as pass-through
trustee (as to be amended and restated on the
date of issue of the Certificates, the "Trust
Agreement") and (ii) the filing of a
certificate of trust with the Secretary of
State of the State of Delaware on November 21,
1997.
CERTIFICATES.................. $150,000,000 in aggregate principal amount of
Pass-Through Certificates due , 2005
(the "Certificates") will be issued by the
Pass-Through Trust pursuant to the Trust
Agreement. The Certificates will represent
fractional undivided beneficial interests in
the Pass-Through Trust.
PASS-THROUGH TRUST ASSETS..... The sole assets of the Pass-Through Trust from
which holders of the Certificates (the
"Certificateholders") will receive any
distributions on the Certificates will be
$150,000,000 in aggregate principal amount of
% Extendible Tenor Rate-Adjusted Securities
due , 2005 ("X-TRAS(SM)" or the
"Notes") issued by the Company. The Notes will
be issued under an Indenture (the "Indenture")
dated as of September 15, 1992, as supplemented
by a Sixth Supplemental Indenture (the
"Supplemental Indenture") dated as of
, 1998, between the Company and NBD
Bank, as trustee (the "Indenture Trustee"). The
Indenture and the Supplemental Indenture are
hereinafter referred to collectively as the
"Senior Debt Indenture."
The Pass-Through Trust will acquire the Notes,
which will bear interest at the rate per annum
set forth on the cover page of this Prospectus
and will mature on , 2005 (the "Final
Distribution Date") unless extended as
described below. In addition, the Pass-Through
Trust will be party to an ISDA master agreement
(the "ISDA Master Agreement") with Morgan
Stanley Capital Services Inc. ("MSCS"), a
wholly owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co. Under the ISDA Master
Agreement, an amount is payable by MSCS to the
Pass-Through Trust on the date of issue of the
Certificates. Such amount will not be assigned
for the benefit of the Certificateholders, and
will be used by the Pass-Through Trust,
together with the proceeds of the offering of
the Certificates, to purchase the Notes at par
value from the Company. The amount payable, if
any, by the Pass-Through Trust to MSCS pursuant
to the ISDA Master Agreement (the "ISDA
Amount") will be payable either (i) by the
Company pursuant to the Senior Debt Indenture
or (ii) in the event of a remarketing, with the
proceeds of the remarketing. Accordingly,
Certificateholders will obtain no benefit from,
and will be exposed
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<PAGE> 6
to no risk as a result of, interest rate
changes which may give rise to payment by the
Company of the ISDA Amount under the Senior
Debt Indenture, and in turn, the payment
thereof by the Trustee to MSCS pursuant to the
ISDA Master Agreement.
REGULAR DISTRIBUTION DATES.... , 1998, and thereafter each and
.
SPECIAL DISTRIBUTION DATE..... Any Business Day.
RECORD DATE................... The first day, whether or not a Business Day,
of each and , except that no Record
Date shall be applicable to distributions to
be made on the Final Distribution Date.
DISTRIBUTIONS................. All payments of principal of, Applicable
Premium, if any, and interest on the Notes
received by the Trustee will be distributed by
the Trustee to Certificateholders on the date
such receipt is confirmed by the Trustee,
except in certain cases where the Notes are in
default, when the Notes are redeemed in part
or when there is a Change in Control (as
defined) or an Excess Proceeds Offer (as
defined). Payments of interest on the Notes
are scheduled to be received by the Trustee on
the Regular Distribution Dates and will be
distributed to the Certificateholders on the
corresponding Regular Distribution Date.
Payments of principal of, Applicable Premium
and interest on the Notes resulting from
optional redemption, if any, of all of the
Notes and payments received by the Trustee
following an Event of Default will be
distributed on a Special Distribution Date
after not less than 20 days' notice from the
Trustee to the Certificateholders. For a
discussion of distributions upon an Event of
Default, a redemption in part or a Change in
Control or Excess Proceeds Offer, see
"Description of Certificates -- Events of
Default," "Description of Notes -- Optional
Redemption at a Premium" and "-- Purchase of
Certificates upon Change in Control or Excess
Proceeds Offer."
OPTIONAL REDEMPTION OF THE
NOTES AT A PREMIUM............ The Notes are redeemable at any time, at the
option of the Company, in whole or in part, on
not less than 30 nor more than 60 days' prior
notice by the Company, at a redemption price
equal to 100% of the principal amount of the
Notes being redeemed, interest, if any,
thereon to the redemption date, and the
Applicable Premium if such redemption occurs
on or prior to the 91st day prior to the Final
Distribution Date (the "Premium Termination
Date") plus the ISDA Amount. All payments of
principal of, Applicable Premium and interest
on the Notes paid by the Company to the
Pass-Through Trust with respect to a
redemption in whole will be distributed to the
Certificateholders on a Special Distribution
Date, which shall be the redemption date of
such Notes. The ISDA Amount will be
distributed to MSCS. If less than all of the
Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem
appropriate and fair, the particular
Certificates or portions thereof representing
beneficial ownership of the Notes to be
redeemed. Certificates representing beneficial
ownership of the Notes selected for partial
redemption will be required to be presented to
the Trustee for cancellation. Upon such
presentation, all payments of principal of,
Applicable Premium
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<PAGE> 7
and interest on the Notes paid by the Company
to the Pass-Through Trust will be distributed
to the holders of such Certificates. The ISDA
Amount will be distributed to MSCS. See
"Description of Notes -- Optional Redemption
at a Premium."
FINAL DISTRIBUTION DATE....... , 2005.
FINAL DISTRIBUTION............ The final distribution (the "Final
Distribution") on the Certificates,
representing an amount equal to the principal
of and interest on the Notes, assuming the
Notes had been held until the Final
Distribution Date, is expected to be made on
the Final Distribution Date. If the Yield (as
defined) on the date which is 90 days prior to
the Final Distribution Date (the "Exercise
Date") is equal to or greater than the
reference U.S. Treasury Note yield of % used
to determine the interest rate per annum borne
by the Notes as set forth on the cover page of
this Prospectus, the Notes will mature on the
Final Distribution Date. If the Yield on the
Exercise Date is less than such reference U.S.
Treasury Note yield, the maturity of the Notes
will be extended and, prior to the Final
Distribution Date, one of the following will
occur: (a) the interest rate borne by the Notes
will be reset and the Notes will be remarketed
so as to yield net proceeds in cash at least
equal to the principal amount of the Notes plus
the ISDA Amount (the "Remarketing Proceeds")
which, together with the amount payable by the
Company representing interest on the Notes
through the Final Distribution Date, will be
sufficient to enable the Trustee to make the
Final Distribution on the Certificates, (b) the
Company will exercise its option to redeem the
Notes on the Final Distribution Date at a
purchase price equal to the principal amount of
and interest on the Notes plus the ISDA Amount
or (c) the Pass-Through Trust will exercise its
Put Option (as defined) and require the Company
to purchase the Notes on the Final Distribution
Date at a purchase price equal to the principal
amount of and interest on the Notes. In any
case, the principal of and interest on the
Notes will be distributed by the Pass-Through
Trust to the Certificateholders on the Final
Distribution Date. The ISDA Amount (if any)
will be distributed to MSCS. See "Description
of Certificates -- Final Distribution."
"Yield" shall mean the yield-to-maturity on the
then current 7-year U.S. Treasury Note as
determined by linear interpolation of the
5-year and 10-year then current offered-side
yields for the on-the-run most recently issued
U.S. Treasury Notes, as published on Telerate
page 500 as of approximately 12:30 p.m., New
York City time, on the Exercise Date. If
Telerate 500 is unavailable, "Yield" shall be
the arithmetic mean of offered-side yields for
the then current 7-year U.S. Treasury Note as
determined by linear interpolation of the
5-year and 10-year then current offered-side
yields for the on-the-run most recently issued
U.S. Treasury Notes, without regards to highest
and lowest yields, quoted as of approximately
12:30 p.m., New York City time, on the Exercise
Date by five primary dealers in U.S. Treasury
Notes selected by MSCS.
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<PAGE> 8
FINAL DISTRIBUTION UPON A
SUCCESSFUL REMARKETING........ If the maturity of the Notes is extended,
unless the Company exercises its option to
redeem the Notes (which option the Company
shall be entitled to exercise at any time
subsequent to the delivery of the Extension
Notice (as defined) and prior to the earlier of
the pricing of the remarketing and the
Remarketing Deadline (as defined)), the
interest rate borne by the Notes will be reset
in order that the Notes may be remarketed so as
to yield net proceeds in cash at least equal to
the Remarketing Proceeds which, together with
the amount payable by the Company representing
interest on the Notes through the Final
Distribution Date, will be sufficient to enable
the Trustee to make the Final Distribution to
the Certificateholders. The Pass-Through Trust
will distribute to the Certificateholders the
principal of and interest on the Notes. The
ISDA Amount will be distributed to MSCS.
FINAL DISTRIBUTION UPON
OPTIONAL REDEMPTION OF THE
NOTES WITHOUT PREMIUM...... If the maturity of the Notes is extended, the
Company may, in lieu of permitting the Notes to
be remarketed, exercise its option to redeem
all of the Notes on the Final Distribution Date
at a purchase price equal to the principal
amount of and interest on the Notes plus the
ISDA Amount, but without the Applicable
Premium. The Pass-Through Trust will distribute
to the Certificate-holders the principal of and
interest on the Notes. The ISDA Amount will be
distributed to MSCS.
FINAL DISTRIBUTION UPON
EXERCISE BY THE TRUSTEE OF PUT
OPTION..................... If the maturity of the Notes is extended and
for any reason the Trustee does not receive an
amount in cash equal to the principal amount of
and interest on the Notes by 15 days prior to
the Final Distribution Date or such earlier
date as may be mutually agreed upon by the
Company and the Trustee (the "Remarketing
Deadline"), the Pass-Through Trust will be
deemed to have exercised its option to require
the Company to repurchase (the "Put Option"),
on the Final Distribution Date, all of the
outstanding Notes at a purchase price equal to
the principal amount of and interest on the
Notes. The Pass-Through Trust will distribute
to the Certificateholders the principal of and
interest on the Notes.
REPURCHASE UPON CHANGE IN
CONTROL OR EXCESS PROCEEDS
OFFER...................... In the event of any Change in Control (as
defined) of the Company, each Certificateholder
will have the right to direct the Trustee to
require the Company to repurchase all or any
part of the Notes beneficially owned by such
Certificateholder at a repurchase price equal
to 101% of the principal amount of and interest
on such Notes plus the ISDA Amount. In the
event that the Company has Excess Proceeds (as
defined) from an Asset Sale (as defined), each
Certificateholder will have the right to direct
the Trustee to require the Company to
repurchase on a pro rata basis an aggregate
principal amount of Notes beneficially owned by
such Certificateholder on the relevant purchase
date equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the
principal amount of and interest on such Notes
plus the ISDA Amount. The
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<PAGE> 9
percentage of principal of and interest on such
Notes will be distributed by the Pass-Through
Trust to the Certificateholders who directed
the Trustee to require the Company to
repurchase Notes beneficially owned by such
Certificateholders. The ISDA Amount will be
distributed to MSCS. See "Description of
Certificates -- Purchase of Certificates upon
Change in Control or Excess Proceeds Offer."
TRANSFER RESTRICTIONS......... The Certificates are subject to transfer
restrictions pursuant to Rule 3a-7 under the
Investment Company Act of 1940, as amended. See
"Transfer Restrictions."
BOOK-ENTRY; DELIVERY AND
FORM.......................... The Certificates will be represented by one or
more permanent global Certificates in
definitive, fully registered form deposited
with the Trustee as custodian for, and
registered in the name of, a nominee of The
Depository Trust Company ("DTC"). The
Certificates will be sold in minimum
denominations of $250,000. See "Description of
Certificates -- Book-Entry; Delivery and Form"
and "Transfer Restrictions."
USE OF PROCEEDS............... The proceeds of the offering of the
Certificates, together with the amount payable
by MSCS to the Pass-Through Trust on the date
of issue of the Certificates, will be used by
the Pass-Through Trust to purchase the Notes at
par value from the Company. The net proceeds to
the Company from the sale of the Notes to the
Pass-Through Trust will be used to repay
certain revolving credit and working capital
facility borrowings, some of which were
incurred in connection with a Company
subsidiary's acquisition of an ownership
interest in a Brazilian electric distribution
company.
CERTAIN COVENANTS OF THE
COMPANY....................... The Senior Debt Indenture will contain certain
covenants which, among other things, restrict
the ability of the Company and its Restricted
Subsidiaries (as defined) to: incur or
guarantee additional indebtedness; make
restricted payments; create liens; sell assets
and consolidate, merge or sell all or
substantially all of their assets. See
"Description of Notes -- Certain Covenants."
TRUSTEE....................... Wilmington Trust Company will act as Trustee,
paying agent and registrar for the
Certificates.
INDENTURE TRUSTEE............. NBD Bank will act as Indenture Trustee.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS............. The Pass-Through Trust will be classified as a
grantor trust and not as an association (or
publicly traded partnership) taxable as a
corporation for U.S. federal income tax
purposes. For U.S. federal income tax purposes,
while the characterization of the transaction
is not without doubt, Federal Tax Counsel (as
defined) believes that the Certificates
represent ownership of a debt instrument issued
by the Company through the Pass-Through Trust.
The debt instrument will have an absolute
maturity corresponding to the Final
Distribution Date, but will otherwise have the
characteristics of the Notes, including the
principal amount of and interest rate payable
on the Notes. Each Certificateholder will be
required to report on its federal income tax
return its pro rata share of the income from
the debt instrument, including interest income
at the
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<PAGE> 10
interest rate on the debt instrument in
accordance with its method of accounting. The
debt instrument may be issued with original
issue discount. See "Certain Federal Income Tax
Considerations."
ERISA CONSIDERATIONS.......... Each purchaser of Certificates will, by its
purchase, be deemed to have directed the
Trustee to purchase the Notes and to have
approved all of the documents relating to the
Notes, and to have represented and warranted
that either (A) no part of the assets to be
used by it to purchase and hold such
Certificates constitutes the assets of any (i)
employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) subject to
Title I of ERISA, (ii) plan described in
Section 4975(e)(1) of the U.S. Internal Revenue
Code of 1986, as amended (the "Code") that is
subject to Section 4975 of the Code or (iii)
entity whose underlying assets include "plan
assets" under Department of Labor Regulation 29
C.F.R. Section 2510.3-101 (collectively,
"Plans") or (B) one or more prohibited
transaction statutory or administrative
exemptions applies such that the use of such
Plan assets to purchase and hold such
Certificates will not constitute a non-exempt
prohibited transaction under ERISA or the Code.
Any Plan fiduciary that proposes to cause a
Plan to purchase Certificates should consult
with its legal advisors with respect to the
potential applicability of ERISA and the Code
to such investment and the potential
consequences of such investment with respect to
its specific circumstances. See "ERISA
Considerations" and "Transfer Restrictions."
9
<PAGE> 11
THE COMPANY
The Company, incorporated in Michigan in 1987, is the parent holding
company of Consumers Energy Company ("Consumers") and CMS Enterprises Company
("Enterprises"). Consumers, a combination electric and gas utility company
serving in all 68 counties of Michigan's Lower Peninsula, is the largest
subsidiary of the Company. Consumers' customer base includes a mix of
residential, commercial and diversified industrial customers, the largest
segment of which is the automotive industry. Enterprises is engaged in several
domestic and international energy-related businesses including: (i) oil and gas
exploration and production; (ii) acquisition, development and operation of
independent power production facilities; (iii) energy marketing, risk management
and energy management to large utility, commercial and industrial customers;
(iv) transmission, storage and processing of natural gas; and (v) international
energy distribution.
The Company conducts its principal operations through the following seven
business segments: (i) electric utility operations; (ii) gas utility operations;
(iii) oil and gas exploration and production operations; (iv) independent power
production; (v) energy marketing, services and trading; (vi) natural gas
storage, transmission and processing; and (vii) international energy
distribution. Consumers or Consumers' subsidiaries are engaged in two segments:
electric operations and gas operations. Consumers' electric and gas businesses
are principally regulated utility operations.
The Company and its subsidiaries routinely evaluate, invest in, acquire and
divest energy-related assets and/or businesses both domestically and
internationally. Consideration for such transactions may involve the delivery of
cash and/or securities.
The Company's 1996 consolidated operating revenue was $4,333 million. This
consolidated operating revenue was derived from its electric utility operations
(approximately 57% or $2,446 million), its gas utility operations (approximately
30% or $1,282 million), gas transmission, storage and marketing (approximately
7% or $320 million), oil and gas exploration and production activities
(approximately 3% or $130 million) and independent power production and other
non-utility activities (approximately 3% or $155 million). Consumers'
consolidated operations in the electric and gas utility businesses account for
the majority of the Company's total assets, revenue and income. The
unconsolidated share of non-utility electric generation and distribution and gas
transmission and storage revenue for 1996 was $557 million.
Consumers is a public utility serving gas or electricity to almost six
million of Michigan's nine and one-half million residents in all of the 68
counties in Michigan's Lower Peninsula. Consumers' service area includes
automotive, metal, chemical, food and wood products industries and a diversified
group of other industries. Consumers' 1996 consolidated operating revenue of
$3,770 million was derived approximately 65% ($2,446 million) from its electric
utility business, approximately 34% ($1,282 million) from its gas utility
business and approximately 1% ($42 million) from its non-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 the Company and its subsidiaries does
not purport to be comprehensive. For additional information concerning the
Company and its subsidiaries' businesses 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.
RECENT DEVELOPMENTS
On November 7, 1997, the Company issued $300 million principal amount of
7 3/8% Senior Unsecured Notes due 2000 and used the net proceeds to repay $269
million of the outstanding balance under the Company's revolving credit
facility, used $24 million to repay one of the Company's line of credit, and
used the remaining amount for general corporate purposes. On November 20, 1997,
the Company issued 4.142 million shares of CMS Energy common stock, par value
$.01 per share ("CMS Energy Common Stock") and used the proceeds for general
corporate purposes, including the repayment of long-term debt.
10
<PAGE> 12
On December 4, 1997, the Company and a privately held Brazilian utility,
Companhia Forca e luz Cataguazes-Leopoldina (CFLCL), announced that the
Brazilian State of Sergipe selected CFLCL as the winning bidder in the
privatization of the Energipe electric distribution utility. Energipe serves
approximately 348,000 customers in Sergipe, located in northeastern Brazil.
CFLCL submitted the winning bid of US$520.3 million for 86.4% of the ownership
interest of Energipe. CMS Electric and Gas Company, a subsidiary of the Company,
has agreed to acquire a 42.6% ownership interest in the CFLCL/Energipe combined
company for a price of approximately US$180 million and to assume an active role
in advising the company on technical matters.
On December 19, 1997, the Michigan Public Service Commission issued an ex
parte order, responsive to a December 9, 1997 Consumers application, authorizing
a voluntary, experimental program that will allow up to 300,000 Michigan natural
gas customers to choose their own supplier over the next three years. The new
program will begin April 1, 1998, when 100,000 residential, commercial and
industrial retail gas sales customers of Consumers will be offered the
opportunity to participate on a first-come, first-served basis. An additional
100,000 customers will be allowed to participate in the program in each of the
following two years. During the program, Consumers' distribution service rates
for all retail gas customers will be frozen. In addition, the gas cost recovery
clause will be suspended and the gas commodity charge will be frozen at the
1996-97 rate of $2.8364 per thousand cubic feet (Mcf) for customers who remain
full-service sales customers. Finally, an earnings sharing mechanism will
provide for refunds to customers in the event that Consumer's actual gas utility
business earnings exceed certain predetermined levels.
11
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of certain financial information of the Company
and its consolidated subsidiaries and is qualified in its entirety by, and
should be read in conjunction with, the Company's consolidated financial
statements and notes thereto included in the Incorporated Documents. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenue................................ $3,614 $3,890 $4,333 $3,150 $3,394
Pretax operating income.......................... 503 603 677 547 565
Operating expenses............................... 3,111 3,287 3,656 2,603 2,829
Income taxes..................................... 92 118 139 116 107
Net income....................................... $ 179 $ 204 $ 240 $ 196 $ 204
Earnings per average common share -- CMS Energy
Common Stock................................... $ 2.09 $ 2.27 $ 2.45 $ 2.02 $ 2.04
Earnings per average common share -- Class G
Common Stock................................... -- .38 1.82 1.38 1.13
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 79 $ 56 $ 56 $ 55 $ 134
Net plant and property........................... 4,814 5,074 5,280 5,177 5,415
Total assets..................................... 7,378 8,143 8,615 8,291 9,500
Long-term debt, excluding current maturities..... 2,709 2,906 2,842 2,996 3,060
Notes payable.................................... 339 341 333 341 394
Other liabilities................................ $2,867 $3,071 $3,282 $2,879 $3,581
Company-obligated mandatorily redeemable Trust
Preferred Securities of Consumers Power Company
Financing I(1)................................. -- -- 100 100 100
Company-obligated mandatorily redeemable Trust
Preferred Securities of Consumers Energy
Company Financing II(1)........................ -- -- -- -- 120
Company-obligated convertible Trust Preferred
Securities of CMS Energy Trust I(2)............ -- -- -- -- 173
Preferred stock of subsidiary.................... 356 356 356 356 238
Common stockholders' equity...................... $1,107 $1,469 $1,702 $1,619 $1,834
</TABLE>
- -------------------------
(1) The primary asset of Consumers Power Company Financing I is $103 million
principal amount of 8.36% subordinated deferrable interest notes due 2015
from Consumers. The primary asset of Consumers Energy Company Financing II
is $124 million principal amount of 8.20% subordinated deferrable interest
notes due 2027 from Consumers.
(2) The primary asset of CMS Energy Trust I is $178 million principal amount of
7.75% convertible subordinated debentures due 2027 from CMS Energy.
12
<PAGE> 14
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the nine months ended September
30, 1997 and for each of the years ended December 31, 1992 through 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------------------- ENDED
1992(1) 1993 1994 1995 1996 SEPTEMBER 30, 1997
------- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......... -- 1.88 2.07 1.94 2.01 2.01
</TABLE>
- -------------------------
(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 Co.'s reduction in its investment in The
Oxford Energy Company. The ratio of earnings to fixed charges would have
been 1.33 excluding these amounts.
For the purpose of computing such ratio, earnings represent net income
before income taxes, net interest charges and estimated interest portion of
lease rentals.
USE OF PROCEEDS
The proceeds of the offering of the Certificates, together with the amount
payable by MSCS to the Pass-Through Trust on the date of issue of the
Certificates, will be used by the Pass-Through Trust to purchase the Notes at
par value from the Company.
The net proceeds to the Company from the sale of the Notes to the
Pass-Through Trust will be used to repay certain of the Company's borrowings
under its revolving credit facility and various working capital facilities as
well as for its general corporate purposes. The revolving credit facility
matures in the year 2000, and it and the working capital facilities have a
combined weighted average interest rate at December 18, 1997 of 7.22%.
Borrowings under the revolving credit facility are funding a Company
subsidiary's acquisition of an ownership interest in a Brazilian electric
distribution company. See "Recent Developments."
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1997, and as adjusted to reflect the sale of the
Notes to the Pass-Through Trust, the application of the estimated net proceeds
from such sale and other adjustments described below. See "Use of Proceeds." The
table is qualified in its entirety by, and should be read in conjunction with,
the Company's consolidated financial statements and notes thereto included in
the Incorporated Documents. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Non-current portion of capital leases....................... $ 82 $ 82
Long-Term Debt:
Other long-term debt (excluding current
maturities)(1)(2)(3)................................... 3,060 2,945
% Extendible Tenor Rate-Adjusted Securities due
2005(4)................................................ -- 150
------ ------
Total long-term debt................................... 3,060 3,095
------ ------
Company-obligated mandatorily redeemable Trust Preferred
Securities of Consumers Power Company Financing I(5)...... 100 100
Company-obligated mandatory redeemable Trust Preferred
Securities of Consumers Energy Company Financing II(5).... 120 120
Company-obligated convertible Trust Preferred Securities of
CMS Energy
Trust I (5)............................................... 173 173
Total stockholders' equity:
Preferred stock of subsidiary............................. 238 238
Common stockholders' equity(2)............................ 1,834 1,986
------ ------
Total stockholders' equity............................. 2,072 2,224
------ ------
Total capitalization................................... $5,607 $5,794
====== ======
</TABLE>
- -------------------------
(1) Adjusted to reflect the issuance on November 7, 1997 of $300 million
principal amount of 7 3/8% Senior Unsecured Notes due 2000 and the
concurrent repayment of $269 million of the outstanding balance under the
Company's revolving credit facility and repayment of $24 million under one
of the Company's lines of credit with the proceeds from the issuance of such
Senior Unsecured Notes.
(2) Adjusted to reflect net proceeds of $152 million from the issuance of 4.142
million shares of CMS Energy Common Stock on November 20, 1997, which
proceeds were used for general corporate purposes including the repayment of
long-term debt.
(3) Adjusted to reflect the December 8, 1997 borrowing of $180 million under the
Company's revolving credit facility to fund a Company subsidiary's
acquisition of an ownership interest in a Brazilian electric distribution
company, and the proposed repayment of $150 million of such borrowing with
the proceeds of the issuance of the % Extendible Tenor Rate-Adjusted
Securities due 2005.
(4) Adjusted to reflect the proposed issuance of $150 million principal amount
of % Extendible Tenor Rate-Adjusted Securities due 2005.
(5) The primary asset of Consumers Power Company Financing I is approximately
$103 million principal amount of 8.36% subordinated deferrable interest
notes due 2015 from Consumers Energy Company. The primary asset of Consumers
Energy Company Financing II is approximately $124 million principal amount
of 8.20% subordinated deferrable interest notes due 2027 from Consumers
Energy Company. The primary asset of CMS Energy Trust I is approximately
$178 million principal amount of 7.75% convertible subordinated debentures
due 2027 from CMS Energy.
14
<PAGE> 16
FORMATION OF THE PASS-THROUGH TRUST
The Pass-Through Trust is a statutory business trust formed under the
Delaware Business Trust Act pursuant to (i) a trust agreement dated as of
November 21, 1997 as to be amended and restated on the date of issue of the
Certificates, between the Company and Wilmington Trust Company, as Trustee and
(ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on November 21, 1997. Pursuant to the Trust Agreement, the
Pass-Through Trust will issue and sell the Certificates to the Underwriters and
enter into the ISDA Master Agreement with MSCS, a wholly owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. Under the ISDA Master Agreement, an
amount is payable by MSCS to the Pass-Through Trust on the date of issue of the
Certificates. Such amount will not be assigned for the benefit of the
Certificateholders but will be used by the Pass-Through Trust, together with the
proceeds from the sale of the Certificates, to purchase the Notes at par value
from the Company. The Notes will be the sole assets of the Pass-Through Trust
from which Certificateholders will be entitled to receive any distributions on
the Certificates. The ISDA Amount, if any, will be payable by the Pass-Through
Trust to MSCS pursuant to the ISDA Master Agreement either (i) by the Company
pursuant to the Senior Debt Indenture or (ii) in the event of a remarketing,
with the proceeds of the remarketing. Accordingly, Certificateholders will
obtain no benefit from, and will be exposed to no risk as a result of, interest
rate changes which may give rise to payment by the Company of the ISDA Amount
under the Senior Debt Indenture and in turn, the payment thereof by the Trustee
to MSCS pursuant to the ISDA Master Agreement.
DESCRIPTION OF CERTIFICATES
The Certificates will be issued under the Trust Agreement. The following
summaries of certain provisions of the Trust Agreement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Certificates and the Trust Agreement, including the
definition therein of certain terms. Wherever particular defined terms of the
Certificates and the Trust Agreement are referred to, such defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. Copies of the Trust
Agreement are available from the Trustee upon request.
GENERAL
The Certificates will represent fractional undivided beneficial interests
in the Pass-Through Trust. The sole assets (the "Trust Assets") of the
Pass-Through Trust from which Certificateholders will receive any distributions
on the Certificates will be $150,000,000 in aggregate principal amount of the
Notes issued by the Company, including the interest and Applicable Premium, if
any, thereon, but not any ISDA Amount payable in respect of the ISDA Master
Agreement. The Pass-Through Trust will acquire the Notes, which will bear
interest at the rate per annum set forth on the cover page of this Prospectus
and will mature on the Final Distribution Date unless extended as described
below. Certificateholders will be entitled to receive distributions equal to
amounts paid by the Company in respect of principal of, Applicable Premium, if
any, and interest on the Notes.
COLLECTIONS AND DISTRIBUTIONS
The Trust Agreement will require the Trustee to establish and maintain a
segregated account (the "Certificate Account") held in trust for the benefit of
the Certificateholders. The Trustee shall cause to be deposited in the
Certificate Account on the date of receipt thereof all amounts received with
respect to the Notes other than any ISDA Amount payable in respect of the ISDA
Master Agreement.
Payments of principal of, Applicable Premium, if any, and interest on the
Notes held in the Pass-Through Trust will be distributed by the Trustee to
Certificateholders on each Regular Distribution Date and each Special
Distribution Date as described in the following three paragraphs, except in
certain cases when the Notes are in default, when the Notes are redeemed in part
or when there is a Change in Control or an Excess Proceeds Offer. See
"Description of the Trust Agreement -- Events of Default," "Description of Notes
- --Optional Redemption at a Premium" and "-- Purchase of Certificates upon Change
in Control or Excess
15
<PAGE> 17
Proceeds Offer." Interest paid on the Notes will be passed through to the
Certificateholders on and of each year, commencing on
, 1998, until the Final Distribution Date for the Pass-Through Trust
(each, a "Regular Distribution Date"). Payment of principal on the Notes is
scheduled to be received by the Trustee not later than the Final Distribution
Date (such scheduled payments of the principal amount of and interest on the
Notes are herein referred to as "Scheduled Payments").
The Trustee will distribute on each Regular Distribution Date all Scheduled
Payments the receipt of which is confirmed by the Trustee on such date. Each
Certificateholder will be entitled to receive a pro rata share of any
distribution in respect of Scheduled Payments made on the Notes. Each such
distribution in respect of Scheduled Payments will be made by the Trustee to the
holders of record of the Certificates on the first day, whether or not a
Business Day, of the calendar month in which such Regular Distribution Date
occurs, except that no record date shall be applicable to distributions to be
made on the Final Distribution Date. If a Scheduled Payment is not received by
the Trustee on a Regular Distribution Date but is received within five Business
Days thereafter, it will be distributed on the date so received by the Trustee
to such holders of record. If it is received after such five day period, it will
be treated as a Special Payment and distributed as described below.
Payments of principal of, Applicable Premium and interest on the Notes
received by the Trustee on account of an optional redemption, if any, of all of
the Notes, and payments received by the Trustee following an Event of Default
("Special Payments") will be distributed on, in the case of an early redemption,
the date of such early redemption, which shall be a Business Day, and otherwise
20 days after the Trustee has confirmed receipt of the funds for such Special
Payment (or the next Business Day after such 20th day if such date is not a
Business Day) (each, a "Special Distribution Date"). The Trustee will mail
notice to the Certificateholders not less than 20 days prior to the Special
Distribution Date on which any Special Payment is scheduled to be distributed by
the Trustee stating such anticipated Special Distribution Date. Each
distribution of a Special Payment, other than the final distribution, on a
Special Distribution Date will be made by the Trustee to Certificateholders of
record on the 15th day next preceding such Special Distribution Date. See
"Description of Notes -- Optional Redemption at a Premium" and "Description of
the Trust Agreement -- Events of Default."
The Notes will be prepaid on a Special Distribution Date at a price equal
to the principal amount of, interest on, and Applicable Premium, if such
redemption occurs on or prior to the Premium Termination Date. If less than all
of the Notes are to be redeemed, the Trustee shall select, in such manner as it
shall deem appropriate and fair, the particular Certificates or portions thereof
representing beneficial ownership of the Notes to be redeemed. Upon a redemption
of less than all of the Notes, Certificates representing beneficial ownership of
the Notes selected for redemption will be required to be presented to the
Trustee for cancellation. Upon such presentation, all payments of principal of,
Applicable Premium, if any, and interest on the Notes paid by the Company to the
Pass-Through Trust will be distributed to the holders of such Certificates. The
ISDA Amount will be distributed to MSCS. See "Description of Notes -- Optional
Redemption at a Premium" for a description of the manner of computing the
Applicable Premium, if any.
FINAL DISTRIBUTION
The Final Distribution on the Certificates, representing an amount equal to
the principal of and interest on the Notes, assuming the Notes have been held
until the Final Distribution Date, is expected to be made on the Final
Distribution Date. If the Yield on the Exercise Date is equal to or greater than
the reference U.S. Treasury Note yield of % used to determine the interest
rate per annum borne by the Notes as set forth on the cover page of this
Prospectus, the Notes will mature on the Final Distribution Date. If the Yield
on the Exercise Date is less than such reference U.S. Treasury Note yield the
maturity of the Notes will be extended and, prior to the Final Distribution
Date, one of the following will occur: (a) the interest rate borne by the Notes
will be reset and the Notes will be remarketed so as to yield net proceeds in
cash at least equal to the Remarketing Proceeds which, together with the amount
payable by the Company representing interest on the Notes through the Final
Distribution Date, will be sufficient to enable the Trustee to make the Final
Distribution on the Certificates, (b) the Company will exercise its option to
redeem the Notes on the Final Distribution Date at a purchase price equal to the
principal amount of and interest on the Notes plus the
16
<PAGE> 18
ISDA Amount or (c) the Pass-Through Trust will exercise its Put Option and
require the Company to purchase the Notes on the Final Distribution Date at a
purchase price equal to the principal amount of and interest on the Notes. In
any case, the principal of and interest on the Notes will be distributed by the
Pass-Through Trust to the Certificateholders on the Final Distribution Date. The
ISDA Amount (if any) will be distributed to MSCS.
"Yield" shall mean the yield-to-maturity on the then current 7-year U.S.
Treasury Note as determined by linear interpolation of the 5-year and 10-year
then current offered-side yields for the on-the-run most recently issued U.S.
Treasury Notes, as published on Telerate page 500 as of approximately 12:30
p.m., New York City time, on the Exercise Date. If Telerate 500 is unavailable,
"Yield" shall be the arithmetic mean of offered-side yields for the then current
7-year U.S. Treasury Note as determined by linear interpolation of the 5-year
and 10-year then current offered-side yields for the on-the-run most recently
issued U.S. Treasury Notes, without regards to highest and lowest yields, quoted
as of approximately 12:30 p.m., New York City time, on the Exercise Date by five
primary dealers in U.S. Treasury Notes selected by MSCS.
MSCS will deliver notice of the extension of the maturity of the Notes (the
"Extension Notice") to both the Trustee and the Company at their respective
addresses set forth herein on or prior to the Exercise Date.
Final Distribution upon a Successful Remarketing
If the maturity of the Notes is extended, unless the Company exercises its
option to redeem the Notes (which option the Company may exercise at any time
subsequent to the delivery of the Extension Notice and prior to the earlier of
the pricing of the remarketing and the Remarketing Deadline), the interest rate
borne by the Notes will be reset in order that the Notes may be remarketed so as
to yield net proceeds in cash equal to the Remarketing Proceeds. On the Exercise
Date and once every 15 days thereafter, Morgan Stanley & Co. Incorporated (or,
subsequent to the Exercise Date, such other investment banking institution as
may be selected as the remarketing agent) will provide the Company with
non-binding indications of the interest rate and discount or premium at which it
believes it could remarket the Notes. The Company may then, on behalf of the
Pass-Through Trust, either request that Morgan Stanley & Co. Incorporated
remarket the Notes, select another investment banking institution to remarket
the Notes or exercise the option to redeem the Notes. Regardless of whether it
has been selected to act as remarketing agent, Morgan Stanley & Co. Incorporated
shall at all times be permitted to offer to purchase the Notes bearing a reset
interest rate specified by Morgan Stanley & Co. Incorporated for net proceeds in
cash at least equal to the Remarketing Proceeds, which offer the Company and the
Trustee shall be required to accept, unless (i) any other party shall have
remarketed the Notes bearing an interest rate less than or equal to that
specified by Morgan Stanley & Co. Incorporated and for net proceeds in cash at
least equal to the Remarketing Proceeds or (ii) the Company exercises its option
to redeem all of the Notes on the Final Distribution Date at a purchase price
equal to the principal amount of and interest on the Notes plus the ISDA Amount.
Upon the closing of any remarketing, the portion of the proceeds representing
principal of the Notes, together with the amount paid by the Company
representing interest on the Notes through the Final Distribution Date, will be
deposited with the Trustee for distribution to Certificateholders, and the
portion of the proceeds representing the ISDA Amount will be distributed to
MSCS.
Final Distribution upon Optional Redemption of the Notes without Premium
If the maturity of the Notes is extended, the Company may, in lieu of
permitting the Notes to be remarketed, exercise its option to redeem all of the
Notes on the Final Distribution Date at a purchase price equal to the principal
amount of and interest on the Notes plus the ISDA Amount, but without the
Applicable Premium. The Company may exercise this option at any time subsequent
to the delivery of the Extension Notice and prior to the earlier of the pricing
of the remarketing and the Remarketing Deadline. The principal of and interest
on the Notes paid by the Company to the Pass-Through Trust will be distributed
to the Certificateholders on the Final Distribution Date. The ISDA Amount will
be distributed to MSCS.
17
<PAGE> 19
Final Distribution upon Exercise by the Trustee of Put Option
If the maturity of the Notes is extended and for any reason the Trustee
does not receive an amount in cash equal to the principal amount of and interest
on the Notes by the Remarketing Deadline, the Pass-Through Trust will be deemed
to have exercised its Put Option and required the Company to purchase the Notes
on the Final Distribution Date at a purchase price equal to the principal amount
of and interest on the Notes. All payments in respect of the Notes paid by the
Company to the Pass-Through Trust upon exercise of the Put Option will be
distributed to Certificateholders on the Final Distribution Date.
PURCHASE OF CERTIFICATES UPON CHANGE IN CONTROL OR EXCESS PROCEEDS OFFER
Change in Control
In the event of any Change in Control (as defined below) (the effective
date of such change in control being the "Change in Control Date") each
Certificateholder will have the right, at such Certificateholder's option,
subject to the terms and conditions of the Trust Agreement, to direct the
Trustee to require the Company to repurchase all or any part of the Notes
beneficially owned by such Certificateholder on a date selected by the Company
that is no earlier than 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, together with accrued interest to
the Change in Control Purchase Date (the "Change in Control Purchase Price"),
plus the ISDA Amount. Upon receipt of any payments on the Notes by the
Pass-Through Trust pursuant to a Change in Control, the Trustee will pay the
Change in Control Purchase Price to the Certificateholders who directed the
Trustee to require the Company to repurchase all or any part of the Notes
beneficially owned by them upon presentation for cancellation of the related
Certificates. The ISDA Amount will be distributed to MSCS.
Within 30 days after the Change in Control Date, the Company is obligated
to mail to each Certificateholder a notice regarding the Change in Control,
which notice shall state: (i) that a Change in Control has occurred and that
each such Certificateholder has the right to direct the Trustee to require the
Company to repurchase all or any part of the Notes beneficially owned by such
Certificateholder at the Change in Control Purchase Price upon presentation for
cancellation of the related Certificates; (ii) the Change in Control Purchase
Price; (iii) the Change in Control Purchase Date; (iv) the name and address of
the Paying Agent (as defined) for the Notes; and (v) the procedures that
Certificateholders must follow to cause the Notes beneficially owned by such
Certificateholder to be repurchased by the Company.
To exercise this right, a Certificateholder must deliver a written notice
(the "Change in Control Purchase Notice") to the Paying Agent at its corporate
trust office in Detroit, Michigan, 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, among
other things, (i) the portion of the principal amount of any Notes beneficially
owned by such Certificateholder to be repurchased, which must be $1,000 or an
integral multiple thereof; and (ii) that such Notes are to be repurchased by the
Company pursuant to the applicable change-in-control provisions of the Senior
Debt Indenture and the Trust Agreement.
Any Change in Control Purchase Notice may be withdrawn by the
Certificateholder 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 of Notes
beneficially owned by such Certificateholder and, if applicable, the certificate
numbers of the Certificates 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 Certificate is represented by a Global Certificate, the Depositary (as
defined) or its nominee will be the holder of such Certificate and therefore
will be the only entity that may require the Company to repurchase Notes upon a
Change in Control. To obtain repayment with respect to any Note upon a Change in
Control, the beneficial owner of the Certificate evidencing beneficial ownership
of such Note must provide to the broker or other entity through which it holds
the beneficial interest in such Certificate (i) the Change in
18
<PAGE> 20
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 Depositary of
such beneficial owner's desire to cause the Company to repurchase such Notes
beneficially owned by such Certificateholder. 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 Notes in respect of a
Certificate in certificated form (a "Definitive Certificate") for which a Change
in Control Purchase Notice has been delivered and not withdrawn is conditioned
upon delivery of such Definitive Certificate (together with necessary
endorsements) to the Paying Agent at its office in Detroit, Michigan, 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 Notes in respect of such Definitive Certificate will
be made promptly following the later of the Change in Control Purchase Date or
the time of presentation for cancellation of such Definitive Certificate.
If the Paying Agent holds, in accordance with the terms of the Senior Debt
Indenture, money sufficient to pay the Change in Control Purchase Price of Notes
in respect of a Certificate on the Business Day following the Change in Control
Purchase Date for such Certificate, then, on and after such date, interest on
such Note will cease to accrue, whether or not such Certificate is delivered to
the Paying Agent, and all other rights of the Certificateholder shall terminate
(other than the right to receive the Change in Control Purchase Price upon
delivery of the Certificate).
Under the Senior Debt Indenture, a "Change in Control" means an event or
series of events by which (i) the Company ceases to beneficially own, directly
or indirectly, at least 80% of the total voting power of all classes of 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
the Company or Consumers, any merger, consolidation, liquidation or dissolution
of the Company 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 35% of the Voting Stock (as defined)
of the Company; or (iii) the Company 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 the Company, in either event pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or exchanged
for cash, securities, or other property, other than any such transaction where
(A) the outstanding Voting Stock of the Company is changed into or exchanged for
Voting Stock of the surviving corporation and (B) the holders of the Voting
Stock of the Company 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 Trust Agreement and the Senior Debt Indenture require the Company to
comply with the provisions of Regulation 14E and any other tender offer rules
under the Exchange Act which may then be applicable in connection with any offer
by the Company to purchase Notes beneficially owned by Certificateholders at the
option of Certificateholders upon a Change in Control. The Change in Control
purchase feature of the Certificates may in certain circumstances make more
difficult or discourage a takeover of the Company 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 antitakeover provisions. Instead, the Change in Control
purchase feature is a term contained in many similar debt offerings and the
terms of such feature result from negotiations between
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<PAGE> 21
the Company and the Underwriters. Management has no present intention to propose
any antitakeover measures although it is possible that the Company 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 "Description of the Trust Agreement -- Events of Default" (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.
Excess Proceeds Offer
Under the terms of the Senior Debt Indenture, so long as any of the Notes
are outstanding, the Company may not sell, transfer or otherwise dispose of any
property or assets of the Company, including Capital Stock of any Consolidated
Subsidiary, in one transaction or a series of transactions in an amount which
exceeds $50,000,000 (an "Asset Sale") unless the Company shall (i) apply an
amount equal to such excess Net Cash Proceeds to permanently repay Indebtedness
of a Consolidated Subsidiary or Indebtedness of the Company which is pari passu
with the Notes or (ii) invest an equal amount not so used in clause (i) in
property or assets of related business within 24 months after the date of the
Asset Sale (the "Application Period") or (iii) apply such excess Net Cash
Proceeds not so used in (i) or (ii) (the "Excess Proceeds") to make an offer,
within 30 days after the end of the Application Period, to purchase on a pro
rata basis an aggregate principal amount of Notes on the relevant purchase date
equal to the Excess Proceeds on such date, at a purchase price equal to 100% of
the principal amount of the Notes on the relevant purchase date and unpaid
interest, if any, to the purchase date (the "Excess Proceeds Purchase Price")
plus the ISDA Amount, if any (an "Excess Proceeds Offer"). The Company shall
only be required to make an Excess Proceeds Offer if the Excess Proceeds equal
or exceed $25,000,000 at any given time.
The procedures to be followed by the Company in making an offer to the
Trustee on behalf of Certificateholders to purchase Notes with Excess Proceeds
and to pay the Excess Proceeds Purchase Price therefor, and the directions to
the Trustee by Certificateholders to accept such offer with respect to
Certificates beneficially owned by them, shall be the same as those set forth
above in with respect to a Change in Control and payment of the Change of
Control Purchase Price.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Certificates will be issued in fully
registered form without interest coupons and will be represented by one or more
permanent global Certificates in definitive, fully registered form without
interest coupons (each, a "Global Certificate") and will be deposited with the
Trustee as custodian for, and registered in the name of, a nominee of DTC. Each
Global Certificate (and any Certificates issued in exchange therefor) will be
subject to certain restrictions on transfer set forth therein as described under
"Transfer Restrictions." Except in the limited circumstances described below,
owners of beneficial interests in a Global Certificate will not be entitled to
receive physical delivery of Definitive Certificates.
The Certificates will be sold in minimum denominations of $250,000.
Ownership of beneficial interests in a Global Certificate will be limited
to persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Certificates represented by such Global
Certificate for all purposes under the Trust Agreement and the Certificates. No
beneficial owner of an interest in a Global Certificate will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Senior Debt Indenture.
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<PAGE> 22
Payments of the principal amount, premium, if any, and interest on, a
Global Certificate will be made to DTC or its nominee, as the case may be, as
the registered owner thereof. Neither the Company nor the Trustee 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
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Certificate, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Certificate as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Certificate held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by
a Certificateholder (including the presentation of Certificates for exchange as
described below) only at the direction of one or more participants to whose
account or accounts the DTC interests in a Global Certificate is credited and
only in respect of such portion of the aggregate principal amount of the
Certificate as to which such participant or participants has or have given such
direction. However, if there is an Event of Default under the Certificates, DTC
will exchange the applicable Global Certificate for Definitive Certificates,
which it will distribute to its participants and which may be legended as set
forth under the heading "Transfer Restrictions."
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry charges in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("Indirect Participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Certificate among participants of
DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by DTC
or its respective participants or indirect participants of its respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY CERTIFICATES FOR DEFINITIVE CERTIFICATES
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the
Pass-Through Trust will issue individual, fully registered, definitive
Certificates in exchange for the Global Certificate or Certificates representing
such Definitive Certificates. Upon the exchange of a Global Certificate for
Definitive Certificates, such Global Certificate shall be cancelled by the
Trustee and the Definitive Certificates shall be registered in such names and in
such authorized denominations as DTC, pursuant to instructions from its
Participants, any Indirect Participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Certificates to the persons in whose
names such Certificates are so registered and shall recognize such persons as
Certificateholders.
Definitive Certificates will bear, and be subject to, the legend described
in "Transfer Restrictions" (unless the Company determines otherwise in
accordance with applicable law). The holder of a Definitive Certificate may
transfer such Certificate, subject to compliance with the provisions of such
legend, as provided herein.
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DESCRIPTION OF THE TRUST AGREEMENT
The following summaries of certain provisions of the Trust Agreement do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Trust Agreement, including the definition
therein of certain terms. Wherever particular defined terms of the Trust
Agreement are referred to, such defined terms are incorporated herein by
reference as part of the statement made, and the statement is qualified in its
entirety by such reference. Copies of the Trust Agreement are available from the
Trustee upon request.
GENERAL
Pursuant to the Trust Agreement, the Pass-Through Trust will issue and sell
the Certificates to the Underwriters and enter into the ISDA Master Agreement.
Under the ISDA Master Agreement, an amount is payable by MSCS to the
Pass-Through Trust on the date of issue of the Certificates. Such amount will
not be assigned for the benefit of the Certificateholders but will be used by
the Pass-Through Trust, together with the proceeds from the sale of the
Certificates, to purchase the Notes at par value from the Company. The Notes
will be the sole assets of the Pass-Through Trust from which Certificateholders
will be entitled to receive any distributions on the Certificates. The ISDA
Amount, if any, payable by the Pass-Through Trust to MSCS pursuant to the ISDA
Master Agreement will be payable either (i) by the Company pursuant to the
Senior Debt Indenture or (ii) in the event of a remarketing, with the proceeds
of the remarketing. Accordingly, Certificateholders will obtain no benefit from,
and will be exposed to no risk as a result of, interest rate changes which may
give rise to payment by the Company of the ISDA Amount under the Senior Debt
Indenture and in turn, the payment thereof by the Trustee to MSCS pursuant to
the ISDA Master Agreement.
THE TRUSTEE
Wilmington Trust Company will act as Trustee for the Certificates and the
Pass-Through Trust pursuant to the Trust Agreement. The Trustee's offices are
located at 1100 North Market Street, Wilmington, Delaware 19890-0001.
The Trust Agreement provides that the Company will, to the fullest extent
permitted by law, indemnify and hold harmless the Trustee against any loss,
damage, claim, liability, penalty or expense incurred by the Trustee arising out
of or in connection with the administration of the Trust Agreement, the
Certificates, the ISDA Master Agreement or the Underwriting Agreement (as
defined) except to the extent that such loss, liability or expense is due to
wilful misconduct, bad faith or negligence of the Trustee.
Pursuant to the Trust Agreement, as compensation for the performance of its
duties under such agreement, the Company will pay such compensation as the
Company and the Trustee shall agree in writing, and except as otherwise agreed
to, the Trustee, upon its request, shall be entitled to be reimbursed by the
Company for any reasonable expenses, except any such expenses as may be
attributable to wilful misconduct, bad faith or negligence, or as may be
incurred due to the Trustee's breach of its representations and warranties under
the Trust Agreement.
ADMINISTRATIVE PROCEDURES
The Trustee shall administer the Trust Assets for the benefit of the
Certificateholders. Except as provided in the Trust Agreement, the Trustee shall
have full power and authority to do or cause to be done any and all things in
connection with the administration of the Pass-Through Trust which it deems
necessary to comply with the terms of the Trust Agreement.
EVENTS OF DEFAULT
An event of default with respect to the Certificates shall occur upon an
event of default under the Notes (an "Event of Default"). See "Description of
Notes -- Events of Default."
If an Event of Default occurs and continues resulting in acceleration of
the Notes, then the Trustee may vote the Notes, and upon the direction of a
majority of Certificateholders, the Trustee shall vote in favor of
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<PAGE> 24
directing the Indenture Trustee to declare the unpaid principal amount of the
Notes then outstanding and interest, if any, due and payable. Amounts paid by
the Company to the Pass-Through Trust in respect of (i) the principal amount of
and interest on the Notes will be distributed to the Certificateholders as a
Special Payment on a Special Distribution Date and (ii) the ISDA Amount, if any,
as of the date of the Event of Default will be distributed to MSCS. If in
connection with any such Event of Default the amounts paid by the Company to the
Pass-Through Trust in respect of the foregoing clauses (i) and (ii) are less
than the amounts due, the amounts received by the Pass-Through Trust will be
distributed on a pro rata basis to the Certificateholders, on the one hand, and
MSCS, on the other; provided that no such distribution shall effect the right of
the Trustee to demand and receive payment in full of all amounts due from the
Company.
VOTING RIGHTS
Each Certificateholder shall be entitled to direct the Trustee to vote a
principal amount of the Notes corresponding to the principal amount of the
Certificates held by such Certificateholder in the manner directed by the
Certificateholder (the "Voting Rights"). The Trust Agreement contains minimum
aggregate voting requirements for certain actions including, among other things,
actions by the Trustee, removal of the Trustee, amendment of the Trust Agreement
and commencement of claims under the Trust Agreement. Without the consent of all
Certificateholders, no amendment may be made to the Trust Agreement which
reduces the percentage of Voting Rights required to modify the Trust Agreement
in a way which adversely affects in any material respect the interests of
Certificateholders. See "-- Amendment of the Trust Agreement."
VOTING OF NOTES
The Trustee, as holder of the Notes, has the right to vote and give
consents and waivers in respect of the Notes and enforce such other rights of a
holder of the Notes except as otherwise limited by the Trust Agreement or the
Senior Debt Indenture. In the event that the Trustee, as holder of any Notes,
receives a request from the Company or, if applicable, any depositary with
respect to the Notes, for the Trustee's consent to any amendment, modification
or waiver of the Senior Debt Indenture, or any document thereunder, or relating
thereto, or receives any other solicitation for any action with respect to the
Notes, the Trustee shall within five Business Days mail a notice of such
proposed amendment, modification, waiver or solicitation to each
Certificateholder of record as of the date of such request. The Trustee shall
request instructions from the Certificateholders as to what action to take in
response to such request. Except as otherwise provided in the Trust Agreement,
the Trustee shall consent or vote, or refrain from consenting or voting, in the
same proportion as the Certificates were actually voted or not voted by the
holders thereof as of the date determined by the Trustee prior to the date such
vote or consent as a Certificateholder of Notes is required; provided, however,
that, the Trustee shall at no time, without the consent of each
Certificateholder, vote in favor of or consent to any matter (i) unless such
vote or consent would not, based on an opinion of counsel, alter the status of
the Pass-Through Trust as a grantor trust under the Code or result in an actual
or constructive sale or exchange of any Note for tax purposes, (ii) which would
alter the timing or amount of any payment on the Notes, or (iii) which would
result in the exchange or substitution of any Notes pursuant to a plan for the
refunding or refinancing of such Notes, and without the written consent of the
Company. The Trustee shall have no liability for any failure to act resulting
from the Certificateholders' late return of, or failure to return, directions
requested by the Trustee from the Certificateholders.
TERMINATION OF OBLIGATIONS UNDER THE PASS-THROUGH TRUST
The respective obligations of the Company and the Trustee under the Trust
Agreement which are for the benefit of Certificateholders shall cease upon the
completion of the Final Distribution to Certificateholders.
AMENDMENT OF THE TRUST AGREEMENT
The Trust Agreement may be amended from time to time by the Company and the
Trustee without notice to or the consent of any of the Certificateholders for
any of the following purposes: (i) to evidence the succession of another
corporation to the Company and the assumption by any such successor of the
covenants
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of the Company contained in the Trust Agreement; (ii) to add to the covenants,
restrictions or obligations of the Company or the Trustee; (iii) to add or
supplement any security for the benefit of any Certificateholders; (iv) to cure
any ambiguity or to correct or supplement any provision which may be defective
or inconsistent with any other provision in the Trust Agreement, the Senior Debt
Indenture or the ISDA Master Agreement or to make such other provisions as the
Company deems necessary or desirable with respect to matters or questions
arising under the Trust Agreement, provided that no such action materially
adversely affects the interests of any Certificateholders; (v) to modify,
eliminate or add to the provisions of the Trust Agreement to such extent as
shall be necessary to continue the qualification of the Trust Agreement under
the Trust Indenture Act, or under any similar federal statute hereafter enacted,
and to add such other provisions as expressly permitted by the Trust Indenture
Act, with certain exceptions; (vi) to evidence and provide for the acceptance of
appointment of a Trustee other than Wilmington Trust Company, and to add to or
change any of the provisions of the Trust Agreement as shall be necessary to
provide for or facilitate the administration of the Pass-Through Trust; (vii) to
provide certain information as to the Trustee as required under the Trust
Agreement; (viii) to modify or amend any provision of the Trust Agreement that
relates to the ISDA Master Agreement or the remarketing procedure so long as
such modification or amendment does not have a material adverse effect on the
Certificateholders; or (ix) to comply with any requirements imposed by the Code;
provided further that no such amendment referred to in the foregoing clauses (i)
through (ix) which has a material adverse effect on MSCS may be entered into
without the consent of MSCS, and no such amendment, as evidenced by an opinion
of counsel, shall alter the status of the Pass-Through Trust as a grantor trust
under the Code or result in an actual or constructive sale or exchange of any
Certificate for tax purposes. The Trustee is entitled to receive, and may rely
upon, an opinion of counsel with respect to any amendment.
The Trust Agreement also permits the Company and the Trustee, with the
consent of the Certificateholders of not less than a majority in aggregate
principal amount of the Certificates then Outstanding, to enter into agreements,
to add any provisions to, or change in any manner or eliminate any of the
provisions of, the Trust Agreement or modify in any manner the rights of the
Certificateholders; provided, however, that the Company and the Trustee may not,
without the consent of each Certificateholder affected thereby, enter into such
agreement (i) which would alter the timing or amount of any payment on the
Certificates or changes the place of payment where, or the coin or currency in
which, any Certificate is payable, or impairs the right to institute for the
enforcement of any such payment or distribution on or after the Regular
Distribution Date or Special Distribution Date applicable thereto, (ii) permits
the disposition of any Notes, except as permitted by the Trust Agreement, or
otherwise deprives the Certificateholder of the benefit of ownership of the
Notes in the Trust, (iii) reduces the percentage of the aggregate fractional
undivided interest in the Notes that is evidenced by a Certificate which is
required for any supplemental agreement which adversely affects in any material
respects the interests of the Certificateholders, or reduces such percentage
required for any waiver of compliance with certain provisions or certain
defaults of the Trust Agreement, (iv) modifies any of the provisions relating to
"supplemental agreements with consent of certificateholders" and "waiver of past
defaults" contained in the Trust Agreement, except to increase such percentage
or to provide that certain provisions cannot be waived or modified without
consent of the Certificateholder, or (v) which would result in the exchange or
substitution of any Certificates pursuant to a plan for the refunding or
refinancing of such Certificates; provided further that no amendment referred to
in the foregoing clauses (i) through (v) which has a material adverse effect on
MSCS may be entered into without the consent of MSCS and unless such vote or
consent would not, based on an opinion of counsel, alter the status of the
Pass-Through Trust as a grantor trust under the Code or result in an actual or
constructive sale or exchange of any Note for tax purposes.
REPORTS TO CERTIFICATEHOLDERS
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the Trustee shall furnish, or cause to be furnished,
to each person who at any time during such calendar year shall have been a
holder of record of Certificates and received any payment thereon, a statement
containing such information as may be required by the Code and applicable
Treasury Regulations to enable such person to prepare its federal income tax
returns.
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<PAGE> 26
MODIFICATION OF OTHER AGREEMENTS
Certain provisions of the Senior Debt Indenture and the ISDA Master
Agreement may be modified, amended or supplemented by the parties thereto
without the consent of the Certificateholders or MSCS so long as such
modification, amendment or supplement does not have a material adverse effect on
the Certificateholders or MSCS, as the case may be. See "Description of Notes --
Modification of the Senior Debt Indenture."
NOTICES TO DEPOSITARY
Whenever a notice or other communication to Certificateholders whose
ownership is evidenced by one or more Global Certificates is required under the
Trust Agreement, unless and until Definitive Certificates shall have been issued
to such Certificateholders pursuant to the Trust Agreement, the Trustee shall
give all such notices and communications specified to be given to
Certificateholders to DTC or a successor depositary, and shall have no
obligation to the Certificateholders.
REPLACEMENT CERTIFICATES
If the Trustee receives evidence of the mutilation, destruction, loss or
theft of any Certificate, and there is delivered to the Trustee such security,
indemnity or bond as it may require to hold it and any Paying Agent harmless,
and the Trustee has not received notice that such Certificate has been acquired
by a bona fide purchaser, then, upon payment by the holder of any applicable
expenses, the Trustee shall execute and authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate a
new Certificate or Certificates of like tenor, form, terms and principal amount.
GOVERNING LAW
The Trust Agreement and the Certificates will be governed by, and construed
in accordance with, the laws of the State of Delaware.
DESCRIPTION OF NOTES
The Notes will be issued as a series of securities under the Indenture
dated as of September 15, 1992, as previously supplemented and as further
supplemented by a Sixth Supplemental Indenture establishing the Notes dated as
of , 1998 between the Company and NBD Bank, as Trustee. The Indenture
and the Supplemental Indenture are hereinafter referred to collectively as the
"Senior Debt Indenture." The following summaries of certain provisions of the
Senior Debt Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Senior Debt
Indenture, including the definitions therein of certain terms. Wherever
particular defined terms of the Senior Debt Indenture are referred to, such
defined terms are incorporated herein by reference as part of the statement
made, and the statement is qualified in its entirety by such reference. Copies
of the Senior Debt Indenture are available from the Indenture Trustee upon
request.
GENERAL
The Notes will be limited in aggregate principal amount to $150,000,000.
Unless the Company redeems the Notes or the maturity of the Notes is extended
(see "Description of Certificates -- Final Distribution"), the entire principal
amount of the Notes will mature and become due and payable, together with
accrued and unpaid interest thereon, if any, on , 2005.
The Senior Debt Indenture does not limit the aggregate principal amount of
debt securities that may be issued thereunder and provides that debt securities
may be issued thereunder, from time to time, in one or more series. The Notes
and all other debt securities hereafter issued under the Senior Debt Indenture
are collectively referred to herein as the "Senior Debt Securities."
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<PAGE> 27
The Notes will be unsecured debt securities of the Company. As of September
30, 1997, the Company had outstanding approximately $1.984 billion aggregate
principal amount of indebtedness, none of which was secured. None of such
indebtedness would be senior to the Notes and the Notes will not be senior to
any such indebtedness, except that the Notes will be senior to certain
subordinated debentures in an aggregate principal amount of $178,000,000, issued
in connection with certain preferred securities of a subsidiary trust. The Notes
will rank pari passu in right of payment with all other unsecured and
unsubordinated indebtedness of the Company.
The Company is a holding company and its assets consist primarily of
investments in its subsidiaries. The Notes will be obligations exclusively of
the Company. The Company's ability to service its indebtedness, including the
Notes, 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
Notes 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 (as defined) of Notes, 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 the Company). As of September 30, 1997, the
Company's subsidiaries had total indebtedness for borrowed money (excluding
intercompany indebtedness) of approximately $2.780 billion.
INTEREST
Interest on the Notes will accrue from , 1998 and be payable in
cash on each Regular Distribution Date, commencing , 1998, at the rate
per annum set forth on the cover page of this Prospectus. Such interest will be
computed on the basis of a 360-day year of twelve 30-day months.
In any case where any interest payment date, repurchase date or maturity of
any Note shall not be a Business Day (as defined) at any place of payment, then
payment of the principal amount of, premium, if any, and interest on the Notes
need not be made at such place of payment on such date, but may be made on the
next succeeding Business Day at such place of payment with the same force and
effect as if made on the interest payment date, repurchase date or at maturity;
and no interest shall accrue on the amount so payable for the period from and
after such interest payment date, redemption date, repurchase date or maturity,
as the case may be, to such Business Day.
OPTIONAL REDEMPTION AT A PREMIUM
The Notes will be redeemable at any time, at the option of the Company, in
whole or in part, on not less than 30 nor more than 60 days' prior notice by the
Company to the Indenture Trustee, the Trustee and MSCS, at a redemption price
equal to the sum of (a) 100% of the principal amount of the Notes being
redeemed, interest, if any, thereon to the redemption date, and the Applicable
Premium if such redemption occurs on or prior to the Premium Termination Date,
plus (b) the ISDA Amount. In no event will the redemption price calculated
pursuant to the foregoing clause (a) ever be less than 100% of the principal
amount of the Notes to be redeemed plus accrued interest to the redemption date.
All payments of principal of, Applicable Premium and interest on the Notes paid
by the Company to the Pass-Through Trust with respect to a redemption in whole
will be distributed to the Certificateholders on a Special Distribution Date,
which shall be the redemption date of such Notes. The ISDA Amount will be
distributed to MSCS.
If less than all of the Notes are to be redeemed, the Trustee shall select,
in such manner as it shall deem appropriate and fair, the particular
Certificates or portions thereof representing beneficial ownership of the Notes
to be redeemed. Notice of redemption shall be given by mail not less than 20 nor
more than 60 days
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prior to the date fixed for redemption to the Holders whose Notes are to be
redeemed; provided, however, that the failure to duly give such notice by mail,
or any deficit therein, shall not affect the validity of any proceedings for the
redemption of Notes as to which there shall have been no such failure or defect.
On and after the date fixed for redemption (unless the Company shall default in
the payment of the Notes or portions thereof to be redeemed at the applicable
redemption price, interest on the Notes or the portions thereof so called for
redemption shall cease to accrue. Certificates representing beneficial ownership
of the Notes selected for partial redemption will be required to be presented to
the Trustee for cancellation. Upon such presentation, all payments of principal
of, Applicable Premium, if any, and interest on the Notes paid by the Company to
the Pass-Through Trust will be distributed to the holders of such Certificates.
The ISDA Amount will be distributed to MSCS.
The following definitions are used to determine the Applicable Premium:
"Applicable Premium" means, with respect to a Note (or portion thereof)
being redeemed at any time, the excess of (A) the present value at such time of
the principal amount of such Note (or portion thereof) being redeemed plus all
interest payments due on such Note (or portion thereof) from and after the
redemption date, which present value shall be computed using a discount rate
equal to the Treasury Rate plus 50 basis points, over (B) the principal amount
of such Note (or portion thereof) being redeemed at such time. For purposes of
this definition, the present values of interest and principal payments will be
determined in accordance with generally accepted principles of financial
analysis.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) (the
"Statistical Release") which has become publicly available at least two Business
Days prior to the redemption date or, in the case of defeasance, prior to the
date of deposit (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining average life to stated maturity of the Notes; provided, however, that
if the average life to stated maturity of the Notes is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given.
No sinking fund is provided for the Notes.
FINAL DISTRIBUTION
The Final Distribution on the Certificates, representing an amount equal to
the principal amount of and interest on the Notes, assuming the Notes had been
held until the Final Distribution Date, is expected to be made on the Final
Distribution Date. If the Yield on the Exercise Date is equal to or greater than
the reference U.S. Treasury Note yield of % used to determine the interest
rate per annum borne by the Notes as set forth on the cover page of this
Prospectus, the Notes will mature on the Final Distribution Date. If the Yield
on the Exercise Date is less than such reference U.S. Treasury Note yield, the
maturity of the Notes will be extended and, prior to the Final Distribution
Date, one of the following will occur: (a) the interest rate borne by the Notes
will be reset and the Notes will be remarketed so as to yield net proceeds in
cash at least equal to the Remarketing Proceeds which, together with the amount
payable by the Company representing interest on the Notes through the Final
Distribution Date, will be sufficient to enable the Trustee to make the Final
Distribution on the Certificates, (b) the Company will exercise its option to
redeem the Notes on the Final Distribution Date at a purchase price equal to the
principal amount of and interest on the Notes plus the ISDA Amount or (c) the
Pass-Through Trust will exercise its Put Option and require the Company to
purchase the Notes on the Final Distribution Date at a purchase price equal to
the principal amount of and interest on the Notes. In any case, the principal of
and interest on the Notes will be distributed by the Pass-Through Trust to the
Certificateholders on the Final Distribution Date. The ISDA Amount (if any) will
be distributed to MSCS.
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Final Distribution upon a Successful Remarketing
If the maturity of the Notes is extended, unless the Company exercises its
option to redeem the Notes (which the Company may exercise at any time
subsequent to the delivery of the Extension Notice and prior to the earlier of
the pricing of the remarketing and Remarketing Deadline), the interest rate
borne by the Notes will be reset in order that the Notes may be remarketed so as
to yield net proceeds in cash equal to the Remarketing Proceeds. On the Exercise
Date and once every 15 days thereafter, Morgan Stanley & Co. Incorporated (or,
subsequent to the Exercise Date, such other investment banking institution as
may be selected as the remarketing agent) will provide the Company with
non-binding indications of the interest rate, and discount or premium at which
it believes it could remarket the Notes. The Company may then, on behalf of the
Pass-Through Trust, either request that Morgan Stanley & Co. Incorporated
remarket the Notes, select another investment banking institution to remarket
the Notes or exercise the option to redeem the Notes. Regardless of whether it
has been selected to act as remarketing agent, Morgan Stanley & Co. Incorporated
shall at all times be permitted to offer to purchase the Notes bearing a reset
interest rate specified by Morgan Stanley & Co. Incorporated for net proceeds at
least equal to the Remarketing Proceeds which offer the Company and the Trustee
shall be required to accept, unless (i) any other party shall have remarketed
the Notes bearing an interest rate less than or equal to that specified by
Morgan Stanley & Co. Incorporated and for net proceeds at least equal to the
Remarketing Proceeds or (ii) the Company exercises its option to redeem all of
the Notes on the Final Distribution Date at a purchase price equal to the
principal amount of and interest on the Notes plus the ISDA Amount. Upon the
closing of any remarketing, the portion of the proceeds representing principal
of the Notes, together with the amount paid by the Company representing interest
on the Notes through the Final Distribution Date, will be deposited with the
Trustee for distribution to Certificateholders, and the portion of the proceeds
representing the ISDA Amount will be distributed to MSCS.
Final Distribution upon Optional Redemption of the Notes without Premium
If the maturity of the Notes is extended, the Company may, in lieu of
permitting the Notes to be remarketed, exercise its option to redeem all of the
Notes on the Final Distribution Date at a purchase price equal to the principal
amount of and interest on the Notes plus the ISDA Amount, but without the
Applicable Premium. The Company may exercise this option at any time subsequent
to the delivery of the Extension Notice and prior to the earlier of the pricing
of the remarketing and Remarketing Deadline. The principal of and interest on
the Notes paid by the Company to the Pass-Through Trust will be distributed to
the Certificateholders on the Final Distribution Date. The ISDA Amount will be
distributed to MSCS.
Final Distribution upon Exercise by the Trustee of Put Option
If the maturity of the Notes is extended and for any reason the Trustee
does not receive an amount in cash equal to the principal amount of and interest
on the Notes by the Remarketing Deadline, the Pass-Through Trust will be deemed
to have exercised its Put Option and required the Company to purchase the Notes
on the Final Distribution Date at a purchase price equal to the principal amount
of and interest on the Notes. All payments in respect of the Notes paid by the
Company to the Pass-Through Trust upon exercise of the Put Option will be
distributed to Certificateholders on the Final Distribution Date.
CHANGE IN CONTROL
In the event of any Change in Control, each Holder of a Note will have the
right, at such Holders option, subject to the terms and conditions of the Senior
Debt Indenture, to require the Company to repurchase all or any part of such
Holder's Note on 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 the Change in Control Purchase Price.
For details regarding notice and procedures and the definition of a Change in
Control, see "Description of Certificates -- Purchase of Certificates upon
Change in Control or Excess Proceeds Offer -- Change in Control."
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The Senior Debt Indenture requires the Company to comply with the
provisions of Regulation 14E and any other tender offer rules under the Exchange
Act which may then be applicable in connection with any offer by the Company to
purchase 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 the Company 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 antitakeover provisions. Instead, the Change in Control
purchase feature is a term contained in many similar debt offerings and the
terms of such feature result from negotiations between the Company and the
Underwriters. Management has no present intention to propose any antitakeover
measures although it is possible that the Company 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 "Description of the Trust Agreement -- Events of Default" (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.
CERTAIN COVENANTS
The Senior Debt Indenture contains the covenants described below. Certain
capitalized terms used below are defined herein under the heading "Certain
Definitions."
Limitation on Restricted Payments
Under the terms of the Senior Debt Indenture, so long as any of the Notes
are Outstanding and until senior unsecured debt of the Company is rated BBB- or
above (or an equivalent rating) by Standard & Poor's and one Other Rating
Agency, at which time the Company will be permanently released from the
provisions of this "Limitation on Restricted Payments," 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 its Capital Stock (except
dividends or distributions payable solely in its Non-Convertible Capital Stock
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), (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company, or (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity or scheduled
repayment thereof, any Subordinated Indebtedness (any such dividend,
distribution, purchase, redemption, repurchase, defeasing, other acquisition or
retirement being hereinafter referred to as a "Restricted Payment") if at the
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 May 6, 1997 would exceed
the sum of (a) $100,000,000 plus 100% of Consolidated Net Income from May 6,
1997 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 Cash Proceeds received by
the Company from the issue or sale of or contribution with respect to its
Capital Stock after May 6, 1997.
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
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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.
Limitation on Certain Liens
Under the terms of the Senior Debt Indenture, so long as any of the Notes
are outstanding, the Company shall not create, incur, assume or suffer to exist
any Lien upon or with respect to any of its property of any character, including
without limitation any shares of Capital Stock of Consumers or Enterprises,
without making effective provision whereby the Notes shall be (so long as any
such other creditor shall be so secured) equally and ratably secured. The
foregoing restrictions shall 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
the secured Indebtedness of the Company at such date shall not exceed 5% of
Consolidated Net Tangible Assets or (b) certain liens for taxes, pledges to
secure workman's compensation, other statutory obligations and Support
Obligations, certain materialmen's, mechanic's and similar liens and certain
purchase money liens.
Limitation on Asset Sales
Under the terms of the Senior Debt Indenture, so long as any of the Notes
are outstanding, the Company may not sell, transfer or otherwise dispose of any
property or assets of the Company, including Capital Stock of any Consolidated
Subsidiary, in one transaction or a series of transactions in an amount which
exceeds $50,000,000 unless the Company shall (i) apply an amount equal to such
excess Net Cash Proceeds to permanently repay Indebtedness of a Consolidated
Subsidiary or Indebtedness of the Company which is pari passu with the Notes or
(ii) invest an equal amount not so used in clause (i) in property or assets of
related business within the Application Period or (iii) make an Excess Proceeds
Offer. The Company shall only be required to make an Excess Proceeds Offer to
purchase Notes from Holders pursuant to subsection (iii) if the Excess Proceeds
equal or exceed $25,000,000 at any given time.
The procedures to be followed by the Company in making an Excess Proceeds
Offer, and for the acceptance of such offer by the Holders, shall be the same as
those set forth above in " Description of Certificates -- Purchase of
Certificates upon Change in Control or Excess Proceeds Offer" with respect to a
Change in Control.
Limitation on Consolidation, Merger, Sale or Conveyance of Assets
The Senior Debt Indenture provides that the Company may consolidate with or
merge into, or sell, lease or convey its property as an entirety or
substantially as an entirety to, any other corporation if such corporation
assumes the obligations of the Company under the Notes and the Senior Debt
Indenture and is organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia.
The Senior Debt Indenture further provides that so long as any of the Notes
are outstanding and until senior unsecured debt of the Company is rated BBB- or
above (or an equivalent rating) by Standard & Poor's and one Other Rating Agency
(at which time the Company will be permanently released from the following
restrictions), the Company shall not consolidate with or merge into any other
Person or sell, lease or convey the property of the Company in the entirety or
substantially as an entirety, unless (i) immediately after giving effect to such
transaction the Consolidated Net Worth of the surviving entity is at least equal
to the Consolidated Net Worth of the Company immediately prior to the
transaction, and (ii) after giving effect to such transaction, the surviving
entity would be entitled to incur at least one dollar of additional Indebtedness
(other than revolving Indebtedness to banks) pursuant to the first paragraph
under "--Limitation on Consolidated Indebtedness" below. Notwithstanding the
foregoing provisions, such a transaction may constitute a Change of Control as
described in "-- Purchase of Notes upon Change in Control" above and give rise
to the right of a Holder to direct the Trustee to require the Company to
repurchase all or part of such Holder's Notes.
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Limitation on Consolidated Indebtedness
Under the terms of the Senior Debt Indenture, so long as any of the Notes
are outstanding and until senior unsecured debt of the Company is rated BBB- or
above (or an equivalent rating) by Standard & Poor's and one Other Rating
Agency, at which time the Company will be permanently released from the
provisions of this "Limitation on Consolidated Indebtedness," the Company will
not, and will not permit any of its Consolidated Subsidiaries to, issue, create,
assume, guarantee, incur or otherwise become liable for (collectively, "issue"),
directly or indirectly, any Indebtedness unless 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 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 1.7 to 1.0.
The foregoing limitation is subject to exceptions for: (i) Indebtedness of
the Company to banks not to exceed $1,000,000,000 in aggregate outstanding
principal amount at any time; (ii) Indebtedness (other than Indebtedness
described in clause (i)) outstanding on the date of the Supplemental Indenture
and certain refinancings thereof; (iii) certain refinancings and Indebtedness of
the Company to a Subsidiary or by a Subsidiary to the Company; (iv) Indebtedness
of a Consolidated Subsidiary issued to acquire, develop, improve, construct or
to provide working capital for a gas, oil or electric generation, exploration,
production, distribution, storage or transmission facility and related assets,
provided that such Indebtedness is without recourse to any assets of the
Company, Consumers, Enterprises, CMS Generation, NOMECO, CMS Electric and Gas,
CMS Gas Transmission and Storage, CMS MST or any other Designated Enterprises
Subsidiary; (v) Indebtedness of a Person existing at the time at which such
Person became a Subsidiary and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary; (vi) Indebtedness issued by
the Company not to exceed $150,000,000 in aggregate outstanding principal amount
at any time; and (vii) Indebtedness of a Consolidated Subsidiary in respect of
rate reduction bonds issued to recover electric restructuring transition costs
of Consumers, provided that such Indebtedness is without recourse to the assets
of Consumers.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the Senior
Debt Indenture. Reference is made to the Senior Debt Indenture for a full
definition of all terms as well as any other capitalized terms used herein and
not otherwise defined.
"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.
"Business Day" means a day on which banking institutions in New York, New
York or Detroit, Michigan are not authorized or required by law or regulation to
close.
"Capital Lease Obligation" 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.
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"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any Preferred Stock or Letter
Stock; provided that Hybrid Preferred Securities are not considered Capital
Stock for purposes of this definition.
"CMS Electric and Gas" means CMS Electric and Gas Company, a Michigan
corporation and wholly owned subsidiary of Enterprises.
"CMS Gas Transmission and Storage" means CMS Gas Transmission and Storage
Company, a Michigan corporation and wholly owned subsidiary of Enterprises.
"CMS Generation" means CMS Generation Co., a Michigan corporation and
wholly owned subsidiary of Enterprises.
"CMS MST" means CMS Marketing, Services and Trading Company, a Michigan
corporation and wholly owned subsidiary of Enterprises.
"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 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 Current Liabilities" means, for any period, the aggregate
amount of liabilities of the Company and its Consolidated Subsidiaries which may
properly be classified as current liabilities (including taxes accrued as
estimated), after (i) eliminating all inter-company items between the Company
and any Consolidated Subsidiary and (ii) deducting all current maturities of
long-term Indebtedness, all as determined in accordance with generally accepted
accounting principles.
"Consolidated Indebtedness" means, for 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; provided that Consolidated Indebtedness shall not include
any subordinated debt owned by any Hybrid Preferred Securities Subsidiary.
"Consolidated Interest Expense" means, for any period, the total interest
expense in respect of Consolidated 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
bankers' 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 (a) any costs otherwise included in interest expense recognized on early
retirement of debt and (b) any interest expense in respect of any Indebtedness
of any Subsidiary of Consumers, CMS Generation, NOMECO, CMS Electric and Gas,
CMS Gas Transmission and Storage, CMS MST or any other Designated Enterprises
Subsidiary, provided that such Indebtedness is without recourse to any assets of
the Company, Consumers, Enterprises, CMS Generation, NOMECO, CMS Electric and
Gas, CMS Gas Transmission and Storage, CMS MST or any other Designated
Enterprises Subsidiary.
"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 dividend or other distribution and (B) the
Company's equity in a net loss of any such Person for such period
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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;
(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; and (iv) any net income of any Subsidiary of Consumers, CMS
Generation, NOMECO, CMS Electric and Gas, CMS Gas Transmission and Storage, CMS
MST or any other Designated Enterprises Subsidiary whose interest expense is
excluded from Consolidated Interest Expense, provided, however, that for
purposes of this clause (iv), any cash, dividends or distributions of any such
Subsidiary to the Company shall be included in calculating Consolidated Net
Income.
"Consolidated Net Tangible Assets" means, for any period, the total amount
of assets (less accumulated depreciation or amortization, allowances for
doubtful receivables, other applicable reserves and other properly deductible
items) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, and after giving effect to purchase accounting and after
deducting therefrom, to the extent otherwise included, the amounts of: (i)
Consolidated Current Liabilities; (ii) minority interests in Consolidated
Subsidiaries held by Persons other than the Company or a Restricted Subsidiary;
(iii) excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors as evidenced by Board
resolutions; (iv) any revaluation or other write-up in value of assets
subsequent to December 31, 1996, as a result of a change in the method of
valuation in accordance with generally accepted accounting principles; (v)
unamortized debt discount and expenses and other unamortized deferred charges,
goodwill, patents. trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (vi) treasury
stock; and (vii) any cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other retirement of Capital
Stock to the extent such obligation is not reflected in Consolidated Current
Liabilities.
"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.
"Consumers" means Consumers Energy Company, a Michigan corporation, all of
whose common stock is on the date hereof owned by the Company.
"Designated Enterprises Subsidiary" means any wholly owned subsidiary of
Enterprises formed after the date of the Supplemental Indenture which is
designated a Designated Enterprises Subsidiary by the Board of Directors.
"Enterprises" means CMS Enterprises Company, a Michigan corporation and
wholly owned subsidiary of the Company.
"Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable for or convertible into another security (other than Capital Stock
of such corporation that is neither Exchangeable Stock nor Redeemable Stock).
"Holder" means the Person in whose name a Note is registered in the
security register kept by the Company for that purpose. Initially such Holder
will be the Pass-Through Trust.
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"Hybrid Preferred Securities" means any preferred securities issued by a
Hybrid Preferred Securities Subsidiary, where such preferred securities have the
following characteristics: (i) such Hybrid Preferred Securities Subsidiary lends
substantially all of the proceeds from the issuance of such preferred securities
to the Company or Consumers in exchange for subordinated debt issued by the
Company or Consumers, respectively; (ii) such preferred securities contain terms
providing for the deferral of distributions corresponding to provisions
providing for the deferral of interest payments on such subordinated debt; and
(iii) the Company or Consumers (as the case may be) makes periodic interest
payments on such subordinated debt, which interest payments are in turn used by
the Hybrid Preferred Securities Subsidiary to make corresponding payments to the
holders of the Hybrid Preferred Securities.
"Hybrid Preferred Securities Subsidiary" means any business trust (or
similar entity) (i) all of the common equity interest of which is owned (either
directly or indirectly through one or more wholly owned Subsidiaries of the
Company or Consumers) at all times by the Company or Consumers, (ii) that has
been formed for the purpose of issuing Hybrid Preferred Securities and (iii)
substantially all of the assets of which consist at all times solely of
subordinated debt issued by the Company or Consumers (as the case may be) and
payments made from time to time on such subordinated debt.
"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, bankers' acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (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.
"Letter Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is intended to
reflect the separate performance of certain of the businesses or operations
conducted by such corporation or any of its subsidiaries.
"Lien" means any lien, mortgage, pledge, security interest, conditional
sale, title retention agreement or other charge or encumbrance of any kind.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the aggregate
proceeds of such Asset Sale 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 (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes
will actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of the Company and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with generally
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accepted accounting principles and (b) 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 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 other
than cash is greater than $25,000,000, 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.
"NOMECO" means CMS NOMECO Oil & Gas Co., a Michigan corporation and wholly
owned subsidiary of Enterprises.
"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; provide, 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 and any noncash amortization of debt issuance
costs, any nonrecurring, noncash charges to earnings and any negative accretion
recognition.
"Other Rating Agency" shall mean any one of Duff & Phelps Credit Rating
Co., Fitch Investors Service, L.P. or Moody's Investors Service, Inc., and any
successor to any of these organizations which is a nationally recognized
statistical rating organization.
"Paying Agent" means any person authorized by the Company to pay the
principal of, Applicable Premium, if any, or interest on any of the Notes on
behalf of the Company. Initially, the Paying Agent is the Indenture Trustee.
"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; provided that Hybrid Preferred Securities are not considered
Preferred Stock for purposes of this definition.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
is required to be redeemed prior to the first anniversary of the stated maturity
of the outstanding Notes or is redeemable at the option of the Holder thereof at
any time prior to the first anniversary of the stated maturity of the
outstanding Notes.
"Restricted Subsidiary" means any Subsidiary (other than Consumers and its
subsidiaries) of the Company 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; provided that no Subsidiary may be designated a
Restricted Subsidiary if, immediately after giving effect thereto, an Event of
Default or event that, with the lapse of time or 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 one dollar of additional Indebtedness
pursuant to the first paragraph under "Description of the Notes -- Certain
Covenants -- Limitation on Consolidated Indebtedness," 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,
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(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 and (iii) such
Restricted Subsidiary must be a Consolidated Subsidiary.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division
of McGraw Hill Inc., and any successor thereto which is a nationally recognized
statistical rating organization, or if such entity shall cease to rate the Notes
or shall cease to exist and there shall be no such successor thereto, any other
nationally recognized statistical rating organization selected by the Company
which is acceptable to the Indenture Trustee.
"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the date of the Supplemental Indenture or thereafter incurred)
which is contractually subordinated or junior in right of payment to the Notes.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Support Obligations" means, for any Person, without duplication, any
financial obligation, contingent or otherwise, of such Person guaranteeing or
otherwise supporting any debt or other obligation of any other Person in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such debt or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such debt, (ii) to purchase property, securities or services for the purpose
of assuring the owner of such debt of the payment of such debt, (iii) to
maintain working capital, equity capital, available cash or other financial
statement condition of the primary obligor so as to enable the primary obligor
to pay such debt, (iv) to provide equity capital under or in respect of equity
subscription arrangements (to the extent that such obligation to provide equity
capital does not otherwise constitute debt), or (v) to perform, or arrange for
the performance of, any non-monetary obligations or non-funded debt payment
obligations of the primary obligor.
"Tax-Sharing Agreement" means the Amended and Restated Agreement for the
Allocation of Income Tax Liabilities and Benefits, dated January 1, 1994, 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).
MODIFICATION OF THE SENIOR DEBT INDENTURE
The Senior Debt Indenture permits the Company and the Indenture Trustee to
enter into supplemental indentures thereto without the consent of the Holders of
the Notes to: (a) secure the Notes, (b) evidence the assumption by a successor
corporation of the obligations of the Company under the Senior Debt Indenture
and the Notes then outstanding, (c) add covenants for the protection of the
Holders of the Notes, (d) cure any ambiguity or correct or supplement any
provision which may be defective or inconsistent with any other provision in the
Senior Debt Indenture, the ISDA Master Agreement or the Trust Agreement or to
make such other provisions as the Company deems necessary or desirable with
respect to matters or questions arising under the Senior Debt Indenture,
provided that no such action adversely affects the interests of any Holders of
the Notes, (e) establish the form and terms of any series of securities under
the Senior Debt Indenture, (f) evidence the acceptance of appointment by a
successor Indenture Trustee and (g) to modify or amend any provision of the
Notes or the Senior Debt Indenture that (i) relates to the ISDA Master Agreement
or the remarketing procedure or (ii) that is effective only from and after the
remarketing of the Notes so long as such modification or amendment does not have
a material adverse effect on the Holders of the Notes; provided that no
supplemental indenture referred to in the foregoing clauses (a) through (g)
which has a material adverse effect on MSCS may be entered into without the
consent of MSCS.
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The Senior Debt Indenture also permits the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Senior Debt Securities of all series then
outstanding and affected (voting as one class), to enter into supplemental
indentures, to add any provisions to, or change in any manner or eliminate any
of the provisions of, the Senior Debt Indenture or modify in any manner the
rights of the holders of the Senior Debt Securities of each such affected
series; provided, however, that the Company and the Indenture Trustee may not,
without the consent of the holder of each Senior Debt Security then outstanding
and affected thereby, enter into any supplemental indenture to: (a) change the
time of payment of the principal (or any installment of principal) of any Senior
Debt Security, or reduce the principal amount thereof, or reduce the rate or
change the time of payment of interest thereon, or impair the right to institute
suit for the enforcement of any payment on any Senior Debt Security when due; or
(b) reduce the percentage in principal amount of Senior Debt Securities of the
affected series, the consent of whose holders is required for any such
modification or for any waiver provided for in the Senior Debt Indenture;
provided further that no supplemental indenture referred to in the foregoing
clauses (a) and (b) which has a material adverse effect on MSCS may be entered
into without the consent of MSCS.
Prior to the acceleration of the maturity of any Senior Debt Security, the
holders of a majority in aggregate principal amount of the Senior Debt
Securities of all series at the time outstanding with respect to which a default
or Event of Default has occurred and is continuing (voting as one class) may on
behalf of the holders of any all such affected Senior Debt Securities waive any
past default or Event of Default and its consequences, except a default or an
Event of Default (i) in the payment of the principal of or interest, if any, on
any Senior Debt Security, or (ii) in respect of a covenant or provision of the
Senior Debt Indenture which cannot be modified or amended without the consent of
the holder of each Senior Debt Security affected or MSCS, as the case may be.
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The Senior Debt Indenture provides that, at the option of the Company: (a)
the Company will be discharged from any and all obligations in respect of the
Notes (except for certain obligations to register the transfer of or exchange of
the Notes, to replace stolen, lost or mutilated Notes, to maintain paying
agencies and to maintain the trust described below), or (b) the Company need not
comply with certain restrictive covenants of the Senior Debt Indenture
(including those described under "Limitation on Consolidation, Merger, Sale or
Conveyance of Assets"), in each case if the Company (i) irrevocably deposits in
trust with the Trustee money, and/or securities backed by the full faith and
credit of the United States which, through the payment of the principal thereof
and interest thereon in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of and Applicable Premium, if any,
and interest on the Notes on the Final Distribution Date and (ii) pays the ISDA
Amount, if any, to MSCS. To exercise such option, the Company is required, among
other things, to deliver to the Indenture Trustee an opinion of independent
counsel to the effect that the exercise of such option would not cause the
Holders of the Notes to recognize income, gain or loss for United States federal
income tax purposes as a result of such defeasance, and such Holders of Notes
will be subject to United States 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
had not occurred, and, in the case of a discharge as described in clause (a) of
the preceding sentence, such opinion is to be accompanied by a private letter
ruling to the same effect received from the Internal Revenue Service, a revenue
ruling to such effect pertaining to a comparable form of transaction published
by the Internal Revenue Service or appropriate evidence that since the date of
the Senior Debt Indenture there has been a change in the applicable federal
income tax law.
In the event the Company exercises its option to effect a covenant
defeasance with respect to the Notes as described in the preceding paragraph and
the Notes are thereafter declared due and payable because of the occurrence of
any Event of Default other than an Event of Default caused by failing to comply
with the covenants which are defeased, and the amount of money and securities on
deposit with the Indenture Trustee would be insufficient to pay amounts due on
the Notes at the time of the acceleration resulting from such Event of Default,
the Company would remain liable for such amounts.
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The Company may also obtain a discharge of the Senior Debt Indenture with
respect to all Senior Debt Securities then outstanding by (a) irrevocably
depositing in trust with the Trustee money, and/or securities backed by the full
faith and credit of the United States which, through the payment of the
principal amount thereof and interest thereon in accordance with their terms,
will provide money in an amount sufficient to pay the principal amount of and
interest on the Senior Debt Securities on the stated maturities thereof
(including one or more redemption dates), provided that such Senior Debt
Securities are by their terms due and payable, within one year and (b) paying
the ISDA Amount, if any, as of the date of such deposit, to MSCS. See "Certain
Federal Income Tax Considerations -- Income of Holders -- Disposition or
Retirement of the Debt Instrument."
EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the Notes
will constitute an "Event of Default": (a) default for 30 days in the payment of
any interest on any of the Notes; (b) default in the payment when due of any of
the principal amount of or Applicable Premium, if any, on any of the Notes,
whether at maturity, upon redemption, acceleration, purchase by the Company at
the option of the Holders, of the Notes; (c) default in the payment when due of
the ISDA Amount, if any, whether on the Final Distribution Date, upon
redemption, acceleration or purchase by the Company, at the option of the
Holders or otherwise; (d) default for 60 days by the Company in the observance
or performance of any other covenant or agreement contained in the Senior Debt
Indenture after written notice thereof as provided in the Senior Debt Indenture;
(e) certain events of bankruptcy, insolvency or reorganization relating to the
Company or Consumers; (f) entry of final judgments against the Company or
Consumers aggregating in excess of $25,000,000 which remain undischarged or
unbonded for 60 days; or (g) a default resulting in the acceleration of
indebtedness of the Company or Consumers in excess of $25,000,000, which
acceleration has not been rescinded or annulled within 10 days after written
notice of such default as provided in the Senior Debt Indenture.
If an Event of Default shall have occurred and be continuing, either the
Indenture Trustee or the Holders of not less than 25% in aggregate principal
amount of the Notes then outstanding may declare the principal amount of the
Notes and interest thereon to be due and payable immediately.
Upon certain conditions, any such declaration may be rescinded and annulled
if all Events of Default, other than the nonpayment of accelerated principal,
with respect to the Senior Debt Securities of all such affected series then
outstanding shall have been cured or waived as provided in the Senior Debt
Indenture by the holders of a majority in aggregate principal amount of the
Senior Debt Securities of the affected series then outstanding.
The Senior Debt Indenture provides that the Indenture Trustee will be under
no obligation to exercise any of its rights or powers under the Senior Debt
Indenture at the request, order or direction of the Holders of the Notes, unless
such Holders shall have offered to the Indenture Trustee reasonable indemnity.
Subject to such provisions for indemnity and certain other limitations contained
in the Senior Debt Indenture, the Holders of a majority in aggregate principal
amount of the Senior Debt Securities of each affected series then outstanding
(voting as one class) will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee,
or exercising any trust or power conferred on the Indenture Trustee, with
respect to the Senior Debt Securities of such affected series.
The Senior Debt Indenture provides that no holder of Senior Debt
Securities, including any Holder of Notes, may institute any action against the
Company under the Senior Debt Indenture (except actions for payment of overdue
principal, Applicable Premium or interest) unless such holder previously shall
have given to the Indenture Trustee written notice of default and continuance
thereof and unless the holders of not less than 25% in aggregate principal
amount of Senior Debt Securities of each affected series then outstanding
(voting as one class) shall have requested the Indenture Trustee to institute
such action and shall have offered the Indenture Trustee reasonable indemnity,
the Indenture Trustee shall not have instituted such action within 60 days of
such request and the Indenture Trustee shall not have received direction
inconsistent with such
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request by the Holders of a majority in aggregate principal amount of the Senior
Debt Securities of each affected series then outstanding (voting as one class).
The Senior Debt Indenture requires the Company to furnish to the Indenture
Trustee annually a statement as to the Company's compliance with all conditions
and covenants under the Senior Debt Indenture. The Senior Debt Indenture
provides that the Indenture Trustee may withhold notice to the Holders of the
Notes of any default (except defaults as to payment of principal premium or
interest on the Notes) if it considers such withholding to be in the best
interests of the Holders thereof.
Governing Law
The Senior Debt Indenture will be governed by, and construed in accordance
with, the laws of the State of Michigan.
Concerning the Indenture Trustee
NBD Bank, the Indenture Trustee under the Senior Debt Indenture, is one of
a number of banks with which the Company and its subsidiaries maintain ordinary
banking relationships, including credit facilities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof, revenue rulings, judicial decisions and existing and proposed
Treasury regulations, including final regulations concerning the tax treatment
of debt instruments issued with original issue discount (the "OID Regulations"),
changes to any of which subsequent to the date of the Prospectus may affect the
tax consequences described herein.
This summary discusses only Certificates held by Certificateholders as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a Certificateholder
in light of its particular circumstances or to Certificateholders subject to
special rules, such as certain financial institutions, insurance companies,
dealers or Certificateholders holding the Certificates as part of a hedging
transaction or straddle. In all cases, prospective investors are advised to
consult their own tax advisors regarding the federal tax consequences to them of
holding, owning and disposing of Certificates, including the advisability of
making any of the elections described below, as well as any tax consequences
arising under the law of any other taxing jurisdiction. The Pass-Through Trust
will be provided with an opinion of Shearman & Sterling, special federal income
tax counsel to the Pass-Through Trust ("Federal Tax Counsel") regarding certain
federal income tax matters discussed below. An opinion of counsel, however, is
not binding on the IRS or the courts. The Pass-Through Trust has not sought, nor
does it intend to seek, a ruling from the IRS that its positions, as reflected
in the discussion below, will be accepted by the IRS. Moreover, there are no
cases or IRS rulings on similar transactions and, as a result, there can be no
assurance that the IRS will agree with the conclusions and discussion below.
For purposes of this discussion "U.S. Person" means an individual who, for
federal income tax purposes, is a citizen or resident of the United States or a
corporation, partnership or other entity created or organized in or under the
laws of the United States, or any state thereof (other than a partnership that
is not treated as a United States Person under any applicable Treasury
regulations), an estate that is subject to U.S. federal income tax regardless of
the source of its income, or a trust if a court within the United States is able
to exercise primary supervision of the administration of the trust and one or
more U.S. Persons have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as U.S. Persons prior to such date, that elect to continue to be treated
as U.S. Persons, also will be a U.S. Person. "U.S. Owner" means a
Certificateholder that is a U.S. Person and "Non-U.S. Owner" means a
Certificateholder that is not a U.S. Person.
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CLASSIFICATION OF INVESTMENT ARRANGEMENT
The Pass-Through Trust will be classified as a grantor trust and not as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes.
INCOME OF HOLDERS
In General
For U.S. federal income tax purposes, while the characterization of the
transaction is not without doubt, Federal Tax Counsel believes that the
Certificates represent ownership of a debt instrument issued by the Company
through the Pass-Through Trust (the "Debt Instrument"). The Debt Instrument will
have an absolute maturity corresponding to the Final Distribution Date, but will
otherwise have the characteristics of the Notes, including the principal amount
of and interest rate payable on the Notes. The Debt Instrument will not contain
any of the rights associated with the ISDA Master Agreement because the
Certificateholders will have no interest in the ISDA Master Agreement. The
Certificateholders will agree by their purchase of the Certificates to treat the
Certificates as described in this paragraph.
U.S. Owners
Each U.S. Owner will be required to report on its federal income tax return
its pro rata share of the income from the Debt Instrument, including interest
income at the interest rate on the Debt Instrument, in accordance with its
method of accounting.
Original Issue Discount. The initial Certificateholders will purchase the
Debt Instrument at a discount below its principal amount. As provided in the
Code and the OID Regulations, the excess of the "stated redemption price" of the
Debt Instrument (i.e., its principal amount) over its "issue price" (defined as
the initial offering price to the public, excluding bond houses and brokers, at
which a substantial amount of the offering is sold) will be original issue
discount if such excess equals or exceeds a de minimis amount (i.e., one-quarter
of one percent of such Debt Instrument's stated redemption price multiplied by
the number of complete years to its maturity). A Debt Instrument having more
than a de minimis amount of original issue discount is referred to herein as an
"OID Debt Instrument." A U.S. Owner of a Debt Instrument with a de minimis
amount of original issue discount will include any de minimis original issue
discount in income, as capital gain, when the principal payment is made on the
Debt Instrument.
U.S. Owners are required to include original issue discount in income as it
accrues, which may be before the receipt of the cash attributable to such
income, based on a compounding of interest at a constant rate (using the
original yield to maturity of the Debt Instrument). Under these rules, U.S.
Owners generally must include in income increasingly greater amounts of original
issue discount in successive accrual periods. The OID Regulations permit U.S.
Owners to use accrual periods of any length up to one year (including daily
accrual periods) to compute accruals of original issue discount, provided each
scheduled payment of principal or interest occurs either on the first or the
last day of an accrual period.
Acquisition Premium and Market Discount. In the event that a U.S. Owner
purchases an OID Debt Instrument at an acquisition premium (i.e., at a price in
excess of its "adjusted issue price" but less than its stated redemption price),
the amount includible in income in each taxable year as original issue discount
is reduced by that portion of the excess properly allocable to such year. The
adjusted issue price is defined as the sum of the issue price of the Debt
Instrument and the aggregate amount of previously accrued original issue
discount, less any prior payments of amounts included in its stated redemption
price. Acquisition premium is allocated on a pro rata basis to each accrual of
original issue discount, so that the U.S. Owner is allowed to reduce each
accrual of original issue discount by a constant fraction.
A U.S. Owner that purchases at a "market discount" (i.e., at a price less
than the stated redemption price or, in the case of an OID Debt Instrument, the
adjusted issue price) will be required (unless such difference is less than a de
minimis amount) to treat any principal payments on, or any gain realized upon
the disposition or retirement of, the Debt Instrument as interest income to the
extent of the market discount that accrued while such U.S. Owner held such Debt
Instrument, unless the U.S. Owner elects to include such market discount in
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income on a current basis. Market discount is considered to be de minimis if it
is less than one-quarter of one percent of such Debt Instrument's stated
redemption price multiplied by the number of complete years to maturity after
the U.S. Owner acquired the Certificate. If the Debt Instrument has more than a
de minimis amount of market discount and is disposed of in a nontaxable
transaction (other than a nonrecognition transaction described in Section
1276(d) of the Code), accrued market discount will be includible as ordinary
income to the U.S. Owner as if such U.S. Owner had sold the Debt Instrument at
its then fair market value. A U.S. Owner that acquired at a market discount and
that does not elect to include market discount in income on a current basis also
may be required to defer the deduction for a portion of the interest expense on
any indebtedness incurred or continued to purchase or carry the Debt Instrument
until the deferred income is realized.
Premium. A U.S. Owner that purchases for an amount in excess of the
principal amount will be treated as having premium with respect to the Debt
Instrument in the amount of such excess. A U.S. Owner that purchases an OID Debt
Instrument at a premium is not required to include in income any original issue
discount with respect to such Debt Instrument. If a U.S. Owner makes an election
under Section 171 of the Code to treat such premium as "amortizable bond
premium," the amount of interest that must be included in such U.S. Owner's
income for such accrual period will be reduced by the portion of the premium
allocable to such period based on the Debt Instrument's yield to maturity. The
U.S. Owner may not assume that the call will be exercised and must amortize
premium to the maturity date. If the Debt Instrument is in fact called, any
unamortized premium may be deducted in the year of the call. If a U.S. Owner
makes the election under Section 171, the election also shall apply to all bonds
the interest on which is not excludible from gross income ("Fully Taxable
Bonds") held by the U.S. Owner at the beginning of the first taxable year to
which the election applies and to all such Fully Taxable Bonds thereafter
acquired by it, and is irrevocable without the consent of the IRS. If such an
election is not made, such a U.S. Owner must include the full amount of each
interest payment in income in accordance with its regular method of accounting
and will receive a tax benefit from the premium only in computing its gain or
loss upon the sale or other disposition or retirement of the Debt Instrument.
Accrual Method Election. Under the OID Regulations, a U.S. Owner is
permitted to elect to include in gross income its entire return on the Debt
Instrument (i.e., the excess of all remaining payments to be received on the
Debt Instrument over the amount paid for the Debt Instrument by such U.S. Owner)
based on the compounding of interest at a constant rate. Such an election for a
Debt Instrument with amortizable bond premium (or market discount) will result
in a deemed election for all of the U.S. Owner's debt instruments with
amortizable bond premium (or market discount) and may be revoked only with
permission of the IRS.
Disposition or Retirement of the Debt Instrument. Upon the sale, exchange
or other disposition of the Debt Instrument, or upon the retirement of the Debt
Instrument, a U.S. Owner will recognize gain or loss equal to the difference, if
any, between the amount realized upon the disposition or retirement (including
any call premium) and the U.S. Owner's tax basis in the Debt Instrument. A U.S.
Owner's tax basis for determining gain or loss on the disposition or retirement
of the Debt Instrument will be the cost of the Debt Instrument to such U.S.
Owner, increased by the amount of original issue discount and any market
discount includible in such U.S. Owner's gross income with respect to the Debt
Instrument, and decreased by the amount of any payments under the Debt
Instrument that are part of its stated redemption price and by the portion of
any premium applied to reduce interest payments as described above.
Gain or loss upon the disposition or retirement of the Debt Instrument will
be capital gain or loss, except to the extent the gain represents accrued stated
interest, original issue discount or market discount on the Debt Instrument not
previously included in gross income, to which extent such gain or loss would be
treated as ordinary income. Any capital gain or loss will be long-term capital
gain or loss if at the time of disposition or retirement the Debt Instrument has
been held for more than one year.
Depending on the circumstances, it is possible that a modification of the
terms of the Debt Instrument, including a substitution of other assets for the
Debt Instrument following a default on the Debt Instrument, would be a taxable
event to Certificateholders on which they would recognize gain or loss.
Moreover, a
41
<PAGE> 43
defeasance or discharge of the Company's obligation as a result of a deposit of
money or securities with the Indenture Trustee would be treated as an exchange
of the Debt Instrument for other property. Accordingly, Certificateholders may
be required to recognize gain or loss for federal income tax purposes upon such
exchange. In addition, such Certificateholders thereafter may be required to
recognize income from such property which could be different from the amount
that would be includible in the absence of such deposit.
Alternative Characterizations. Although Federal Tax Counsel believes that
such treatment would be inappropriate, under one possible characterization, the
Company would be treated as issuing a contingent payment debt instrument to the
Pass-Through Trust with the following terms: (i) a principal amount equal to the
principal amount of the Notes, (ii) noncontingent interest payments at the rate
of interest payable on the Notes and a contingent interest payment in an amount
equal to the amount due under the ISDA Master Agreement and (iii) an absolute
maturity corresponding to the Final Distribution Date. Under this
characterization, the Certificateholders would be treated as owning the
noncontingent portion of such debt instrument, which portion would be treated as
a "stripped" debt instrument under Section 1286 of the Code. The
Certificateholders would not be taxed on the contingent portion of the debt
instrument corresponding to the amount due under the ISDA Master Agreement,
which would be owned by and taxed to MSCS. In the case of an initial
Certificateholder, characterization of the Certificates as ownership of a
stripped debt instrument generally would not alter the tax consequences set
forth above. A subsequent Certificateholder would be treated under this
characterization as purchasing a newly-issued debt instrument, rather than as
purchasing an existing debt instrument. Consequently, any discount that would be
treated as market discount with respect to an existing debt instrument for a
subsequent Certificateholder would instead be treated as original issue
discount. As described under "Original Issue Discount" and "Acquisition Premium
and Market Discount" above, a Certificateholder must accrue original issue
discount currently, whereas market discount is accrued currently only at the
election of the Certificateholder. There may also be other differences in the
tax treatment of Certificates to a subsequent Certificateholder under this
characterization.
Under another alternative characterization, although contrary to the form
of the transaction, the Company could be treated as issuing a contingent payment
debt instrument maturing on , 2012, to the Pass-Through Trust, in
which case the Certificateholders would be treated as owning such debt
instrument and as having written a call option on such debt instrument to MSCS.
Pursuant to the call option, MSCS would be considered to have the right to
purchase the contingent payment debt instrument from the Pass-Through Trust at
100% of its principal amount on the Final Distribution Date. The contingent
payment debt instrument under this characterization would be treated as having a
principal amount equal to the principal amount of the Notes and as bearing
interest at the rate of interest payable on the Notes from the issue date
through the Final Distribution Date and at a different fixed rate of interest,
determined based on circumstances as of the Final Distribution Date, from the
Final Distribution Date through , 2012. The debt instrument also would
be treated as containing a put option that provides the Pass-Through Trust with
the right to require the Company to retire the debt instrument at 100% of its
principal amount on the Final Distribution Date. The Trustee would be deemed to
exercise the put option if MSCS does not exercise the call option. Under this
characterization, each Certificateholder would be required to allocate its
purchase price between, and separately account for, the call option and the
contingent payment debt instrument. In this regard, the income from the debt
instrument would be determined in accordance with a projected payment schedule
determined under certain Treasury regulations governing contingent payment debt
instruments. Federal Tax Counsel does not believe the characterization described
in this paragraph is an appropriate characterization of the transaction,
however, and therefore will not provide the Certificateholders with a projected
payment schedule.
Investors should consult their tax advisors regarding the alternative
characterizations set forth above.
Non-U.S. Owners
Interest. Interest (including original issue discount) on a Debt Instrument
of a Non-U.S. Owner will be subject to a 30 percent federal income and
withholding tax, unless an exemption is established. Under such certification
requirements, the Certificateholder must certify, under penalties of perjury,
that it is not a "United States person" and is the beneficial owner of the
Certificates, and must provide its name and address.
42
<PAGE> 44
Disposition or Retirement of the Debt Instrument. A Non-U.S. Owner that
does not have certain present or former connections with the United States
(e.g., holding such Non-U.S. Owner's Debt Instrument in connection with the
conduct of a trade or business within the United States or being present in the
United States for 183 days or more during a taxable year) generally will not be
subject to federal income tax, and no withholding of such tax will be required,
with respect to any gain realized upon the disposition or retirement of the Debt
Instrument.
Backup Withholding
Payments made on the Debt Instrument and proceeds from the sale of the Debt
Instrument will not be subject to a "backup" withholding tax of 31 percent
unless, in general, the Certificateholder fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code.
New Withholding Regulations
The Treasury Department has issued new regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules. The new regulations generally are effective for payments made after
December 31, 1998. Investors should consult their tax advisors regarding such
regulations.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A CERTIFICATEHOLDER'S
PARTICULAR SITUATION. CERTIFICATEHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF
THE CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER THE TAX LAWS OF THE
UNITED STATES, STATES, LOCALITIES, COUNTRIES OTHER THAN THE UNITED STATES AND
ANY OTHER TAXING JURISDICTIONS AND THE POSSIBLE EFFECTS OF CHANGES IN SUCH TAX
LAWS.
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors should consider the
state and local income tax consequences of the acquisition, ownership and
disposition of the Certificates. State and local income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in the
Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, and the
Code, impose certain restrictions on (a) employee benefit plans (as defined in
Section 3(3) of ERISA) that are subject to Title I of ERISA, (b) plans described
in Section 4975(e)(1) of the Code that are subject to Section 4975 of the Code,
including individual retirement accounts or Keogh plans, (c) any entities whose
underlying assets include "plan assets" under the Plan Asset Regulation (as
defined below) (each a "Plan") and (d) persons who have certain specified
relationships to such Plans ("Parties-in-Interest" under ERISA and "Disqualified
Persons" under the Code). Moreover, based on the reasoning of the United States
Supreme Court in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114
S. Ct. 517 (1993), an insurance company's general account may be deemed to
include assets of the Plans investing in the general account (e.g.,through the
purchase of an annuity contract). ERISA also imposes certain duties on persons
who are fiduciaries of Plans subject to ERISA, and ERISA and Section 4975 of the
Code prohibit certain transactions between a Plan and Parties-in-Interest or
Disqualified Persons with respect to such Plan.
The Department of Labor has issued a regulation (29 C.F.R. Section
2510.3-101) concerning the definition of what constitutes the assets of a Plan
(the "Plan Asset Regulation"). The Plan Asset Regulation
43
<PAGE> 45
provides that, as a general rule, the underlying assets and properties of
corporations, partnerships, trusts and certain other entities in which a Plan
purchases an "equity interest" will be deemed for purposes of ERISA and Section
4975 of the Code to be assets of the investing Plan unless certain exceptions
apply. It is likely that the Certificates offered hereby would be treated as
"equity interests" for purposes of the Plan Asset Regulation. In addition, there
can be no assurance that any of the exceptions set forth in the Plan Asset
Regulation will apply to the purchase of the Certificates.
Under the terms of the Plan Asset Regulation, if the Pass-Through Trust
were deemed to hold Plan assets by reason of a Plan's investment in a
Certificate, such Plan assets would include an undivided interest in the Notes
and any other assets of the Trust that relate to such Certificate. In such
event, the persons providing services, or exercising any discretionary authority
or control, with respect to such assets may be subject to the fiduciary
responsibility provisions of Title I of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code with respect to transactions
involving such assets. In order to avoid certain prohibited transactions that
might otherwise arise in connection with the Pass-Through trust assets, each
investing Plan, by its purchase of Certificates, will be deemed to have directed
the Trustee to purchase the Notes and to have approved all of the documents
relating to the Notes. Moreover, the Certificateholders will have the right to
direct the Trustee as to the exercise of remedies in connection with any Event
of Default.
In addition, the Company, the Trustee and the Underwriter, because of their
activities or the activities of their respective affiliates, may be considered
to be Parties-in-Interest or Disqualified Persons with respect to certain Plans.
If the Certificates are acquired by a Plan with respect to which the Company,
the Trustee or the Underwriter is a Party-in-Interest or Disqualified Person,
such transaction could be deemed to be a direct or indirect violation of the
prohibited transaction rules of ERISA and Section 4975 of the Code unless such
transaction were subject to one or more statutory or administrative exemptions
such as Prohibited Transaction Class Exemption ("PTCE") 90-1, which exempts
certain transactions involving insurance company pooled separate accounts; PTCE
91-38, which exempts certain transactions involving bank collective investment
funds; PTCE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager"; PTCE 95-60, which exempts
certain transactions involving insurance company general accounts; or PTCE
96-23, which exempts certain transactions effected on behalf of Plan by an "in-
house asset manager." Even if the conditions specified in one or more of these
exemptions are met, the scope of relief provided may not necessarily cover all
acts that might be construed as prohibited transactions.
Accordingly, each purchaser of Certificates will, by its purchase, be
deemed to have represented and warranted that either (i) no part of the assets
to be used by it to purchase and hold such Certificates constitutes the assets
of any Plan, or (ii) one or more prohibited transaction statutory or
administrative exemptions applies such that the use of such Plan assets to
purchase and hold such Certificates will not constitute a non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Code. See "Transfer Restrictions."
It should also be noted that the Small Business Job Protection Act of 1996
added new Section 401(c) of ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the Code.
Pursuant to Section 401(c), the Department of Labor is required to issue final
regulations (the "General Account Regulations") not later than December 31, 1997
with respect to insurance policies issued on or before December 31, 1998 that
are supported by an insurer's general account. The General Account Regulations
are to provide guidance on which assets held by the insurer constitute "plan
assets" for purposes of the fiduciary responsibility provisions of ERISA and
Section 4975 of the Code. Section 401(c) also provides that, except in the case
of avoidance of the General Account Regulation and actions brought by the
Secretary of Labor relating to certain breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the General Account Regulations become final, no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code may result on the basis of a claim that the assets of
the general account of an insurance company constitute the assets of any such
Plan. The Plan asset status of insurance company separate accounts is unaffected
by new Section 401(c) of ERISA, and separate account assets continue to
generally be treated as the assets of any such Plan invested in such separate
account.
44
<PAGE> 46
Prior to making an investment in the Certificates, prospective Plan
investors should consult with their legal advisers concerning the impact of
ERISA and the Code and the potential consequences of such investment with
respect to their specific circumstances. Moreover, each Plan fiduciary should
take into account, among other considerations, whether the fiduciary has the
authority to make the investment; whether the investment would constitute a
direct or indirect transaction with a Party-in-Interest or Disqualified Person;
and whether under the general fiduciary standards of investment prudence and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
45
<PAGE> 47
UNDERWRITERS
Subject to the terms and conditions contained in an Underwriting Agreement
dated , 1998 (the "Underwriting Agreement"), the Underwriters named
below (the "Underwriters") have severally agreed to purchase from the
Pass-Through Trust the respective principal amounts of the Certificates set
forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME CERTIFICATES
---- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $
Donaldson, Lufkin & Jenrette Securities Corporation.........
Goldman, Sachs & Co. .......................................
Salomon Brothers Inc .......................................
------------
Total..................................................... $150,000,000
============
</TABLE>
The Underwriters will earn a commission of $ , which constitutes
% of the principal amount of the Certificates.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Certificates is subject to approval of
certain legal matters by their counsel and to certain other conditions. The
Underwriters are obligated to take and pay for all of the Certificates if any
are taken.
The Underwriting Agreement provides that the Company and the Underwriters
will indemnify each other against certain liabilities, including liabilities
under the Securities Act, and will contribute to payments the other may be
required to make in respect thereof. Subject to certain conditions, the Company
has also agreed to indemnify the Trustee against certain civil liabilities.
The Underwriters have advised the Pass-Through Trust and the Company that
they intend to offer part of the Certificates at the offering price set forth on
the cover page of this Prospectus directly to Qualified Institutional Buyers and
to Accredited Institutional Investors and part to certain dealers at prices that
represent concessions not to exceed % of the principal amount of the
Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not to exceed % of the principal amount of the Certificates to
certain other dealers. After the initial offering of the Certificates, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
In order to facilitate the offering of the Certificates, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Certificates. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Certificates for
their own account. In addition, to cover overallotments or to stabilize the
price of the Certificates, the Underwriters may bid for, and purchase, the
Certificates in the open market. Finally, the Underwriters may reclaim selling
concessions allowed to an agent or a dealer for distributing the Certificates in
the Offering if the Underwriters repurchase previously distributed Certificates
in transactions to cover the short positions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market price of
the Certificates above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Each of Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, Goldman, Sachs & Co. and Salomon Brothers Inc and
certain of their respective affiliates have provided, and may continue to
provide, investment banking services to the Company. MSCS is a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. and an affiliate of
Morgan Stanley & Co. Incorporated.
46
<PAGE> 48
TRANSFER RESTRICTIONS
In order to qualify for the exemption from the Investment Company Act of
1940, as amended, afforded by Rule 3a-7 of the Commission thereunder, the
Certificates are being offered and sold, and may be resold, in minimum
denominations of $250,000 only (i) to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) and (ii) to a limited number of
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) ("Institutional Accredited Investors"). In
addition, as a further measure to ensure that resales will be made subject to
such limitations, the Company and the Trustee have sent an "important notice" to
DTC for retransmission to each of its participants, to the effect that sales and
resales of Certificates may only be made to Qualified Institutional Buyers and
Institutional Accredited Investors.
Accordingly, by its purchase of Certificates, each purchaser of
Certificates will be deemed to:
1. represent that it is purchasing the Certificates for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is (i) a Qualified
Institutional Buyer or (ii) an Institutional Accredited Investor;
2. agree that, if it should resell or otherwise transfer any of the
Certificates, it will do so only (i) to the Company, (ii) to a Qualified
Institutional Buyer or (iii) to an Institutional Accredited Investor;
3. agree that it will deliver to each person to whom it transfers
Certificates notice of the restrictions on transfer of such Certificates;
4. understand that the Certificates will bear a legend to the
following effect unless otherwise agreed by the Company and the Holder
hereof:
THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE CERTIFICATEHOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT
IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO THE
COMPANY, (B) TO A QUALIFIED INSTITUTIONAL BUYER, OR (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND;
5. agree that if it should resell or otherwise transfer any of the
Certificates, it will do so only in minimum denominations of $250,000; and
6. represent that either (i) no part of the assets to be used by it to
purchase and hold the Certificates constitutes the assets of any Plan or
(ii) one or more prohibited transaction statutory or administrative
exemptions applies such that the use of such Plan assets to purchase and
hold such Certificates will not constitute a non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code.
LEGAL MATTERS
Certain legal matters with respect to the Certificates and the Notes will
be passed upon for CMS Energy by Michael D. VanHemert, Assistant General Counsel
for CMS Energy. Certain other legal matters will be passed upon by Shearman &
Sterling and by Reid & Priest LLP, both of which are acting as counsel for the
Underwriters. Certain matters of Delaware law relating to the validity of the
Certificates offered hereby will be passed upon for the Pass-Through Trust by
Richards, Layton & Finger, special Delaware counsel to the Pass-Through Trust.
Michael D. VanHemert and Shearman & Sterling will rely on the opinion of
Richards, Layton
47
<PAGE> 49
& Finger as to matters relating to the validity of the Certificates under the
Trust Agreement. Reid & Priest LLP provides legal services to an affiliate of
CMS Energy and has, from time to time, provided legal services to CMS Energy.
EXPERTS
The consolidated financial statements and schedules of CMS Energy as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996 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, June 30, and September 30, 1996 and 1997, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports
thereon state that they did not audit and they did not express an opinion on
that interim consolidated financial information. Accordingly, the degree of
reliance on their reports on that information should be restricted in light of
the limited nature of the review procedures applied. In addition, the
accountants are not subject to the liability provisions of Section 11 of the
Securities Act of 1933, as amended ("Securities Act"), for their reports on the
unaudited interim consolidated financial information because these reports are
not "reports" or "part" of the registration statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities Act.
Future consolidated financial statements of 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.
AVAILABLE INFORMATION
The Pass-Through Trust has not been, and it is expected that it will not
be, required to file reports with the Commission or to deliver an annual report
to Certificateholders pursuant to the Exchange Act.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661;
and copies of such material may be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549, at prescribed rates, or through the
World Wide Web (http://www.sec.gov). The outstanding shares of CMS Energy common
stock are 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 the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
48
<PAGE> 50
[CMS ENERGY LOGO]
<PAGE> 51
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Filing fee -- Securities and Exchange Commission............ $ 44,250
Rating Agency fees.......................................... * 100,000
Trustees expenses........................................... 6,500
Printing and Engraving...................................... * 75,000
Services of counsel......................................... * 15,000
Services of independent public accountants, Arthur Andersen
LLP....................................................... * 5,000
Blue Sky fees and expenses.................................. * 12,000
Miscellaneous............................................... * 15,500
---------
Total..................................................... $ 273,250
=========
</TABLE>
- -------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following resolution was adopted by the Board of Directors of CMS
Energy on May 6, 1987:
RESOLVED: That effective March 1, 1987 the Corporation shall indemnify to
the full extent permitted by law every person (including the estate, heirs and
legal representatives of such person in the event of the decease, incompetency,
insolvency or bankruptcy of such person) who is or was a director, officer,
partner, trustee, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against all liability, costs, expenses, including attorneys'
fees, judgments, penalties, fines and amounts paid in settlement, incurred by or
imposed upon the person in connection with or resulting from any claim or any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative, investigative or of whatever nature, arising from the
person's service or capacity as, or by reason of the fact that the person is or
was, a director, officer, partner, trustee, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Such right of indemnification shall not be
deemed exclusive of any other rights to which the person may be entitled under
statute, bylaw, agreement, vote of shareholders or otherwise.
CMS Energy's Bylaws provide:
The Corporation may purchase and maintain liability insurance, to the full
extent permitted by law, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity.
Article VIII of the Articles of Incorporation reads:
A director shall not be personally liable to the Corporation or its
shareholders for monetary damages for breach of duty as a director except (i)
for a breach of the director's duty of loyalty to the Corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for a violation of
Section 551(l) of the Michigan Business Corporation Act, and (iv) any action
from which the director derived an improper personal benefit. No amendment to or
repeal of this Article VIII, and no modification to its provisions by law, shall
apply to, or have any effect upon, the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment, repeal or modification.
II-1
<PAGE> 52
Article IX of the Articles of Incorporation reads:
Each director and each officer of the Corporation shall be indemnified by
the Corporation to the fullest extent permitted by law against expenses
(including attorneys' fees), judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
defense of any proceeding in which he or she was or is a party or is threatened
to be made a party by reason of being or having been a director or an officer of
the Corporation. Such right of indemnification is not exclusive of any other
rights to which such director or officer may be entitled under any now or
thereafter existing statute, any other provision of these Articles, bylaw,
agreement, vote of shareholders or otherwise. If the Business Corporation Act of
the State of Michigan is amended after approval by the shareholders of this
Article IX to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Business Corporation Act of the State of Michigan, as so amended. Any repeal
or modification of this Article IX by the shareholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
Sections 561 through 571 of the Michigan Business Corporation Act provides
CMS Energy with the power to indemnify directors, officers, employees and agents
against certain expenses and payments, and to purchase and maintain insurance on
behalf of directors, officers, employees and agents.
Officers and directors are covered within specified monetary limits by
insurance against certain losses arising from claims made by reason of their
being directors or officers of CMS Energy or of CMS Energy's subsidiaries and
CMS Energy's officers and directors are indemnified against such losses by
reason of their being or having been directors of officers or another
corporation, partnership, joint venture, trust or other enterprise at CMS
Energy's request. In addition, CMS Energy has indemnified each of its present
directors by contracts that contain affirmative provisions essentially similar
to those in sections 561 through 571 of the Michigan Business Corporation Act
cited above.
The Trust Agreement of the Trust provides that to the fullest extent
permitted by applicable law, the Company shall indemnify and hold harmless the
Trustee from and against any loss, damage, claim, liability, penalty or
reasonable expense incurred without negligence, bad faith or wilful misconduct
on its part, arising out of or in connection with the acceptance or
administration of the Trust Agreement, including the reasonable costs and legal
fees of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties under the Trust
Agreement, except any such cost or expense as may be attributable to the
Trustee's negligence, bad faith or wilful misconduct.
ITEM 16. EXHIBIT.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
(1) -- Form of Underwriting Agreement with respect to the
Certificates
*(4)(a) -- Indenture dated as of September 15, 1992 between CMS Energy
Corporation and NBD Bank, as Trustee. (Designated in CMS
Energy's Form S-3 Registration Statement filed May 1, 1992,
File No 33-47629, as Exhibit (4)(a).)
First Supplemental Indenture dated as of October 1, 1992
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 8-K dated October 1, 1992,
File No 1-9513, as Exhibit (4).)
Second Supplemental Indenture dated as of October 1, 1992
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 8-K dated October 1, 1992,
File No. 1-9513, as Exhibit 4(a).)
Third Supplemental Indenture dated as of May 6, 1997 between
CMS Energy Corporation and NBD Bank, as Trustee. (Designated
in CMS Energy's Form 10-Q for the quarter ended March 31,
1997, File No. 1-9513, as Exhibit (4).)
</TABLE>
II-2
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
Fourth Supplemental Indenture dated as of September 26, 1997
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form S-3 Registration Statement
filed October 6, 1997, File No. 333-37241, as Exhibit
(4)(a).)
Fifth Supplemental Indenture dated as of November 4, 1997
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 10-Q for the quarter ended
September 30, 1997, File No. 1-9513, as Exhibit (4)(b).)
(4)(b) -- Form of Sixth Supplemental Indenture to be entered into
between CMS Energy Corporation and NBD Bank, as trustee, in
connection with the Extendible Tenor Rate-Adjusted
Securities.
*(4)(c) -- Credit Agreement dated as of July 21, 1997, among CMS Energy
Corporation, the Banks, the Administrative Agent, the
Collateral Agent, the Documentation Agent, the Syndication
Agent, the Co-Agents and the Lead Manager, all as defined
therein, and the Exhibits thereto. (Designated in CMS
Energy's Form 10-Q for the quarter ended June 30, 1997, File
No. 1-9513, as Exhibit (4).)
*(4)(d) -- Certificate of Trust of CMS Energy X-TRAS(SM) Pass-through
Trust I.
(4)(e) -- Form of Amended and Restated Trust Agreement of CMS Energy
X-TRAS(SM) Pass-Through Trust I.
*(4)(f) -- Restated Articles of Incorporation of CMS Energy.
(Designated in CMS Energy's Form S-4 dated June 6, 1995,
File No. 33-60007, as Exhibit 3(c).)
*(4)(g) -- By-Laws of CMS Energy. (Designated in CMS Energy's Form 10-K
for the year ended December 31, 1994, File No. 1-9513, as
Exhibit 3(c).)
*(4)(h) -- Form of Pass-Through Certificate (included in (4)(f)).
*(4)(i) -- Form of Extendible Tenor Rate-Adjusted Security (included in
(4)(b)).
*(5)(a) -- Opinion of Michael D. VanHemert, Assistant General Counsel
for CMS Energy.
*(5)(b) -- Opinion of Richards, Layton & Finger regarding the legality
of the Certificates.
*(8) -- Opinion of Shearman & Sterling regarding tax matters.
*(12) -- Statement re: computation of ratios of earnings to fixed
charges.
*(15) -- Letter regarding unaudited interim financial information.
*(23)(a) -- Consent of Michael D. VanHemert, Assistant General Counsel
for CMS Energy (included in Exhibit (5)(a) above).
*(23)(b) -- Consent of Richards, Layton & Finger (included in Exhibit
(5)(b) above).
*(23)(c) -- Consent of Shearman & Sterling (included in Exhibit (8)
above).
*(23)(d) -- Consent of Arthur Andersen LLP.
*(24) -- Powers of Attorney of Directors whose names are signed to
this registration statement pursuant to such powers.
*(25) -- Statement of Eligibility and Qualification of NBD Bank
(Trustee under the Supplemental Indenture). (Designated in
CMS Energy's Form S-3 dated December 5, 1996, File No.
333-17289, as Exhibit (25)(a).)
</TABLE>
- -------------------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by reference with the same effect as
if filed with this Registration Statement.
II-3
<PAGE> 54
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that as
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
be governed by the final adjudication of such issue.
(3) That (i) for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and (ii) for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CMS Energy
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to Form S-3 Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Dearborn, and State
of Michigan, on the 23rd day of December, 1997.
CMS ENERGY CORPORATION
By: /s/ A. M. WRIGHT
------------------------------------
Alan M. Wright
Senior Vice President,
Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Form S-3 Registration Statement has been signed below by the following
persons in their respective capacities as officers and/or directors of CMS
Energy Corporation and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
(i) Principal executive officer
/s/ WILLIAM T. MCCORMICK, JR. Chairman of the Board, Chief
- --------------------------------------- Executive Officer and Director
(William T. McCormick, Jr.) December 23, 1997
(ii) Principal financial officer
/s/ A. M. WRIGHT Senior Vice President, Chief
- --------------------------------------- Financial Officer and Treasurer
(Alan M. Wright) December 23, 1997
(iii) Controller or principal account officer
/s/ P. D. HOPPER Senior Vice President, Controller
- --------------------------------------- and Chief Accounting Officer
(Preston D. Hopper) December 23, 1997
* Director
- ---------------------------------------
(John M. Deutch) December 23, 1997
* Director
- ---------------------------------------
(James J. Duderstadt) December 23, 1997
Director
- ---------------------------------------
(Kathleen R. Flaherty) December 23, 1997
* Director
- ---------------------------------------
(Victor J. Fryling) December 23, 1997
* Director
- ---------------------------------------
(Earl D. Holton) December 23, 1997
</TABLE>
II-5
<PAGE> 56
<TABLE>
<C> <S> <C>
* Director
- ---------------------------------------
(William U. Parfet) December 23, 1997
Director
- ---------------------------------------
(Percy A. Pierre) December 23, 1997
* Director
- ---------------------------------------
(Kenneth Whipple) December 23, 1997
* Director
- ---------------------------------------
(John B. Yasinsky) December 23, 1997
*By: /s/ A. M. WRIGHT
--------------------------------
(Alan M. Wright)
Attorney-in-fact
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, CMS Energy
X-TRAS(SM) Pass-Through Trust I has duly caused this Amendment No. 1 to Form S-1
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Dearborn, State of Michigan, on the 23rd day of
December, 1997.
CMS ENERGY X-TRAS(SM) PASS-THROUGH
TRUST I
By: CMS Energy Corporation
By: /s/ A. M. WRIGHT
------------------------------------
Alan M. Wright
Senior Vice President,
Chief Financial Officer and
Treasurer
II-6
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
(1) -- Form of Underwriting Agreement with respect to the
Certificates
*(4)(a) -- Indenture dated as of September 15, 1992 between CMS Energy
Corporation and NBD Bank, as Trustee. (Designated in CMS
Energy's Form S-3 Registration Statement filed May 1, 1992,
File No 33-47629, as Exhibit (4)(a).)
First Supplemental Indenture dated as of October 1, 1992
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 8-K dated October 1, 1992,
File No 1-9513, as Exhibit (4).)
Second Supplemental Indenture dated as of October 1, 1992
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 8-K dated October 1, 1992,
File No. 1-9513, as Exhibit 4(a).)
Third Supplemental Indenture dated as of May 6, 1997 between
CMS Energy Corporation and NBD Bank, as Trustee. (Designated
in CMS Energy's Form 10-Q for the quarter ended March 31,
1997, File No. 1-9513, as Exhibit (4).)
Fourth Supplemental Indenture dated as of September 26, 1997
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form S-3 Registration Statement
filed October 6, 1997, File No. 333-37241, as Exhibit
(4)(a).)
Fifth Supplemental Indenture dated as of November 4, 1997
between CMS Energy Corporation and NBD Bank, as Trustee.
(Designated in CMS Energy's Form 10-Q for the quarter ended
September 30, 1997, File No. 1-9513, as Exhibit (4)(b).)
(4)(b) -- Form of Sixth Supplemental Indenture to be entered into
between CMS Energy Corporation and NBD Bank, as trustee, in
connection with the Extendible Tenor Rate-adjusted
Securities.
*(4)(c) -- Credit Agreement dated as of July 21, 1997, among CMS Energy
Corporation, the Banks, the Administrative Agent, the
Collateral Agent, the Documentation Agent, the Syndication
Agent, the Co-Agents and the Lead Manager, all as defined
therein, and the Exhibits thereto. (Designated in CMS
Energy's Form 10-Q for the quarter ended June 30, 1997, File
No. 1-9513, as Exhibit (4).)
*(4)(d) -- Certificate of Trust of CMS Energy X-TRAS(SM) Pass-through
Trust I.
(4)(e) -- Form of Amended and Restated Trust Agreement of CMS Energy
X-TRAS(SM) Pass-through Trust I.
*(4)(f) -- Restated Articles of Incorporation of CMS Energy.
(Designated in CMS Energy's Form S-4 dated June 6, 1995,
File No. 33-60007, as Exhibit 3(c).)
*(4)(g) -- By-Laws of CMS Energy. (Designated in CMS Energy's From 10-K
for the year ended December 31, 1994, File No. 1-9513, as
Exhibit 3(c).)
*(4)(h) -- Form of Pass-Through Certificate (included in (4)(f)).
*(4)(i) -- Form of Extendible Tenor Rate-Adjusted Security (included in
(4)(b)).
*(5)(a) -- Opinion of Michael D. VanHemert, Assistant General Counsel
for CMS Energy.
*(5)(b) -- Opinion of Richards, Layton & Finger regarding the legality
of the Certificates.
*(8) -- Opinion of Shearman & Sterling regarding tax matters.
*(12) -- Statement re: computation of ratios of earnings to fixed
charges.
*(15) -- Letter regarding unaudited interim financial information.
*(23)(a) -- Consent of Michael D. VanHemert, Assistant General Counsel
for CMS Energy (included in Exhibit (5)(a) above).
*(23)(b) -- Consent of Richards, Layton & Finger (included in Exhibit
(5)(b) above).
*(23)(c) -- Consent of Shearman & Sterling (included in Exhibit (8)
above).
*(23)(d) -- Consent of Arthur Anderson LLP.
*(24) -- Powers of Attorney of Directors whose names are signed to
this registration statement pursuant to such powers.
*(25) -- Statement of Eligibility and Qualification of NBD Bank
(Trustee under the Supplemental Indenture). (Designated in
CMS Energy's Form S-3 dated December 5, 1996, File No.
333-17289, as Exhibit (25)(a).)
</TABLE>
- -------------------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by reference with the same effect as
if filed with this Registration Statement.
<PAGE> 1
$150,000,000
CMS ENERGY CORPORATION
Pass-Through Certificates due , 2005
_____________________________________________
Underwriting Agreement
, 1998
To the Representatives named
in Schedule I hereto of the
Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
CMS Energy Corporation, a Michigan corporation (the "Company"), proposes
that the CMS Energy X-TRAS Pass-Through Trust I, a Delaware statutory business
trust (the "Pass-Through Trust"), subject to the terms and conditions stated
herein, issue and sell to the several Underwriters (as defined in Section 14
hereof) its pass-through certificates to be in the aggregate principal amount
and to mature in the year specified in Schedule III hereto (the "Certificates"),
and hereby confirms its agreement with the Underwriters as set forth herein.
The Certificates shall be issued pursuant to the Trust Agreement between
the Company and Willmington Trust Company (the "Trustee"), dated as of November
21, 1997 to be amended and restated as of ,
1998 (the "Trust Agreement"), relating to the creation and administration of
the Pass-Through Trust. The sole assets of the Pass-Through Trust from which
holders of the Certificates will receive any distributions on the Certificates
will be $150,000,000 in aggregate principal amount of the Company's __%
Extendible Tenor Rate-Adjusted Securities due , 2005 ("X-TRAS(SM)"
or the "Notes"). In addition, the Pass-Through Trust will be party to an ISDA
Master Agreement (the "ISDA Master Agreement") with Morgan Stanley Capital
Services Inc. ("MSCS"), a wholly owned subsidiary of Morgan Stanley, Dean
Witter, Discover & Co. The proceeds from the sale of the Certificates and the
amount payable by MSCS pursuant to the ISDA Master Agreement will be used by
the Pass-Through Trust to purchase the Notes at par value from the Company. The
Notes will be issued under an Indenture (the "Indenture") dated as of September
15, 1992, as supplemented by a Sixth Supplemental Indenture (the "Supplemental
Indenture") dated as of , 1998, between the Company and NBD Bank, as
Trustee (the "Indenture Trustee"). The Indenture and the Supplemental
Indenture are hereinafter referred to collectively as the "Senior Debt
Indenture." The Underwriters have designated the Representatives to execute
this Agreement on their behalf and to act for them in the manner provided in
this Agreement.
<PAGE> 2
2
Capitalized terms used but not defined herein have the meanings assigned to
them in the Trust Agreement or the Senior Debt Indenture.
The Company and the Pass-Through Trust have prepared and filed with the
Securities and Exchange Commission (the "Commission"), in accordance with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), a
combined registration statement on Form S-3 and S-1 (Registration Nos.
333-41395 and 333-41395-01) relating to the Certificates and the Notes. The
registration statement as amended at the time it became effective, including
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act, is
hereinafter referred to as the "Registration Statement"; the prospectus in the
form first used to confirm sales of Certificates (including the documents
incorporated by reference therein) is hereinafter referred to as the
"Prospectus." If the Company and the Pass-Through Trust have filed an
abbreviated registration statement to register additional Certificates and
Notes pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
The Prospectus and the Registration Statement incorporate certain reports of
the Company filed pursuant to Section 13 or 14 or 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Any reference herein to the
terms "amend," "amendment" or "supplement" with respect to the Registration
Statement or the Prospectus shall be deemed to include only amendments or
supplements to the Registration Statement or Prospectus, as the case may be,
and documents incorporated by reference therein after the date of this
Agreement and prior to the termination of the offering of the Certificates by
the Underwriters.
1. Purchase and Sale: Upon the basis of the representations and warranties
and on the terms and subject to the conditions herein set forth, the Company
agrees to cause the Pass-Through Trust to sell to the respective Underwriters,
severally and not jointly, and the respective Underwriters, severally and not
jointly, agree to purchase from the Pass-Through Trust, at the purchase price
specified in Schedule III hereto, the respective principal amounts of
Certificates set opposite their names in Schedule II hereto.
The Company is advised by the Representatives that the Underwriters propose
to make a public offering of their respective portions of the Certificates as
soon as practicable, in their judgment, after this Agreement has become
effective. The Company is further advised by the Representatives that the
Certificates are to be offered to the public initially at ____% of the
principal amount of the Certificates and to certain dealers selected by you at
a price that represents a concession not in excess of ____% of the principal
amount of the Certificates, and that any Underwriter may allow, and such
dealers may reallow, a concession not in excess of ____% of the principal
amount of the Certificates to certain other dealers.
As compensation to the Underwriters for their commitments and obligations
hereunder in respect of the Certificates, including their undertakings
to distribute certificates, the Company will pay to the Underwriters
an amount equal to that percentage of the aggregate principal amount
of the Certificates purchased by the Underwriters as set forth in Schedule
III. Such payment will be made simultaneously with the payment by you
to the Trustee of the purchase price of the Certificates as specified in
Sections 1 and 2 hereof. Payment of such compensation shall be made by wire
transfer of Federal or other immediately available funds.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated, the Company will not offer, sell, contract to sell
or otherwise issue debt securities substantially similar to the Notes for a
period from the date of the execution of this Agreement to the day of the Time
of Purchase (as hereinafter defined).
2. Payment and Delivery: The Company will cause the Pass-Through Trust to
issue and deliver against payment of the purchase price the Certificates to be
purchased by each Underwriter hereunder and to be offered and sold by the
Underwriters in the form of one or more permanent global securities in
definitive form without interest coupons (the "Global
<PAGE> 3
3
Certificates") deposited with the Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC.
Each Global Certificate shall include the legend regarding restrictions on
transfer set forth under "Transfer Restrictions" in the Prospectus. Interests
in any permanent Global Certificates will be held only in book-entry form
through DTC, except in the limited circumstances described in the Prospectus.
The Company agrees to make the Certificates available for inspection by the
Underwriters at the offices of Morgan Stanley & Co. Incorporated at least 24
hours prior to the Time of Purchase (as hereinafter defined), in definitive,
fully registered form.
Payment for the Certificates issued by the Pass-Through Trust shall be made
to Pass-Through Trust in Federal or other immediately available funds in New
York City (or such other place or places of payment as shall be agreed upon by
the Company, the Pass Through Trust and the Representatives in writing), upon
the delivery to the Trustee as custodian for DTC of the Global Certificate
representing all of the Certificates (or such other place or places of delivery
as shall be agreed upon by the Company, the Pass-Through Trust and the
Representatives). Such payment and delivery shall be made at 10:00 A.M., New
York time on , 1998 (or on such later business day as shall be
agreed upon by the Company, the Pass-Through Trust and the Representatives in
writing), unless postponed in accordance with the provisions of Section 10
hereof. The day and time at which payment and delivery for the Certificates
are to be made is herein called the "Time of Purchase."
3. Conditions of Underwriters' Obligations: The several obligations of the
Underwriters hereunder are subject to the accuracy of the warranties and
representations on the part of the Company and to the following other
conditions:
(a) That all legal proceedings to be taken in connection with the issue
and sale of the Certificates shall be reasonably satisfactory in form and
substance to Shearman & Sterling and Reid & Priest LLP, both of New York,
New York, counsel to the Underwriters.
(b) That, at the Time of Purchase, the Representatives shall be furnished
with the following opinions, dated the day of the Time of Purchase:
(1) Opinion of Michael D. VanHemert, Esq., counsel to the Company,
substantially to the effect set forth in Exhibit A to this Agreement;
(2) Opinion of Shearman & Sterling, of New York, New York, counsel to the
Underwriters, substantially to the effect set forth in Exhibit B to this
Agreement;
<PAGE> 4
4
(3) Opinion of Reid & Priest LLP, of New York, New York, counsel to the
Underwriters, substantially to the effect set forth in Exhibit C to this
Agreement; and
(4) Opinion of Richards, Layton & Finger, of Wilmington, Delaware,
counsel to the Pass-Through Trust and Wilmington Trust Company,
substantially to the effect set forth in Exhibit D to this Agreement.
(c) That on the date of the Time of Purchase the Representatives shall
have received a letter from Arthur Andersen LLP in form and substance
satisfactory to the Representatives, dated as of such date, (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and the applicable published rules and regulations of the
Commission thereunder, (ii) stating that in their opinion the financial
statements examined by them and included or incorporated by reference in the
Registration Statement complied as to form in all material respects with the
applicable accounting requirements of the Commission, including applicable
published rules and regulations of the Commission, and (iii) covering, as of
a date not more than five business days prior to the date of such letter,
such other matters as the Representatives reasonably request.
(d) That, between the date of the execution of this Agreement and the Time
of Purchase, no material and adverse change shall have occurred in the
business, properties or financial condition of the Company and its
subsidiaries (as defined in Rule 405 under the Securities Act, and hereafter
called the "Subsidiaries"), taken as a whole, which, in the judgment of the
Representatives, after reasonable inquiries on the part of the
Representatives, impairs the marketability of the Certificates (other than
changes referred to in or contemplated by the Registration Statement or the
Prospectus).
(e) That, prior to the Time of Purchase, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Securities Act by the Commission or proceedings therefor initiated or
threatened.
(f) That, at the Time of Purchase, the Company shall have delivered to the
Representatives a certificate of an executive officer of the Company to the
effect that, to the best of his knowledge, information and belief there shall
have been no material adverse change in the business, properties or financial
condition of the Company and its Subsidiaries, taken as a whole, from that
set forth in the Registration Statement or the Prospectus (other than changes
referred to in or contemplated by the Registration Statement or the
Prospectus).
(g) That the Company shall have performed such of its obligations under
this Agreement as are to be performed at or before the Time of Purchase by
the terms hereof.
<PAGE> 5
5
(h) That any additional documents or agreements reasonably requested by
the Representatives or their counsel to permit the Underwriters to perform
their obligations or permit their counsel to deliver opinions hereunder shall
have been provided to them.
(i) That between the date of the execution of this Agreement and the day
of the Time of Purchase there has been no downgrading of the investment
ratings of any of the Company's securities or of Consumers Energy Company's
first mortgage bonds by Standard & Poor's Corporation, Moody's Investors
Service, Inc. or Duff & Phelps Credit Rating Co., and neither the Company nor
Consumers Energy Company shall have been placed on "credit watch" or "credit
review" with negative implications by any of such statistical rating
organizations if any of such occurrences shall, in the reasonable judgment of
the Representatives, after reasonable inquiries on the part of the
Representatives, impair the marketability of the Certificates.
(j) That any filing of the Prospectus and any supplements thereto required
pursuant to Rule 424 under the Securities Act have been made in compliance
with Rule 424 in the time periods provided by Rule 424.
4. Conditions of the Company's Obligations: The obligations of the Company
hereunder are subject to the satisfaction of the condition set forth in Section
3(e).
5. Certain Covenants of the Company: In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To use its best efforts to cause any post-effective amendments to the
Registration Statement to become effective as promptly as possible. During
the time when a Prospectus is required to be delivered under the Securities
Act, the Company will comply so far as it is able with all requirements
imposed upon it by the Securities Act and the rules and regulations of the
Commission to the extent necessary to permit the continuance of sales of or
dealings in the Certificates in accordance with the provisions hereof and of
the Prospectus.
(b) To deliver to each of the Representatives a conformed copy of the
Registration Statement and any amendments thereto (including all exhibits
thereto) and full and complete sets of all comments of the Commission or its
staff and all responses thereto with respect to the Registration Statement
and any amendments thereto, and to furnish to the Representatives, for each
of the Underwriters, conformed copies of the Registration Statement and any
amendments thereto, without exhibits.
(c) As soon as the Company is advised thereof, the Company will advise the
Representatives and confirm the advice in writing of: (i) the effectiveness
of any amendment to the Registration Statement, (ii) any request made by the
Commission for
<PAGE> 6
6
amendments to the Registration Statement or Prospectus or for additional
information with respect thereto, (iii) the suspension of qualification of
the Certificates for sale under Blue Sky or state securities laws, and (iv)
the entry of a stop order suspending the effectiveness of the Registration
Statement or of the initiation or threat or any proceedings for that purpose
and, if such a stop order should be entered by the Commission, to make every
reasonable effort to obtain the lifting or removal thereof.
(d) To deliver to the Underwriters, without charge, as soon as
practicable, and from time to time during such period of time (not exceeding
nine months) after the date of the Prospectus as they are required by law to
deliver a prospectus, as many copies of the Prospectus (as supplemented or
amended if the Company shall have made any supplements or amendments thereto)
as the Representatives may reasonably request; and in case any Underwriter is
required to deliver a prospectus after the expiration of nine months after
the date of the Prospectus, to furnish to the Representatives, upon request,
at the expense of such Underwriter, a reasonable quantity of a supplemental
prospectus or of supplements to the Prospectus complying with Section
10(a)(3) of the Securities Act.
(e) For such period of time (not exceeding nine months) after the date of
the Prospectus as the Underwriters are required by law to deliver a
prospectus in respect of the Certificates, if any event shall have occurred
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it becomes
necessary to amend or supplement the Prospectus to comply with law, to
forthwith prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus and deliver to the Underwriters, without charge,
such number of copies thereof as may be reasonably requested.
(f) To make generally available to the Company's security holders, as soon
as practicable, an "earning statement" (which need not be audited by
independent public accountants) covering a twelve-month period commencing
after the effective date of the Registration Statement and ending not later
than 15 months thereafter, which shall comply in all material respects with
and satisfy the provisions of Section 11(a) of the Securities Act and Rule
158 under the Securities Act.
(g) To use its best efforts to qualify the Certificates for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the
Representatives may designate and to pay (or cause to be paid), or reimburse
(or cause to be reimbursed) the Underwriters and their counsel for,
reasonable filing fees and expenses in connection therewith (including the
reasonable fees and disbursements of counsel to the Underwriters and filing
fees and expenses paid and incurred prior to the date hereof), provided,
however, that the Company shall not be required to qualify to do business as
a foreign
<PAGE> 7
7
corporation or as a securities dealer or to file a general consent to service
of process or to file annual reports or to comply with any other requirements
deemed by the Company to be unduly burdensome.
(h) To pay all expenses, fees and taxes, including but not limited to the
fees and disbursements of the Trustee and the Indenture Trustee (other than
transfer taxes on sales by the respective Underwriters), in connection with
the issuance and delivery of the Certificates, except that the Company shall
be required to pay the fees and disbursements (other than disbursements
referred to in paragraph (g) of this Section 5) of Shearman & Sterling and
Reid & Priest LLP, both of New York, New York, counsel to the Underwriters,
only in the events provided in paragraph (i) of this Section 5, the
Underwriters hereby agreeing to pay such fees and disbursements in any other
event, and that except as provided in Section 5(i), the Company shall not be
responsible for any out-of-pocket expenses of the Underwriters in connection
with their services hereunder.
(i) If the Underwriters shall not take up and pay for the Certificates due
to the failure of the Company to comply with any of the conditions specified
in Section 3 hereof, or, if this Agreement shall be terminated in accordance
with the provisions of Section 11 hereof prior to the Time of Purchase, to
pay the reasonable fees and disbursements of Shearman & Sterling and Reid &
Priest LLP, counsel to the Underwriters, and, if the Underwriters shall not
take up and pay for the Certificates due to the failure of the Company to
comply with any of the conditions specified in Section 3 hereof, to reimburse
the Underwriters for their reasonable out-of-pocket expenses, in an aggregate
amount not exceeding a total of $3,000, incurred in connection with the
financing contemplated by this Agreement.
(j) Prior to the termination of the offering of the Certificates, to not
file any amendment to the Registration Statement or supplement to the
Prospectus (including the Prospectus) unless the Company has furnished the
Representatives and counsel to the Underwriters with a copy for their review
and comment a reasonable time prior to filing and has reasonably considered
any comments of the Representatives, or any such amendment or supplement to
which such counsel shall reasonably object on legal grounds in writing, after
consultation with the Representatives.
(k) To furnish the Representatives with copies of all documents required to
be filed with the Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act subsequent to the time the Registration Statement becomes
effective and prior to the termination of the offering of the Certificates.
(l) So long as may be required by law for the distribution of the
Certificates by the Underwriters or by any dealers that participate in the
distribution thereof, the Company will comply with all requirements under the
Exchange Act relating to the
<PAGE> 8
8
timely filing with the Commission of its reports pursuant to Section 13 of
the Exchange Act and of its proxy statements pursuant to Section 14 of the
Exchange Act.
6. Representations and Warranties of the Company: The Company represents
and warrants to, and agrees with, each of the Underwriters that:
(a) The Registration Statement has become effective under the Securities
Act; no stop order suspending the effectiveness of the Registration Statement
is in effect, and no proceedings for such purposes are pending before or, to
the knowledge of the Company, threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such part became
effective, did not contain and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder and (iii) the Prospectus
does not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this Section 6(b) do not apply (A) to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein or (B) to that part
of the Registration Statement that constitutes the Statement of Eligibility
and Qualification (Form T-1) under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), of the Indenture Trustee.
(c) The documents incorporated by reference in the Registration Statement,
any preliminary prospectus and the Prospectus, when they were filed (or, if
an amendment with respect to any such document was filed, when such amendment
was filed) with the Commission, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and any further documents so filed and
incorporated by reference will, when they are filed with the Commission,
conform in all material respects to the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder; none of
such documents, when it was filed (or, if an amendment with respect to any
such document was filed, when such amendment was filed), contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and no such
further document, when it is filed, will contain an untrue
<PAGE> 9
9
statement of a material fact or will omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Michigan and has
all requisite authority to own or lease its properties and conduct its
business as described in the Prospectus and to consummate the transactions
contemplated hereby, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business as
described in the Prospectus or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Each significant subsidiary
(as defined in Rule 405 under the Securities Act, and hereinafter called a
"Significant Subsidiary") of the Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has all requisite authority to own or
lease its properties and conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business as described in the
Prospectus or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
(e) The Certificates are in the form contemplated by the Trust Agreement
and the Certificates and the Trust Agreement have been duly authorized by the
Trustee. At the Time of Purchase, the Certificates and the Trust Agreement
will have been duly executed and delivered by the Trustee and, when the
Certificates are authenticated by the Trustee in the manner provided for in
the Trust Agreement and delivered against payment therefor as provided in
this Agreement, the Certificates and the Trust Agreement will constitute
valid and binding obligations of the Trustee, enforceable against the Trustee
in accordance with their terms, except to the extent that enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general principles
of equity (regardless of whether enforcement is considered in a proceeding at
law or in equity). The Certificates conform in all material respects to the
descriptions thereof in the Prospectus.
(f) Each of the Trust Agreement and the Senior Debt Indenture has been
duly authorized by the Company. At the Time of Purchase, each of the Trust
Agreement and the Senior Debt Indenture will have been duly executed and
delivered by the Company and will constitute a valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof
<PAGE> 10
10
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general principles
of equity (regardless of whether enforcement is considered in a proceeding at
law or in equity); each of the Trust Agreement and the Senior Debt Indenture
conforms in all material respects to the description thereof in the
Prospectus; and the Senior Debt Indenture has been duly qualified under the
Trust Indenture Act.
(g) The Notes are in the form contemplated by the Senior Debt Indenture
and have been duly authorized by the Company. At the Time of Purchase, the
Notes will have been duly executed and delivered by the Company and, when
authenticated by the Trustee in the manner provided for in the Senior Debt
Indenture and delivered against payment therefor as provided in this
Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity). The Notes
conform in all material respects to the descriptions thereof in the
Prospectus.
(h) This Agreement has been duly authorized, executed and delivered by the
Company.
(i) The ISDA Master Agreement has been duly authorized, executed and
delivered by the Trust, and assuming due authorization, execution and
delivery of the Agreement by MSCS, the ISDA Master Agreement constitutes the
valid and legally binding obligation of the Pass-Through Trust, enforceable
against the Trust in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity).
(j) Except for the outstanding shares of preferred stock of Consumers
Energy Company, the 8.36% Trust Originated Preferred Securities of
Consumers Power Company Financing I and the 8.20% Trust Originated Preferred
Securities of Consumers Energy Company Financing II, all of the outstanding
capital stock of each of Consumers Energy Company and CMS Enterprises Company
is owned directly or indirectly by the Company, free and clear of any
security interest, claim, lien, or other encumbrance or preemptive rights,
and (ii) there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in any of Consumers Energy Company and CMS Enterprises
Company or any contract, commitment, agreement, understanding or arrangement
of any kind relating to the issuance of any such
<PAGE> 11
11
capital stock, any such convertible or exchangeable securities or any such
rights, warrants or options.
(k) Each of the Company and its Significant Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of and
from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations
and all courts and other tribunals, to own, lease, license and use its
properties and assets and to conduct its business in the manner described in
the Prospectus, except to the extent that the failure to obtain or file would
not have a material adverse effect on the Company and its Subsidiaries, taken
as a whole.
(l) No order, license, consent, authorization or approval of, or exemption
by, or the giving of notice to, or the registration with any federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, and no filing, recording, publication or registration in
any public office or any other place, was or is now required to be obtained
by the Company to authorize its execution or delivery of, or the performance
of its obligations under, this Agreement, the Senior Debt Indenture, the
Certificates or the Notes, except such as have been obtained or may be
required under state securities or Blue Sky laws, under the Securities Act or
as referred to in the Prospectus.
(m) None of the issuance and sale of the Notes, or the execution or
delivery by the Company of, or the performance by the Company of its
obligations under, this Agreement, the Trust Agreement or the Senior Debt
Indenture did or will conflict with, result in a breach of any of the terms
or provisions of, or constitute a default or require the consent of any party
under the Company's Articles of Incorporation or by-laws, any material
agreement or instrument to which it is a party, any existing applicable law,
rule or regulation or any judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or assets, or did or
will result in the creation or imposition of any lien on the Company's
properties or assets.
(n) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry or investigation (at law or in equity or otherwise)
pending or, to the knowledge of the Company, threatened against the Company
or any Subsidiary by any governmental
<PAGE> 12
12
authority that (i) questions the validity, enforceability or performance of
the Notes, the Senior Debt Indenture, the Trust Agreement or this Agreement
or (ii) if determined adversely, is likely to have a material adverse effect
on the business or financial condition of the Company and the Subsidiaries,
taken as a whole, or materially adversely affect the ability of the Company
to perform its obligations hereunder or the consummation of the transactions
contemplated by this Agreement.
(o) There has not been any material and adverse change in the business,
properties or financial condition of the Company and its Subsidiaries, taken
as a whole, from that set forth in the Registration Statement (other than
changes referred to in or contemplated by the Registration Statement or the
Prospectus).
(p) Except as set forth in the Prospectus, no event or condition exists
that constitutes, or with the giving of notice or lapse of time or both would
constitute, a default or any breach or failure to perform by the Company or
any of its Significant Subsidiaries in any material respect under any
indenture, mortgage, loan agreement, lease or other material agreement or
instrument to which the Company or any of its Significant Subsidiaries is a
party or by which it or any of its Significant Subsidiaries, or any of their
respective properties, may be bound.
(q) Neither the Pass-Through Trust nor the Company is an "investment
company" or an entity "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
7. Representation and Warranties of Underwriters: Each Underwriter,
severally and not jointly, warrants and represents that:
(a) The information, if any, furnished in writing to the Company through
Morgan Stanley & Co. Incorporated expressly for use in the Registration
Statement and Prospectus is correct in all material respects as to such
Underwriter. Each Underwriter, in addition to other information furnished to
the Company for use in the Registration Statement and Prospectus, herewith
furnished to the Company for use in the Registration Statement and
Prospectus,the information stated herein with regard to the public offering,
if any, by such Underwriter and represents and warrants that such
information is correct in all material respects as to such Underwriter.
(b) It is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB").
(c) It will offer such Certificates only to, persons that it reasonably
believes to be (x) QIBs or (y) other institutional accredited investors (as
defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act).
(d) It will only sell Certificates in minimum denominations of $250,000.
8. Indemnification:
<PAGE> 13
13
(a) The Company agrees, to the extent permitted by law, to indemnify and
hold harmless each of the Underwriters and each person, if any, who controls
any such Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act or otherwise, and to reimburse the Underwriters and
such controlling person or persons, if any, for any legal or other expenses
incurred by them in connection with defending any action, suit or proceeding
(including governmental investigations) as provided in Section 8(c) hereof,
insofar as such losses, claims, damages, liabilities or actions, suits or
proceedings (including governmental investigations) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus as of its
issue date (if used prior to the date of the Prospectus), or, if the Prospectus
shall be amended or supplemented, in the Prospectus as so amended or
supplemented (if such Prospectus or such Prospectus as amended or supplemented
is used after the period of time referred to in Section 5(e) hereof, it shall
contain or be used with such amendments or supplements as the Company deems
necessary to comply with Section 10(a) of the Securities Act), or arise out of
or are based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any such untrue statement or alleged
untrue statement or omission or alleged omission which was made in such
preliminary prospectus, Prospectus or Registration Statement, or in the
Prospectus as so amended or supplemented, in reliance upon and in conformity
with information furnished in writing to the Company by, or through the
Representatives on behalf of, any Underwriter expressly for use therein or with
any statements in or omissions from that part of the Registration Statement
that shall constitute the Statement of Eligibility and Qualification under the
Trust Indenture Act of the Indenture Trustee under the Indenture, and except
that this indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) on account of any losses, claims, damages,
liabilities or actions, suits or proceedings arising from the sale of the
Certificates to any person if a copy of the Prospectus, as the same may then be
supplemented or amended (excluding, however, any document then incorporated or
deemed incorporated therein by reference), was not sent or given by or on
behalf of such Underwriter to such person (i) with or prior to the written
confirmation of sale involved or (ii) as soon as available after such written
confirmation, relating to an event occurring prior to the payment for and
delivery to such person of the Certificates involved in such sale, and the
omission or alleged omission or untrue statement or alleged untrue statement
was corrected in the Prospectus as supplemented or amended at such time.
The Company's indemnity agreement contained in this Section 8(a), and the
covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any
investigation made by or on behalf of any person, and shall survive the
delivery of and payment for the Certificates hereunder, and the indemnity
agreement contained in this Section 8 shall survive any termination of this
Agreement.
<PAGE> 14
14
The liabilities of the Company in this Section 8(a) are in addition to any
other liabilities of the Company under this Agreement or otherwise.
(b) Each Underwriter agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company, its
directors and such of its officers as shall have signed the Registration
Statement, each other Underwriter and each person, if any, who controls the
Company or any such other Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, to the same extent and upon
the same terms as the indemnity agreement of the Company set forth in Section
8(a) hereof, but only with respect to alleged untrue statements or omissions
made in the Registration Statement or in the Prospectus, as amended or
supplemented, (if applicable) in reliance upon and in conformity with
information furnished in writing to the Company by such Underwriter expressly
for use therein.
The indemnity agreement on the part of each Underwriter contained in this
Section 8(b) and the representations and warranties of such Underwriter
contained in this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any other person, and
shall survive the delivery of and payment for the Certificates hereunder, and
the indemnity agreement contained in this Section 8(b) shall survive any
termination of this Agreement. The liabilities of each Underwriter in Section
8(b) are in addition to any other liabilities of such Underwriter under this
Agreement or otherwise.
(c) If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as
to which indemnity may be sought under Section 8(a) or 8(b), such person (the
"Indemnified Person") shall notify the person against whom such indemnity may
be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however,
relieve the Indemnifying Person from any liability which it may have on account
of the indemnity under Section 8(a) or 8(b) if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by the
Representatives in the case of parties indemnified pursuant to Section 8(b) and
by the Company in the case of parties indemnified pursuant to Section 8(a).
Any Indemnified Person shall have the right to participate in such litigation
or proceeding and to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include (x) the Indemnifying Person and (y)
the Indemnified Person and, in the written opinion
<PAGE> 15
15
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the reasonable fees and
expenses of counsel (including disbursements) for such Indemnified Person shall
be reimbursed by the Indemnifying Person to the Indemnified Person. If there
is a conflict as described in clause (ii) above, and the Indemnified Persons
have participated in the litigation or proceeding utilizing separate counsel
whose fees and expenses have been reimbursed by the Indemnifying Person and the
Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Persons shall repay to the Indemnifying Person such fees and
expenses of such separate counsel as the Indemnifying Person shall have
reimbursed. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or
proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for
the reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.
In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the
Representatives and the Company agree that the Indemnifying Person's
obligations to pay such fees and expenses shall be conditioned upon the
following:
(1) in case separate counsel is proposed to be retained by the Indemnified
Persons pursuant to clause (ii) of the preceding paragraph, the Indemnified
Persons shall in good faith fully consult with the Indemnifying Person in
advance as to the selection of such counsel;
(2) reimbursable fees and expenses of such separate counsel shall be
detailed and supported in a manner reasonably acceptable to the Indemnifying
Person (but nothing herein shall be deemed to require the furnishing to the
Indemnifying Person of any information, including without limitation,
computer print-outs of lawyers' daily time entries, to the extent that, in
the judgment of such counsel, furnishing such information might reasonably be
expected to result in a waiver of any attorney-client privilege); and
(3) the Company and the Representatives shall cooperate in monitoring and
controlling the fees and expenses of separate counsel for Indemnified Persons
for which the Indemnifying Person is liable hereunder, and the Indemnified
Person shall use every reasonable effort to cause such separate counsel to
minimize the duplication of activities as between themselves and counsel to
the Indemnifying Person.
<PAGE> 16
16
The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees, subject to the
provisions of this Section 8, to indemnify the Indemnified Person from and
against any loss, damage, liability or expenses by reason of such settlement or
judgment. The Indemnifying Person shall not, without the prior written consent
of the Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.
9. Contribution: If the indemnification provided for in Section
8 above is unavailable to or insufficient to hold harmless an Indemnified
Person under such Section in respect of any losses, claims, damages or
liabilities (or actions, suits or proceedings (including governmental
investigations) in respect thereof) referred to therein, then each Indemnifying
Person under Section 8 shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Indemnifying Person on the one hand and
the Indemnified Person on the other from the offering of the Certificates. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each Indemnifying Person shall contribute to
such amount paid or payable by such Indemnified Person in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of each Indemnifying Person, if any, on the one hand and the Indemnified
Person on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions, suits or
proceedings (including governmental investigations) in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the total
underwriting discounts and commission received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus, bear to the
aggregate offering price of the Certificates. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
9. The amount paid or payable by an Indemnified Person as a result of the
losses, claims, damages or liabilities (or actions, suits or
<PAGE> 17
17
proceedings (including governmental proceedings) in respect thereof) referred
to above in this Section 9 shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such action, suits or proceedings (including
governmental proceedings) or claim, provided that the provisions of Section 8
have been complied with (in all material respects) in respect of any separate
counsel for such Indemnified Person. Notwithstanding the provisions of this
Section 9, no Underwriter shall be required to contribute any amount greater
than the excess of (i) the total price at which the Certificates underwritten
by it and distributed to investors were offered to investors over (ii) the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 9 to contribute are several in
proportion to their respective underwriting obligations and not joint.
The agreement with respect to contribution contained in
Section 9 hereof shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any Underwriter, and shall
survive delivery of and payment for the Certificates hereunder and any
termination of this Agreement.
10. Substitution of Underwriters: If any Underwriter under this
Agreement shall fail or refuse (otherwise than for some reason sufficient to
justify in accordance with the terms hereof, the termination of its obligations
hereunder) to purchase the Certificates which it had agreed to purchase on the
Time of Purchase, the Representatives shall immediately notify the Company and
the Representatives and the other Underwriters may, within 36 hours of the
giving of such notice, determine to purchase, or to procure one or more other
members of the National Association of Securities Dealers, Inc. ("NASD") (or,
if not members of the NASD, who are foreign banks, dealers or institutions not
registered under the Exchange Act and who agree in making sales to comply with
the NASD's Rules of Fair Practice), satisfactory to the Company, to purchase,
upon the terms herein set forth, the principal amount of Certificates which the
defaulting Underwriter had agreed to purchase. If any non-defaulting
Underwriter or Underwriters shall determine to exercise such right, the
Representatives shall give written notice to the Company of such determination
within 36 hours after the Company shall have received notice of any such
default, and thereupon the Time of Purchase shall be postponed for such period,
not exceeding three business days, as the Company shall determine. If in the
event of such a default, the Representatives shall fail to give such notice, or
shall within such 36-hour period give written notice to the Company that no
other Underwriter or Underwriters, or others, will exercise such right, then
this Agreement may be terminated by the Company, upon like notice given to the
Representatives within a further period of 36 hours. If in such case the
Company shall not elect to terminate this Agreement, it shall have the right,
irrespective of such default:
<PAGE> 18
18
(a) to require such non-defaulting Underwriters to
purchase and pay for the respective principal amounts of Certificates
which they had severally agreed to purchase hereunder, as hereinabove
provided, and, in addition, the principal amount of Certificates which
the defaulting Underwriter shall have so failed to purchase up to a
principal amount thereof equal to one-ninth (1/9) of the respective
principal amounts of Certificates which such non-defaulting
Underwriters have otherwise agreed to purchase hereunder; and/or
(b) to procure one or more other members of the NASD (or,
if not members of the NASD, who are foreign banks, dealers or
institutions not registered under the Exchange Act and who agree in
making sales to comply with the NASD's Rules of Fair Practice), to
purchase, upon the terms herein set forth, the principal amount of
Certificates which such defaulting Underwriter had agreed to purchase,
or that portion thereof which the remaining Underwriters shall not be
obligated to purchase pursuant to the foregoing clause (a).
In the event the Company shall exercise its rights under
clause (a) and/or (b) above, the Company shall give written notice thereof to
the Representatives within such further period of 36 hours, and thereupon the
Time of Purchase shall be postponed for such period, not exceeding five
business days, as the Company shall determine. In the event the Company shall
be entitled to but shall not elect to exercise its rights under clause (a)
and/or (b), the Company shall be deemed to have elected to terminate this
Agreement.
Any action taken by the Company under this Section 10 shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement. Termination by the Company under
this Section 10 shall be without any liability on the part of the Company or
any non-defaulting Underwriter.
In the computation of any period of 36 hours referred to in
this Section 9, there shall be excluded a period of 24 hours in respect of each
Saturday, Sunday or legal holiday which would otherwise be included in such
period of time.
11. Termination of Agreement: This Agreement may be terminated at
any time prior to the Time of Purchase by the Representatives, if, prior to
such time (i) trading generally in securities on the New York Stock Exchange
shall have been suspended by the Commission or the New York Stock Exchange,
(ii) trading of any securities of the Company shall have been suspended on any
exchange or over-the-counter market, (iii) a general moratorium on commercial
banking activities in New York shall have been declared by federal or New York
State authorities or (iv) there shall have occurred any outbreak or material
escalation of hostilities or any material adverse disruption in financial
markets or any other calamity or crisis, the effect of which on the financial
markets of the United States is such as to impair, in the
<PAGE> 19
19
Representatives' reasonable judgment, after having made due inquiry, the
marketability of the Certificates.
If the Representatives elect to terminate this Agreement, as
provided in this Section 11, the Representatives will promptly notify the
Company and each other Underwriter by telephone or telecopy, confirmed by
letter. If this Agreement shall not be carried out by any Underwriter for any
reason permitted hereunder, or if the sale of the Certificates to the
Underwriters as herein contemplated shall not be carried out because the
Company is not able to comply with the terms hereof, the Company shall not be
under any obligation under this Agreement and shall not be liable to any
Underwriter or to any member of any selling group for the loss of anticipated
profits from the transactions contemplated by this Agreement and the
Underwriters shall be under no liability to the Company nor be under any
liability under this Agreement to one another.
Notwithstanding the foregoing, the provisions of Sections
5(g), 5(i), 8 and 9 shall survive any termination of this Agreement.
12. Notices: All notices hereunder shall, unless otherwise
expressly provided, be in writing and be delivered at or mailed to the
following addresses or be sent by telecopy as follows: if to the Underwriters
or the Representatives, to the Representatives at the address or number, as
appropriate, designated in Schedule I hereto, and, if to the Company, to CMS
Energy Corporation, Attention: Senior Vice President - Finance, Fairlane Plaza
South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126 (Telecopy:
313-436-9548).
13. Parties in Interest: The Agreement herein set forth has been
and is made solely for the benefit of the Underwriters, the Company (including
the directors thereof and such of the officers thereof as shall have signed the
Registration Statement), and the controlling persons, if any, referred to in
Section 8 hereof, and their respective successors, assigns, executors and
administrators, and, except as expressly otherwise provided in Section 10
hereof, no other person shall acquire or have any right under or by virtue of
this Agreement.
14. Definition of Certain Terms: The term "Underwriters," as used
herein, shall be deemed to mean the several persons, firms or corporations,
named in Schedule II hereto (including the Representatives herein mentioned, if
so named), and the term "Representatives," as used herein, shall be deemed to
mean the representative or representatives designated by, or in the manner
authorized by, the Underwriters in Schedule I hereto. All obligations of the
Underwriters hereunder are several and not joint. If there shall be only one
person, firm or corporation named in Schedule I and Schedule II hereto, the
term "Underwriters" and the term "Representatives," as used herein, shall mean
such person, firm or corporation. If the firm or firms listed in Schedule I
hereto are the same as the firm or firms listed in Schedule II hereto, then the
terms "Underwriters" and "Representatives," as used herein, shall each be
deemed to refer to such firm or firms. The term "successors" as used in this
Agreement shall not include
<PAGE> 20
20
any purchaser, as such purchaser, of any of the Certificates from any of the
respective Underwriters.
15. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
16. Counterparts: This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such respective counterparts shall
together constitute one and the same instrument.
<PAGE> 21
21
If the foregoing is in accordance with your understanding,
please sign and return to us counterparts hereof, and upon the acceptance
hereof by you, this letter and such acceptance hereof shall constitute a
binding agreement between each of the Underwriters and the Company.
Very truly yours,
CMS ENERGY CORPORATION
By:___________________________________
Name:
Title:
Accepted: , 1998
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Salomon Brothers Inc
As Representatives
By Morgan Stanley & Co. Incorporated
By:_________________________________
Name:
Title:
<PAGE> 22
SCHEDULE I
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036-8293
Attention: Syndicate Desk
Telecopy: (212) 761-4305
<PAGE> 23
SCHEDULE II
Underwriters
Principal Amount
of Certificates
to Be Purchased
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . . $
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . . . .
Goldman, Sachs & Co.. . . . . . . . . . . . . . . . . . . . . . . .
Salomon Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . $150,000,000
<PAGE> 24
SCHEDULE III
Information Regarding the Certificates
1. Aggregate Principal Amount: $150,000,000
2. Final Distribution Date: , 2005
3. Purchase Price: [____]% of the Aggregate
Principal Amount
4. Underwriting discounts and commissions: 0.____%
<PAGE> 1
EXHIBIT 4(b)
SIXTH SUPPLEMENTAL INDENTURE
DATED AS OF _________ __, 1998
____________________
This Sixth Supplemental Indenture, dated as of the ____ day of
_________, 1998 between CMS Energy Corporation, a corporation duly organized
and existing under the laws of the State of Michigan (hereinafter called the
"Issuer") and having its principal office at Fairlane Plaza South, Suite 1100,
330 Town Center Drive, Dearborn, Michigan 48126, and NBD Bank, a Michigan
banking corporation (hereinafter called the "Indenture Trustee") and having its
principal Corporate Trust Office at 611 Woodward Avenue, Detroit, Michigan
48226.
WITNESSETH:
WHEREAS, the Issuer and the Indenture Trustee (formerly known as
NBD Bank, National Association) entered into an Indenture, dated as of
September 15, 1992 (the "Original Indenture"), pursuant to which one or more
series of debt securities of the Issuer (the "Securities") may be issued from
time to time; and
WHEREAS, Section 2.3 of the Original Indenture permits the terms
of any series of Securities to be established in an indenture supplemental to
the Original Indenture; and
WHEREAS, Section 8.1(e) of the Original Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Indenture
Trustee without
<PAGE> 2
2
the consent of any Holders of the Securities to establish the form and terms of
the Securities of any series; and
WHEREAS, the Issuer has requested the Indenture Trustee to join
with it in the execution and delivery of this Sixth Supplemental Indenture
in order to supplement and amend the Original Indenture by, among other
things, establishing the form and terms of a series of Securities to be
known as the Issuer's "Extendible Tenor Rate-Adjusted Securities" (the
"X-TRAS"), providing for the issuance of the X-TRAS and amending and adding
certain provisions thereof for the benefit of the Holders of the X-TRAS; and
WHEREAS, the Issuer and the Indenture Trustee desire to enter
into this Sixth Supplemental Indenture for the purposes set forth in Sections
2.3 and 8.1(e) of the Original Indenture as referred to above; and
WHEREAS, the Issuer has furnished the Indenture Trustee with a
copy of the resolutions of its Board of Directors certified by its Secretary or
Assistant Secretary authorizing the execution of this Sixth Supplemental
Indenture; and
WHEREAS, all things necessary to make this Sixth Supplemental
Indenture a valid agreement of the Issuer and the Indenture Trustee and a valid
supplement to the Original Indenture have been done,
NOW, THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
X-TRAS to be issued hereunder by holders thereof, the Issuer and the Indenture
Trustee mutually
<PAGE> 3
3
covenant and agree, for the equal and proportionate benefit of the respective
holders from time to time of the X-TRAS, as follows:
ARTICLE I
STANDARD PROVISIONS; DEFINITIONS
SECTION 1.01. Standard Provisions. The Original Indenture
together with this Sixth Supplemental Indenture and all previous indentures
supplemental thereto entered into pursuant to the applicable terms thereof are
hereinafter sometimes collectively referred to as the "Indenture." All
capitalized terms which are used herein and not otherwise defined herein are
defined in the Indenture and are used herein with the same meanings as in the
Indenture.
SECTION 1.02. Definitions. Section 1.1 of the Original
Indenture is amended to insert the new definitions applicable to the X-TRAS,
in the appropriate alphabetical sequence, as follows:
"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.
"Applicable Premium" means, with respect to X-TRAS (or portion
thereof) being redeemed at any time, the excess of (A) the present value at
such time of the principal amount of such X-TRAS (or portion thereof) being
redeemed plus all interest payments due on such X-TRAS (or portion thereof)
from and after the date of redemption, which present value shall be computed
using a discount rate equal to the
<PAGE> 4
4
Treasury Rate plus 50 basis points, over (B) the principal amount of such
X-TRAS (or portion thereof) being redeemed at such time. For purposes of this
definition, the present values of interest and principal payments will be
determined in accordance with generally accepted principles of financial
analysis.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of (x) the number of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness and
(y) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Calculation Agent" means Morgan Stanley Capital Services, Inc.,
or such other calculation agent as may be provided from time to time under the
ISDA Master Agreement. All determinations made by the Calculation Agent will
be at the sole discretion of the Calculation Agent and will, in the absence of
manifest error, be conclusive for all purposes and binding on the Issuer.
"Capital Lease Obligation" 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
<PAGE> 5
5
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
interests in (however designated) corporate stock, including any Preferred
Stock or Letter Stock; provided that Hybrid Preferred Securities are not
considered Capital Stock for purposes of this definition.
"Certificate" or "Certificates" shall have the meaning set forth
in the Pass Through Trust Agreement.
"Certificateholder" or "Certificateholders" shall have the
meaning set forth in the Pass Through Trust Agreement.
"Change in Control" means an event or series of events by which
(i) the Issuer ceases to own beneficially, directly or indirectly, at least
80% of the total voting power of all classes of Capital Stock then outstanding
of Consumers (whether arising from issuance of securities of the Issuer or
Consumers, any direct or indirect transfer of securities by the Issuer or
Consumers, any merger, consolidation, liquidation or dissolution of the Issuer
or Consumers or otherwise); (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 35% of the Voting Stock of the Issuer;
or (iii)
<PAGE> 6
6
the Issuer 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 the Issuer, in either event pursuant to a transaction in which the
outstanding Voting Stock of the Issuer is changed into or exchanged for cash,
securities, or other property, other than any such transaction in which (A) the
outstanding Voting Stock of the Issuer is changed into or exchanged for Voting
Stock of the surviving corporation and (B) the holders of the Voting Stock of
the Issuer immediately prior to such transaction retain, directly or
indirectly, substantially proportionate ownership of the Voting Stock of the
surviving corporation immediately after such transaction.
"CMS Electric and Gas" means CMS Electric and Gas Company, a
Michigan corporation and wholly-owned subsidiary of Enterprises.
"CMS Gas Transmission and Storage" means CMS Gas Transmission and
Storage Company, a Michigan corporation and wholly-owned subsidiary of
Enterprises.
"CMS Generation" means CMS Generation Co., a Michigan corporation
and wholly-owned subsidiary of Enterprises.
"CMS MST" means CMS Marketing, Services and Trading Company, a
Michigan corporation and wholly-owned subsidiary of Enterprises.
"Consolidated Assets" means, at any date of determination, the
aggregate assets of the Issuer and its Consolidated Subsidiaries determined
on a consolidated basis in accordance with generally accepted accounting
principles.
<PAGE> 7
7
"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 Current Liabilities" means, for any period, the
aggregate amount of liabilities of the Issuer and its Consolidated Subsidiaries
which may properly be classified as current liabilities (including taxes
accrued as estimated), after (i) eliminating all inter- company items between
the Issuer and any Consolidated Subsidiary and (ii) deducting all current
maturities of long-term Indebtedness, all as determined in accordance with
generally accepted accounting principles.
"Consolidated Indebtedness" means, at any date of determination,
the aggregate Indebtedness of the Issuer and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that Consolidated Indebtedness shall not
include any subordinated debt owned by any Hybrid Preferred Securities
Subsidiary.
<PAGE> 8
8
"Consolidated Interest Expense" means, for any period, the total
interest expense in respect of Consolidated Indebtedness of the Issuer 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
bankers' 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 Issuer
or any Consolidated Subsidiaries under clause (v) or (vi) of the definition of
Indebtedness, provided, however, that Consolidated Interest Expense shall
exclude (a) any costs otherwise included in interest expense recognized on
early retirement of debt and (b) any interest expense in respect of any
Indebtedness of any Subsidiary of Consumers, CMS Generation, NOMECO, CMS
Electric and Gas, CMS Gas Transmission and Storage, CMS MST or any other
Designated Enterprises Subsidiary, provided that such Indebtedness is without
recourse to any assets of the Issuer, Consumers, Enterprises, CMS Generation,
NOMECO, CMS Electric and Gas, CMS Gas Transmission and Storage, CMS MST or any
other Designated Enterprises Subsidiary.
"Consolidated Net Income" means, for any period, the net income
of the Issuer 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:
<PAGE> 9
9
(i) any net income of any Person if such Person is not a
Subsidiary, except that (A) the Issuer'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 Issuer or a Consolidated
Subsidiary as a dividend or other distribution and (B) the Issuer'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 Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any gain or loss realized upon the sale or other
disposition of any property, plant or equipment of the Issuer 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; and
(iv) any net income of any Subsidiary of Consumers, CMS
Generation, NOMECO, CMS Electric and Gas, CMS Gas Transmission and
Storage, CMS MST or any other Designated Enterprises Subsidiary whose
interest expense is excluded from Consolidated Interest Expense,
provided, however, that for purposes of this subsection (iv), any cash,
dividends or distributions of any such Subsidiary to the Issuer shall be
included in calculating Consolidated Net Income.
<PAGE> 10
10
"Consolidated Net Tangible Assets" means, for any period, the
total amount of assets (less accumulated depreciation or amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Issuer and its
Consolidated Subsidiaries, determined on a consolidated basis in accordance
with generally accepted accounting principles, and after giving effect to
purchase accounting and after deducting therefrom, to the extent otherwise
included, the amounts of: (i) Consolidated Current Liabilities; (ii) minority
interests in Consolidated Subsidiaries held by Persons other than the Issuer or
a Restricted Subsidiary; (iii) excess of cost over fair value of assets of
businesses acquired, as determined in good faith by the Board of Directors as
evidenced by Board resolutions; (iv) any revaluation or other write-up in value
of assets subsequent to December 31, 1996, as a result of a change in the
method of valuation in accordance with generally accepted accounting
principles; (v) unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses organization or developmental expenses and other
intangible items; (vi) treasury stock; and (vii) any cash set apart and held in
a sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not
reflected in Consolidated Current Liabilities.
"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
<PAGE> 11
11
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 Issuer in
accordance with generally accepted accounting principles.
"Consumers" means Consumers Energy Company, a Michigan
corporation, all of whose common stock is on the date hereof owned by the
Issuer.
"Designated Enterprises Subsidiary" means any wholly-owned
subsidiary of Enterprises formed after the date of this Sixth Supplemental
Indenture which is designated a Designated Enterprises Subsidiary by the Board
of Directors.
"Enterprises" means CMS Enterprises Company, a Michigan
corporation and wholly-owned subsidiary of the Issuer.
"Early Redemption Option" shall have the meaning set forth in
Section 7.01(b).
"Event of Default" with respect to the X-TRAS has the meaning
specified in Article V of this Sixth Supplemental Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 12
12
"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).
"Exercise Date" means the 90th day prior the Settlement Date.
"Extended Stated Maturity" shall have the meaning set forth in
Section 2.01.
"Extension Notice" shall have the meaning set forth in the Pass
Through Trust Agreement.
"Extension Option" shall have the meaning set forth in the Pass
Through Trust Agreement.
"Extension Option Buyer" means Morgan Stanley Capital Services,
Inc.
"FD Redemption Option" shall have the meaning set forth in
Section 7.01(c).
"Final Distribution" shall have the meaning set forth in the
Pass Through Trust Agreement.
"Final Distribution Date" shall have the meaning set forth in the
Pass Through Trust Agreement.
"Hybrid Preferred Securities" means any preferred securities
issued by a Hybrid Preferred Securities Subsidiary, where such preferred
securities have the following characteristics: (i) such Hybrid Preferred
Securities Subsidiary lends substantially all of the proceeds from the issuance
of such preferred securities to the Issuer or Consumers in exchange for
subordinated debt issued by the Issuer or Consumers, respectively; (ii) such
preferred securities contain terms providing for the deferral of distributions
corresponding to provisions
<PAGE> 13
13
providing for the deferral of interest payments on such subordinated
debt; and (iii) the Issuer or Consumers (as the case may be) makes periodic
interest payments on such subordinated debt, which interest payments are in
turn used by the Hybrid Preferred Securities Subsidiary to make corresponding
payments to the holders of the Hybrid Preferred Securities.
"Hybrid Preferred Securities Subsidiary" means any business trust
(or similar entity) (i) all of the common equity interest of which is owned
(either directly or indirectly through one or more wholly-owned Subsidiaries of
the Issuer or Consumers) at all times by the Issuer or Consumers, (ii) that has
been formed for the purpose of issuing Hybrid Preferred Securities and (iii)
substantially all of the assets of which consist at all times solely of
subordinated debt issued by the Issuer or Consumers (as the case may be) and
payments made from time to time on such subordinated debt.
"ISDA Amount" shall mean such amount as may be due and payable by
the Pass Through Trust under the ISDA Master Agreement under the circumstances
contemplated thereby as notified to the Issuer, the Indenture Trustee and the
Pass Through Trustee by the Calculation Agent or the Extension Option Buyer.
"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;
<PAGE> 14
14
(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, bankers' acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in clauses
(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.
"Initial Stated Maturity" means, with respect to the X-TRAS,
___________
<PAGE> 15
15
__, 200_.
"Interest Payment Date" means [_______ __,] 1998 and each
[__________ __] and [___________] in each year thereafter.
"ISDA Master Agreement" means the ISDA Master Agreement, Schedule
and Confirmation dated as of ___________ [ ], 1997 entered into by the Pass
Through Trust and the Extension Option Buyer, as amended from time to time.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Issuer or any Subsidiary against
fluctuations in interest rates.
"Letter Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is intended to reflect the separate performance of certain of the
businesses or operations conducted by such corporation or any of its
subsidiaries.
"Lien" means any lien, mortgage, pledge, security interest,
conditional sale, title retention agreement or other charge or encumbrance of
any kind.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale ,
the aggregate proceeds of such Asset Sale 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 Issuer, net of (i) brokerage commissions and other
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will
<PAGE> 16
16
actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of the Issuer and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Issuer or any Restricted Subsidiary of the Issuer as a reserve
against any liabilities associated with such Asset Sale including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with generally accepted accounting principles and (b) 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 Issuer, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees 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 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.
<PAGE> 17
17
"NOMECO" means, CMS NOMECO Oil & Gas Co., a Michigan corporation
and wholly-owned subsidiary of Enterprises.
"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
Issuer 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 and any noncash amortization of debt
issuance costs, any nonrecurring, noncash charges to earnings and any negative
accretion recognition.
"Other Rating Agency" shall mean any one of Duff & Phelps Credit
Rating Co., Fitch Investors Service, L.P. or Moody's Investors Service, Inc.,
and any successor to any of these organizations which is a nationally
recognized statistical rating organization.
"Pass Through Trust" means the CMS Energy X-TRAS(sm) Pass Through
Trust I created under the Pass Through Trust Agreement, as holder of the X-TRAS
from the Original Issue Date to the Initial Stated Maturity.
"Pass Through Trust Agreement" means the Amended and Restated
Pass Through Trust Agreement dated as of ________ __, 1998 between the Issuer
and the Pass Through Trustee.
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"Pass Through Trustee" means the Pass Through Trustee appointed
from time to time under the Pass Through Trust Agreement (which initially shall
be Wilmington Trust Company).
"Paying Agent" means any person authorized by the Issuer to pay
the principal of (and premium, if any) or interest on any of the X-TRAS on
behalf of the Issuer. Initially, the Paying Agent is the Indenture Trustee.
"Predecessor X-TRAS" of any particular X-TRAS means all previous
X-TRAS evidencing all or a portion of the same debt as that evidenced by such
particular X-TRAS; and, for the purposes of the definition, any X-TRAS
authenticated and delivered under Section 2.9 of the Indenture in exchange for
or in lieu of a mutilated, destroyed, lost or stolen X-TRAS shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen X-TRAS.
"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; provided that Hybrid Preferred Securities are not considered
Preferred Stock for purposes of this definition.
"Premium Termination Date" means the 90th day prior to the
Initial Stated Maturity.
"Put Option" shall have the meaning set forth in Section 7.02.
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"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity of the Outstanding X-TRAS or is redeemable at the option of the
holder thereof at any time prior to the first anniversary of the Stated
Maturity of the Outstanding X-TRAS.
"Reference Treasury Note Yield" means ____ %
"Remarketing Agent" means Morgan Stanley & Co. Incorporated or
such other investment banking institution as shall be selected in accordance
with Section 8.02 in connection with a remarketing of the X-TRAS.
"Remarketing Deadline" means the fifteenth day prior to the
Initial Stated Maturity or such earlier date as may be mutually agreed by the
Issuer, the Indenture Trustee, the Pass Through Trustee and the Extension
Option Buyer.
"Remarketing Procedure" shall have the meaning set forth in
Section 8.02.
"Required Remarketing Proceeds" shall have the meaning set forth
in Section 8.01.
"Restricted Subsidiary" means any Subsidiary (other than
Consumers and its subsidiaries) of the Issuer which, as of the date of the
Issuer's most recent quarterly consolidated balance sheet, constituted at least
10% of the total Consolidated Assets of the Issuer and its Consolidated
Subsidiaries and any other Subsidiary which from time to time is designated a
Restricted Subsidiary by the Board of Directors; provided that no Subsidiary may
be designated
<PAGE> 20
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a Restricted Subsidiary if, immediately after giving effect thereto, an
Event of Default or event that, with the lapse of time or giving of notice or
both, would constitute an Event of Default would exist or the Issuer and its
Restricted Subsidiaries could not incur at least one dollar of additional
Indebtedness under Section 4.03, 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 Issuer or a Restricted
Subsidiary and (iii) such Restricted Subsidiary must be a Consolidated
Subsidiary.
"Settlement Date" means the settlement date under the ISDA
Master Agreement (which is the Initial Stated Maturity).
"Standard & Poor's" shall mean Standard & Poor's Ratings Group,
a division of McGraw Hill Inc., and any successor thereto which is a
nationally recognized statistical rating organization, or if such entity
shall cease to rate the X-TRAS or shall cease to exist and there shall be no
such successor thereto, any other nationally recognized statistical rating
organization selected by the Issuer which is acceptable to the Indenture
Trustee.
"Subordinated Indebtedness" means any Indebtedness of the Issuer
(whether outstanding on the date of this Sixth Supplemental Indenture or
thereafter incurred) which is contractually subordinated or junior in right of
payment to the X-TRAS.
"Support Obligations" means, for any person, without duplication,
any financial obligation, contingent or otherwise, of such person guaranteeing
or otherwise supporting any debt or other obligation of any other person in any
manner, whether directly or indirectly, and
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including, without limitation, any obligation of such person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such debt, (ii) to purchase
property, securities or services for the purpose of assuring the owner of such
debt of the payment of such debt, (iii) to maintain working capital, equity
capital, available cash or other financial statement condition of the primary
obligor so as to enable the primary obligor to pay such debt, (iv) to provide
equity capital under or in respect of equity subscription arrangements (to the
extent that such obligation to provide equity capital does not otherwise
constitute debt), or (v) to perform, or arrange for the performance of, any
non-monetary obligations or non-funded debt payment obligations of the primary
obligor.
"Tax-Sharing Agreement" means the Amended and Restated Agreement
for the Allocation of Income Tax Liabilities and Benefits, dated January 1,
1994, as amended or supplemented from time to time, by and among Issuer, each
of the members of the Consolidated Group (as defined therein), and each of the
corporations that become members of the Consolidated Group.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) (the "Statistical Release") which has become publicly available at
least two Business Days prior to the redemption date or, in the case of
defeasance, prior to the date of deposit (or, if such Statistical Release is no
longer published, any publicly available source of similar market data)) most
nearly equal to the then remaining
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22
average life to stated maturity of the X-TRAS; provided, however, that if the
average life to stated maturity of the X-TRAS is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given.
"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).
"Yield" means the yield-to-maturity on the then current 7-year
U.S. Treasury Note as determined by linear interpolation, which shall equal the
sum of (i) 0.6 times the 5-year then current offered-side yield and (ii) 0.4
times the 10-year then current offered-side yield, in each case in respect of
the on-the-run most recently issued U.S. Treasury Notes, as published on
Telerate page 500 as of approximately [12:30 p.m.], New York City time, on the
Exercise Date. If Telerate 500 is unavailable, "Yield" means the arithmetic
mean of offered-side yields for the then current 7-year U.S. Treasury Note as
determined by linear interpolation, which shall equal the sum of (i) 0.6 times
the 5-year then current offered-side yield and (ii) 0.4 times the 10-year then
current offered-side yield, in each case in respect of the on-the-run most
recently issued U.S. Treasury Notes, without regard to highest and lowest
yields, quoted as of approximately [12:30 p.m.], New York City time, on the
Exercise Date by five primary dealers in U.S. Treasury Notes selected by the
Calculation Agent.
<PAGE> 23
23
Certain terms, used principally in Articles Three and Four of
this Sixth Supplemental Indenture, are defined in those Articles.
ARTICLE II
DESIGNATION AND TERMS OF THE X-TRAS; FORMS
SECTION 2.01. Establishment of Series. (a) There is hereby
created a series of Securities to be known and designated as the "Extendible
Tenor Rate-Adjusted Securities" and limited in aggregate principal amount
(except as contemplated in Section 2.3(f)(2) of the Indenture) to
[$150,000,000]. If the Yield on the Exercise Date is equal to or greater than
the Reference Treasury Note Yield,the X-TRAS will mature on _____________ __,
200_ (the "Initial Stated Maturity"). If the Yield on the Exercise
Date is less than the Reference Treasury Note Yield, the maturity of the X-TRAS
will be extended until ______________ __, 201_ (the "Extended Stated
Maturity").
(b) If the maturity of the X-TRAS is not extended, the X-TRAS
will bear interest from the Original Issue Date to the Initial Stated Maturity,
or from the most recent date to which interest has been paid or duly provided
for, at the rate of ____% per annum stated therein until the principal thereof
is paid or made available for payment. If the maturity of the X-TRAS is
extended until the Extended Stated Maturity, the X-TRAS will bear interest from
the date of closing of the remarketed X-TRAS or from the most recent date to
which interest has been paid or duly provided for, at such rate per annum as
may be established pursuant to Article X, until the principal thereof is paid
or made available
<PAGE> 24
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for payment. Interest will be payable semiannually on each Interest
Payment Date and at Maturity, as provided in the form of X-TRAS in Section 2.03
hereof.
(c) The Record Date referred to in Section 2.3(f)(4) of the
Indenture for the payment of the interest on any X-TRAS payable on 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 Record Date shall be the
date of Maturity.
(d) The payment of the principal of, premium (if any) and
interest on the X-TRAS shall not be secured by a security interest in any
property.
(e) The X-TRAS shall be redeemable at the option of the Issuer
as provided in Section 7.01(b) and (c) hereof. The holders of X-TRAS shall not
be entitled to any sinking fund payments. The X-TRAS shall be purchased by the
Issuer at the option of the Holders thereof as provided in Sections 3.01, 4.05
and 7.02 hereof.
(f) The X-TRAS shall not be convertible.
(g) The X-TRAS will not be subordinated to the payment of
Senior Debt.
(h) The Issuer will not pay any additional amounts on the
X-TRAS held by a Person who is not a U.S. Person in respect of any tax,
assessment or government charge withheld or deducted.
(i) The events specified in Events of Default with respect to
the X-TRAS shall include the events specified in Article Five of this Sixth
Supplemental Indenture. In addition to
<PAGE> 25
25
the covenants set forth in Article Three of the Original Indenture, the
Holders of the X-TRAS shall have the benefit of the covenants of the Issuer
set forth in Article Four hereto.
(j) In the event the maturity of the X-TRAs is extended until
the Extended Maturity Date, then, unless the Issuer exercises the FD Redemption
Option (which option the Issuer shall be entitled to exercise at any time
subsequent to the delivery of the Extension Notice and prior to the earlier of
the pricing of the remarketing and the Remarketing Deadline), the interest rate
borne by the X-TRAS will be reset in order that the X-TRAS may be remarketed so
as to yield proceeds at least sufficient to make available to the Pass Through
Trustee on the Final Distribution Date an amount in cash equal to 100% of the
principal amount thereof plus the ISDA Amount. The remarketing of the X-TRAS
will be conducted in accordance with the provisions of Article X hereof.
SECTION 2.02. Forms Generally. The X-TRAS and Indenture
Trustee's certificates of authentication shall be in substantially the form set
forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by the
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such X-TRAS, as evidenced by their
execution thereof.
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26
The definitive X-TRAS shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such X-TRAS, as evidenced by their
execution thereof.
SECTION 2.03. Form of Face of X-TRAS.
CMS ENERGY CORPORATION
____% EXTENDIBLE TENOR RATE-ADJUSTED SECURITIES ("X-TRAS(SM)")
No. ________ $__________
CMS Energy Corporation, a corporation duly organized and existing
under the laws of the State of Michigan (herein called the "Issuer", which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to _____________________, or
registered assigns, the principal sum of ____________________ Dollars on
____________ __, 200_ ("Initial Stated Maturity") or, in the event the maturity
of the X-TRAS is extended to the Extended Stated Maturity, ___________ __, 201_
and to pay interest thereon semi-annually on [______ __] and [_________ __] in
each year, (x) from [ ,] 1998 (the "Original Issue Date") or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for commencing [______ __,] 1998 at the rate of __% per annum, until
the principal hereof is paid or made available for payment on the Initial
Stated Maturity and (y) in the event the maturity
<PAGE> 27
27
of the X-TRAS is extended until the Extended Stated Maturity, from the
date of closing of the remarketed X-TRAS or from the most recent Interest
Payment Date to which interest has been paid or duly provided at such rate as
may be established pursuant to the Remarketing Procedure, until the principal
hereof is paid or made available for payment on the Extended Stated Maturity.
The amount of interest payable on any Interest Payment Date shall be computed
on the basis of a 360-day year of twelve 30-day months. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Extendible Tenor Rate-Adjusted Security ("Security") (or one or more
Predecessor X-TRAS) is registered at the close of business on the Record Date
for such interest, which shall be the first day of the calendar month in which
such Interest Payment Date occurs (whether or not a Business Day) except that
the Record Date for interest payable at the Initial Stated Maturity or Extended
Stated Maturity shall be the date of such Initial Stated Maturity or Extended
Stated Maturity. Any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the Holder on such Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor X-TRAS) is registered at the close of business on a subsequent
Record Date (which shall be not less than five Business Days prior to the date
of payment of such defaulted interest) for the payment of such defaulted
interest to be fixed by the Indenture Trustee, notice whereof shall be given to
Holders of X-TRAS not less than 15 days preceding such subsequent Record Date.
Payment of the principal of (and premium, if any) and interest,
if any, on this Security will be made at the office or agency of the Issuer
maintained for that purpose in New
<PAGE> 28
28
York, New York (the "Place of Payment"), in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Issuer payment of interest (other than interest payable at Maturity) may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or by wire transfer to an account
designated by such Person not later than ten days prior to the date of such
payment. If the date on which payment of principal or interest on this
Security becomes due is not a Business Day, then such principal or interest
shall be due and payable on the next succeeding Business Day.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Indenture Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under its corporate seal.
Dated:
CMS ENERGY CORPORATION
By:__________________________
Its:
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By:__________________________
Its:
Attest:
SECTION 2.04. Form of Reverse of Security.
This ____% Extendible Tenor Rate-Adjusted Security is one of a
duly authorized issue of securities of the Issuer (herein called the "X-TRAS"),
issued and to be issued under an Indenture, dated as of September 15, 1992, as
supplemented by certain supplemental indentures, including the Sixth
Supplemental Indenture, dated as of _______ __, 1998 (herein collectively
referred to as the "Indenture"), between the Issuer and NBD Bank, a Michigan
banking corporation (formerly known as NBD Bank, National Association), as
Indenture Trustee (herein called the "Indenture Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Indenture Trustee, the Holders of the X-TRAS and of the terms
upon which the X-TRAS are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to [$150,000,000].
The X-TRAS will be redeemable at any time, at the option of the
Issuer, in whole or in part, on any date on or prior to the Premium
Termination Date on not less than 30 nor more than 60 days' notice to the
<PAGE> 30
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Indenture Trustee, the Pass Through Trustee and the Extension Option Buyer, at
a redemption price ("Early Redemption Price") equal to the sum of (i) 100% of
the principal amount of the X-TRAS being redeemed, together with accrued
interest, if any, thereon to the Redemption Date plus the Applicable Premium
(but interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holder thereof of record at the close of
business on the relevant Record Date referred to on the face hereof all as
provided in the Indenture) plus (ii) the ISDA Amount, if any, as determined by
the Extension Option Buyer and notified to the Issuer, the Indenture Trustee
and the Pass Through Trustee [five] Business Days prior to the Redemption Date.
In no event will the Early Redemption Price calculated pursuant to the
foregoing clause (i) ever be less than 100% of the principal amount of the
X-TRAS plus accrued interest to the Redemption Date. The Notional Amount used
to determine the ISDA Amount shall be equal to the aggregate principal amount
of X-TRAS redeemed.
The following definitions are used to determine the
Applicable Premium:
"Applicable Premium" means, with respect to X-TRAS (or portion
thereof) being redeemed at any time, the excess of (A) the present value at
such time of the principal amount of such X-TRAS (or portion thereof) being
redeemed plus all interest payments due on such X-TRAS (or portion thereof) to
the date of redemption, which present value shall be computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
principal amount of such X-TRAS (or portion thereof) being redeemed at such
time. For
<PAGE> 31
31
purposes of this definition, the present values of interest and principal
payments will be determined in accordance with generally accepted principles
of financial analysis.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) (the "Statistical Release") which has become publicly available at
least two Business Days prior to the redemption date or, in the case of
defeasance, prior to the date of deposit (or, if such Statistical Release is no
longer published, any publicly available source of similar market data)) most
nearly equal to the then remaining average life to stated maturity of the
X-TRAS; provided, however, that if the average life to stated maturity of the
X-TRAS is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given.
In the event of redemption of the X-TRAS in part, new X-TRAS for
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation hereof.
If the X-TRAS are extended until the Extended Stated Maturity,
the Issuer shall have the option (the "FD Redemption Option"), in lieu of
permitting the X-TRAS to be remarketed in accordance with Section 8.01 of the
Indenture, to redeem the X-TRAS in whole on the Initial Stated Maturity
<PAGE> 32
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, by irrevocable notice given to the Indenture Trustee, the Pass Through
Trustee, the Extension Option Buyer and the Calculation Agent not later than
the Remarketing Deadline, at a redemption price, payable in cash, equal to the
sum of (i) 100% of the principal amount of the X-TRAS being redeemed together
with accrued interest, if any, thereon to the Initial Stated Maturity plus (ii)
the ISDA Amount, if any, as of the Exercise Date (as calculated by the
Calculation Agent and notified to the Issuer, the Indenture Trustee and the
Pass Through Trustee within five Business Days thereafter), which redemption
price shall be payable at the Initial Stated Maturity. The Notional Amount
used to determine the ISDA Amount shall be the aggregate principal amount of
the X-TRAS outstanding as of the Exercise Date.
If a Change in Control occurs, the Issuer shall notify the Holder
of this Security, the Indenture Trustee, the Pass Through Trustee and the
Extension Option Buyer of such occurrence and each Holder shall have the right
to require the Issuer to make a Required Repurchase of all or any part of this
Security at a Change in Control Purchase Price equal ( ) 101% of the
principal amount of the X-TRAS to be so purchased together with accrued
interest thereon to the date of repurchase plus, (in the aggregate with all
other X-TRAS repurchased pursuant to such Required Repurchase) the ISDA Amount,
if any, as of such date of repurchase as determined by the Extension Option
Buyer and notified to the Issuer, the Indenture Trustee and the Pass Through
Trustee by 10 a.m., New York City time, on such date, as more fully provided in
the Indenture and subject to the terms and conditions set forth therein.
<PAGE> 33
33
In the event of a Required Repurchase of only a portion of this
Security, a new Security or Notes for the unrepurchased portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
In the event that the Issuer has Excess Proceeds from an Asset
Sale, it shall be required to make an offer to purchase from Holders on a pro
rata basis an aggregate principal amount of X-TRAS equal to the Excess
Proceeds, at a purchase price equal to the sum of (i) 100% of the principal
amount of and unpaid interest, if any, to the purchase date on such X-TRAS,
plus (ii) (in the aggregate with all other X-TRAS repurchased pursuant to such
Excess Proceeds Offer) the ISDA Amount as determined by the Extension Option
Buyer and notified to the Issuer, the Indenture Trustee and the Pass Through
Trustee by 10 a.m., New York City time, on such date of repurchase. The
procedures to be followed by the Issuer in making such an offer, and for
acceptance of such offer by Holders, shall be the same as those set forth
in the Indenture with respect to a Change in Control.
If the maturity of the X-TRAS is extended and for any reason the
Pass Through Trustee does not receive an amount in cash equal to the principal
amount of and interest on the X-TRAS plus the ISDA Amount by the Remarketing
Deadline, the Holders of the X-TRAS will be deemed to have exercised the Put
Option and required the Issuer to purchase all of the outstanding X-TRAS on the
Initial Stated Maturity at a purchase price equal to 100% of the principal
amount of and interest on the X-TRAS.
<PAGE> 34
34
If an Event of Default with respect to this Security shall occur
and be continuing, the principal of this Security may be declared due and
payable in the manner and with the effect provided in the Indenture. If any
such acceleration occurs, the Issuer will also be obligated to pay the
ISDA Amount, if any, as of the date of such acceleration, as determined by
the Extension Option Buyer and notified to the Issuer, the Indenture Trustee
and the Pass Through Trustee within [five] Business Days after the date of such
acceleration.
In any case where any Interest Payment Date, repurchase date,
Stated Maturity or Maturity of any Security shall not be a Business Day at any
Place of Payment, then (notwithstanding any other provision of the Indenture or
this Security), payment of interest or principal (and premium, if any) need not
be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date, repurchase date or at the Stated
Maturity or Maturity; provided that no interest shall accrue on the amount so
payable for the period from and after such Interest Payment Date, redemption
date, repurchase date, Stated Maturity or Maturity, as the case may be, to
such Business Day.
The Indenture contains provisions for defeasance at any time of
(i) the entire indebtedness of this Security or (ii) certain restrictive
covenants and Events of Default with respect to this Security, in each case
upon compliance with certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of all Outstanding
X-TRAS under the Indenture at any time by the Issuer and the
<PAGE> 35
35
Indenture Trustee with the consent of the Holders of not less than a
majority in principal amount of Securities of all series then Outstanding and
affected (voting as one class). No such amendment or modification may be made
to the Indenture which has a material adverse effect on the Extension Option
Buyer without the consent of the Extension Option Buyer.
The Indenture permits the Holders of not less than a majority in
principal amount of Securities of all series at the time Outstanding with
respect to which a default shall have occurred and be continuing (voting as one
class) to waive on behalf of the Holders of all Outstanding Securities of such
series any past default by the Issuer, provided that no such waiver may be made
with respect to a default in the payment of the principal of or the interest on
any Security of such series or the default by the Issuer in respect of certain
covenants or provisions of the Indenture, the modification or amendment of
which must be consented to by the Holder of each Outstanding Security of each
series affected or by the Extension Option Buyer, as the case may be.
As set forth in, and subject to, the provisions of the Indenture,
no Holder of any Securities of any series 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 Indenture Trustee written notice
of a continuing Event of Default, the Holders of not less than 25% in principal
amount of the Outstanding Securities of each affected series (voting as one
class) shall have made written request, and offered reasonable indemnity, to
the Indenture Trustee to institute such proceeding as trustee, and the
Indenture Trustee shall not have received from the Holders of a majority in
principal amount of the Outstanding Securities of each affected
<PAGE> 36
36
series (voting as one class) a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the Holder
hereof for the enforcement of payment of the principal of (and premium, if any)
or any interest on this Security on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the
Security Register, upon surrender of this Security for registration of transfer
at the office or agency of the Issuer in any place where the principal of and
any premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The X-TRAS are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, X-TRAS are
exchangeable for a like aggregate
<PAGE> 37
37
principal amount of X-TRAS and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
The Issuer shall not be required to (a) issue, exchange or
register the transfer of this Security for a period of 15 days next preceding
the mailing of the notice of redemption of X-TRAS or (b) exchange or register
the transfer of any Security or any portion thereof selected, called or being
called for redemption, except in the case of any Security to be redeemed in
part, the portion thereof not so to be redeemed.
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
All terms used in this Security without definition which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
SECTION 2.05. Form of Indenture Trustee's Certificate of
Authentication. The Indenture Trustee's certificates of authentication shall
be in substantially the following form:
<PAGE> 38
38
This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
_______________________________
as Indenture Trustee
By:____________________________
Authorized Officer
ARTICLE III
CHANGE IN CONTROL
SECTION 3.01. Change in Control. Upon the occurrence of a
Change in Control (the effective date of such Change in Control being the
"Change in Control Date"), each Holder of X-TRAS shall have the right to
require that the Issuer repurchase (a "Required Repurchase") all or any part of
such Holder's X-TRAS at a repurchase price payable in cash equal to
101% of the principal amount of such X-TRAS plus accrued interest to the Change
in Control Purchase Date (as defined below) (the "Change in Control Purchase
Price") plus (in the aggregate with all other X-TRAS repurchased pursuant to
this Section 3.01) the ISDA Amount, if any, as of the Change in Control
Purchase Date as determined by the Extension Option Buyer and notified to the
Issuer, the Indenture Trustee and the Pass Through Trustee by 10 a.m.,
New York City time, on such date. The Notional Amount used to determine the
Extension Amount shall be equal to the aggregate principal amount of X-TRAS
tendered for repurchase and not withdrawn.
<PAGE> 39
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(a) Within 30 days following the Change in Control Date, the
Issuer shall mail a notice (the "Required Repurchase Notice") to each
Holder with copies to the Indenture Trustee, Pass Through Trustee and
Extension Option Buyer stating:
(i) that a Change in Control has occurred and that such
Holder has the right to require the Issuer to repurchase all or
any part of such Holder's X-TRAS at the Change in Control
Purchase Price;
(ii) the Change in Control Purchase Price;
(iii) the date on which any Required Repurchase shall be
made (which shall be no earlier than 60 days nor later than 90
days from the date such notice is mailed) (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 X-TRAS to be repurchased, which shall be consistent with this
Section and the Indenture.
(b) Holders electing to have X-TRAS repurchased must deliver
a written notice (the "Change in Control Purchase Notice") to the
Paying Agent (initially the Indenture Trustee) at its corporate trust
office in Detroit, Michigan, 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 X-TRAS to be
repurchased, which portion must be $1,000 or an integral multiple
thereof; (ii) that such X-TRAS are to be repurchased by the Issuer
pursuant to the change in control provisions of the Indenture;
<PAGE> 40
40
and (iii) unless the X-TRAS are represented by one or more Global
Notes, the certificate numbers of the X-TRAS to be delivered by the
Holder thereof for repurchase by the Issuer. 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 X-TRAS as to which the withdrawal notice
relates and the principal amount of such X-TRAS, if any, which remains
subject to a Change in Control Purchase Notice.
(c) Payment of the Change in Control Purchase Price for X-TRAS for
which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such X-TRAS (together with
necessary endorsements) to the Paying Agent at its office in Detroit,
Michigan, 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 X-TRAS will be made promptly following the later of the Change in
Control Purchase Date or the time of delivery of such X-TRAS. If the
Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Change in Control Purchase Price of such X-TRAS on
the Business Day following the Change in Control Purchase Date, then, on
and after such date, interest will cease accruing, and all other rights
of the Holder shall
<PAGE> 41
41
terminate (other than the right to receive the Change in Control
Purchase Price upon delivery of the X-TRAS).
(d) The Issuer shall comply with the provisions of Regulation
14E and any other tender offer rules under the Exchange Act, which may
then be applicable in connection with any offer by the Issuer to
repurchase X-TRAS at the option of Holders upon a Change in Control.
(e) No X-TRAS may be repurchased by the Issuer as a result of
a Change in Control if there has occurred and is continuing an Event of
Default (other than a default in the Payment of the Change in Control
Purchase Price with respect to the X-TRAS).
ARTICLE IV
ADDITIONAL COVENANTS OF THE ISSUER
WITH RESPECT TO THE X-TRAS
SECTION 4.01. Limitation on Certain Liens. So long as any of the
X-TRAS are outstanding, the Issuer shall not create, incur, assume or suffer to
exist any Lien or any other type of arrangement intended or having the effect
of conferring upon a creditor of the Issuer or any Subsidiary a preferential
interest upon or with respect to any of its property of any character,
including without limitation any shares of Capital Stock of Consumers or
Enterprises, without making effective provision whereby the X-TRAS shall (so
long as any such other
<PAGE> 42
42
creditor shall be so secured) be equally and ratably secured (along
with any other creditor similarly entitled to be secured) by a direct Lien on
all property subject to such Lien, provided, however, that the foregoing
restrictions shall not apply to:
(i) Liens for taxes, assessments or governmental charges or
levies to the extent not past due;
(ii) pledges or deposits to secure (a) obligations under
workmen's compensation laws or similar legislation, (b) statutory
obligations of the Issuer or (c) Support Obligations at any one time
outstanding;
(iii) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens
arising in the ordinary course of business securing obligations which
are not overdue or which have been fully bonded and are being
contested in good faith;
(iv) purchase money Liens upon or in property acquired and
held by the Issuer in the ordinary course of business to secure the
purchase price of such property or to secure Indebtedness incurred
solely for the purpose of financing the acquisition of any such
property to be subject to such Liens, or Liens existing on any such
property at the time of acquisition, or extensions, renewals or
replacements of any of the foregoing for the same or a lesser amount,
provided that no such Lien shall extend to or cover any property
other than the property being acquired and no such extension, renewal
or replacement shall extend to or cover property not theretofore
subject to the Lien being extended, renewed or replaced, and
provided, further, that the aggregate principal
<PAGE> 43
43
amount of the Indebtedness at any one time outstanding secured by Liens
permitted by this clause (iv) shall not exceed $10,000,000; and
(v) Liens not otherwise permitted by clauses (i) through (iv)
of this Section securing Indebtedness of the Issuer; 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 Issuer at such date shall not exceed 5% of
Consolidated Net Tangible Assets at such date.
SECTION 4.02. Limitation on Consolidation, Merger, Sale or
Conveyance of Assets. So long as any of the X-TRAS are Outstanding and until
senior unsecured debt of the Issuer is rated BBB- or above (or an equivalent
rating) by Standard & Poor's and one Other Rating Agency (or, if Standard &
Poor's shall change its rating system, an equivalent of such rating then
employed by such organization), at which time the Issuer will be permanently
released from the provisions of this Section 4.02, and subject also to Article
Nine of the Indenture, the Issuer shall not consolidate with or merge into any
other Person or sell, lease or convey the property of the Issuer in the
entirety or substantially as an entirety, unless (i) immediately after giving
effect to such transaction the Consolidated Net Worth of the surviving entity
is at least equal to the Consolidated Net Worth of the Issuer immediately
prior to the transaction, and (ii) after giving effect to such transaction,
the surviving entity would be entitled to incur at least one dollar of
additional Indebtedness (other than revolving Indebtedness to banks) without
violation of the limitations in Section 4.03 hereof.
<PAGE> 44
44
SECTION 4.03. Limitation on Consolidated Indebtedness. (a) So
long as any of the senior unsecured debt of the Issuer is Outstanding and until
the senior unsecured debt of the Issuer is rated BBB- or above (or an equivalent
rating) by Standard & Poor's and one Other Rating Agency (or, if Standard &
Poor's shall change its rating system, an equivalent of such rating then
employed by such organization), at which time the Issuer will be permanently
released from the provisions of this Section 4.03, the Issuer shall not, and
shall not permit any Consolidated Subsidiary of the Issuer to, issue, create,
assume, guarantee, incur or otherwise become liable for (collectively,
"issue"), directly or indirectly, any Indebtedness unless the Consolidated
Coverage Ratio of the Issuer 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
Issuer 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
Issuer or any Subsidiary 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
1.7 to 1.0.
<PAGE> 45
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(b) Notwithstanding the foregoing paragraph, the Issuer or any
Restricted Subsidiary may issue, directly or indirectly, the following
Indebtedness:
(1) Indebtedness of the Issuer to banks not to exceed
$1,000,000,000 in aggregate outstanding principal amount at any
time;
(2) Indebtedness (other than Indebtedness described in
clause (1) of this Subsection) outstanding on the date of this Sixth
Supplemental Indenture, as set forth on Schedule 4.03(b)(2) attached
hereto and made a part hereof, and Indebtedness issued in exchange for,
or the proceeds of which are used to refund or refinance, any
Indebtedness permitted by this clause (2); provided, however, that (i)
the principal amount (or accreted value in the case of Indebtedness
issued at a discount) of the Indebtedness so issued shall not exceed the
principal amount (or accreted value in the case of Indebtedness issued
at a discount) of, premium, if any, and accrued but unpaid interest on,
the Indebtedness so exchanged, refunded or refinanced and (ii) the
Indebtedness so issued (A) shall not mature prior to the stated maturity
of the Indebtedness so exchanged, refunded or refinanced, (B) shall have
an Average Life equal to or greater than the remaining Average Life of
the Indebtedness so exchanged, refunded or refinanced and (C) if the
Indebtedness to be exchanged, refunded or refinanced is subordinated to
the X-TRAS, the Indebtedness is subordinated to the X-TRAS in right of
payment;
(3) Indebtedness of the Issuer owed to and held by a
Subsidiary and Indebtedness of a Subsidiary owed to and held by the
Issuer; provided, however, that, in the case of Indebtedness of the
Issuer owed to and held by a Subsidiary, (i) any
<PAGE> 46
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subsequent issuance or transfer of any Capital Stock that results in any
such Subsidiary ceasing to be a Subsidiary or (ii) any transfer of such
Indebtedness (except to the Issuer or a Subsidiary) shall be deemed for
the purposes of this Subsection to constitute the issuance of such
Indebtedness by the Issuer;
(4) Indebtedness of the Issuer issued in exchange for, or the
proceeds of which are used to refund or refinance, Indebtedness of the
Issuer issued in accordance with Subsection (a) of this Section,
provided that (i) the principal amount (or accreted value in the case of
Indebtedness issued at a discount) of the Indebtedness so issued shall
not exceed the principal amount (or accreted value in the case of
Indebtedness issued at a discount) of, premium, if any, and accrued but
unpaid interest on, the Indebtedness so exchanged, refunded or
refinanced and (ii) the Indebtedness so issued (A) shall not mature
prior to the stated maturity of the Indebtedness so exchanged, refunded
or refinanced, (B) shall have an Average Life equal to or greater than
the remaining Average Life of the Indebtedness so exchanged, refunded or
refinanced and (C) if the Indebtedness to be exchanged, refunded or
refinanced is subordinated to the X-TRAS, the Indebtedness so issued is
subordinated to the X-TRAS in right of payment;
(5) Indebtedness of a Restricted Subsidiary issued in exchange
for, or the proceeds of which are used to refund or refinance,
Indebtedness of a Restricted Subsidiary issued in accordance with
Subsection (a) of this Section, provided that (i) the principal amount
(or accreted value in the case of Indebtedness issued at a discount) of
the Indebtedness so issued shall not exceed the principal amount (or
accreted value in the
<PAGE> 47
47
case of Indebtedness issued at a discount) of, premium, if any, and
accrued but unpaid interest on, the Indebtedness so exchanged, refunded
or refinanced and (ii) the Indebtedness so issued (A) shall not mature
prior to the stated maturity of the Indebtedness so exchanged, refunded
or refinanced and (B) shall have an Average Life equal to or greater
than the remaining Average Life of the Indebtedness so exchanged,
refunded or refinanced.
(6) Indebtedness of a Consolidated Subsidiary issued to
acquire, develop, improve, construct or to provide working capital for a
gas, oil or electric generation, exploration, production, distribution,
storage or transmission facility and related assets, provided that such
Indebtedness is without recourse to any assets of the Issuer, Consumers,
Enterprises, CMS Generation, NOMECO, CMS Electric and Gas, CMS Gas
Transmission and Storage, CMS MST or any other Designated Enterprises
Subsidiary;
(7) Indebtedness of a Person existing at the time at which
such person became a Subsidiary and not incurred in connection with, or
in contemplation of, such Person becoming a Subsidiary. Such
Indebtedness shall be deemed to be incurred on the date the acquired
Person becomes a Consolidated Subsidiary;
(8) Indebtedness issued by the Issuer not to exceed
$150,000,000 in aggregate principal amount at any time; and
(9) Indebtedness of a Consolidated Subsidiary in respect of
rate reduction bonds issued to recover electric restructuring
transition costs of Consumers provided that such Indebtedness is without
recourse to the assets of Consumers.
<PAGE> 48
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SECTION 4.04. Limitation on Restricted Payments. (a) So long
as the X-TRAS are Outstanding and until senior unsecured debt of the
Issuer is rated BBB- or above (or an equivalent rating) by Standard &
Poor's and one Other Rating Agency (or, if Standard & Poor's shall change its
rating system, an equivalent of such rating then employed by such
organization), at which time the Issuer will be permanently released from the
provisions of this Section 4.04, the Issuer shall not, and shall not permit any
Restricted Subsidiary of the Issuer, directly or indirectly, to (i) declare or
pay any dividend or make any distribution on the Capital Stock of the Issuer to
the direct or indirect holders of its Capital Stock (except dividends or
distributions payable solely in its Non-Convertible Capital Stock or in
options, warrants or other rights to purchase such Non-Convertible Capital
Stock and except dividends or distributions payable to the Issuer or a
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Issuer, or (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity or scheduled
repayment thereof, any Subordinated Indebtedness (any such dividend,
distribution, purchase, redemption, repurchase, defeasing, other acquisition or
retirement being hereinafter referred to as a "Restricted Payment") if at the
time the Issuer 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 May 6, 1997 would exceed the sum
of:
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(A) $100,000,000;
(B) 100% of Consolidated Net Income, accrued during the
period (treated as one accounting period) from May 6, 1997 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
(C) the aggregate Net Cash Proceeds received by the
Issuer from the issue or sale of or contribution with respect to
its Capital Stock subsequent to May 6, 1997.
For the purpose of determining the amount of any Restricted Payment not in the
form of cash, the amount shall be the fair value of such Restricted Payment as
determined in good faith by the Board of Directors, provided that if the value
of the non-cash portion of such Restricted Payment as determined by the Board
of Directors is in excess of $25 million, such value shall be based on the
opinion from a nationally recognized firm experienced in the appraisal of
similar types of transactions.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the
Issuer made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Issuer
(other than Redeemable Stock or Exchangeable Stock); provided,
however, that such purchase or redemption shall be excluded from
the calculation of the amount of Restricted Payments;
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(ii) dividends or other distributions paid in respect of
any class of the Issuer's Capital Stock issued in respect of the
acquisition of any business or assets by the Issuer or a
Restricted Subsidiary if the dividends or other distributions
with respect to such Capital Stock are payable solely from the
net earnings of such business or assets;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend
would have complied with this Section; provided, however, that at
the time of payment of such dividend, no Event of Default shall
have occurred and be continuing (or result therefrom), and
provided further, however, that such dividends shall be included
(without duplication) in the calculation of the amount of
Restricted Payments; or
(iv) payments pursuant to the Tax-Sharing Agreement.
SECTION 4.05. Limitation on Asset Sales. So long as any of the
X-TRAS are outstanding, the Issuer may not sell, transfer or otherwise dispose
of any property or assets of the Issuer, including Capital Stock of any
Consolidated Subsidiary, in one transaction or a series of transactions in an
amount which exceeds $50,000,000 (an "Asset Sale") unless the Issuer shall
(i) apply an amount equal to such excess Net Cash Proceeds to permanently repay
Indebtedness of a Consolidated Subsidiary or Indebtedness of the Issuer which
is pari passu with the X-TRAS or (ii) invest an equal amount not so used in
clause (i) in property or assets of related business within 24 months after the
date of the Asset Sale (the "Application Period") or (iii) apply such excess
Net Cash Proceeds not so used in (i) or (ii) (the "Excess Proceeds") to make an
offer (the
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"Excess Proceeds Offer"), within 30 days after the end of the
Application Period, to purchase (the "Excess Proceeds Repurchase") from the
Holders on a pro rata basis an aggregate principal amount of X-TRAS on the
Excess Proceeds Purchase Date (as defined herein) equal to the Excess Proceeds
on such date, at a purchase price equal to 100% of the principal amount of the
X-TRAS on the Excess Proceeds Purchase Date and unpaid interest, if any, to
such date (the "Excess Proceeds Repurchase Price") plus (in the aggregate with
all other X-TRAS repurchased pursuant to such Excess Proceeds Offer) the ISDA
Amount, if any, as of the Excess Proceeds Purchase Date as determined by the
Extension Option Buyer as of such date and notified to the Issuer, the
Indenture Trustee and the Pass Through Trustee by 10 a.m., New York City time,
on such date. The Notional Amount used to determine the ISDA Amount shall be
equal to the aggregate principal amount of X-TRAS tendered for repurchase and
not withdrawn. The Issuer shall only be required to make an offer to purchase
X-TRAS from Holders pursuant to subsection (iii) if the Excess Proceeds equal
or exceed $25,000,000 at any given time.
(a) Within 30 days after the end of the Application Period,
the Issuer shall mail a notice (the "Excess Proceeds Repurchase Notice")
to each Holder with copies to the Indenture Trustee, Pass Through
Trustee and Extension Option Buyer stating:
(i) that the Issuer is making an Excess Proceeds Offer
pusuant to Section 4.05 of the Sixth Supplemental Indenture;
(ii) the Excess Proceeds Purchase Price;
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(iii) the date on which any Exceeds Proceeds Repurchase
shall be made (which shall be no earlier than 60 days nor later
than 90 days from the date such notice is mailed) (the "Excess
Proceeds Purchase Date");
(iv) the name and address of the Paying Agent; and
(v) the procedures that Holders must follow to cause
the X-TRAS to be repurchased, which shall be consistent with this
Section and the Indenture.
(b) Holders electing to have X-TRAS repurchased must deliver
a written notice (the "Excess Proceeds Purchase Notice") to the
Paying Agent (initially the Indenture Trustee) at its corporate trust
office in Detroit, Michigan, or any other office of the Paying Agent
maintained for such purposes, not later than 30 days prior to the Excess
Proceeds Purchase Date. The Excess Proceeds Purchase Notice shall
state: (i) the portion of the principal amount of any X-TRAS to be
repurchased, which portion must be $1,000 or an integral multiple
thereof; (ii) that such X-TRAS are to be repurchased by the Issuer
pursuant to the Exceeds Proceeds Offer provisions of the Indenture; and
(iii) unless the X-TRAS are represented by one or more Global Notes, the
certificate numbers of the X-TRAS to be delivered by the Holder thereof
for repurchase by the Issuer. Any Excess Proceeds 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
Excess Proceeds Purchase Date. The notice of withdrawal shall state
the principal amount and, if applicable, the certificate numbers of the
X-TRAS
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as to which the withdrawal notice relates and the principal amount of
such X-TRAS, if any, which remain subject to an Excess Proceeds Purchase
Notice.
(c) Payment of the Excess Proceeds Purchase Price for X-TRAS
for which a Excess Proceeds Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such X-TRAS (together with
necessary endorsements) to the Paying Agent at its office in Detroit,
Michigan, or any other office of the Paying Agent maintained for such
purpose, at any time (whether prior to, on or after the Excess Proceeds
Purchase Date) after the delivery of such Excess Proceeds Purchase
Notice. Payment of the Excess Proceeds Purchase Price for such X-TRAS
will be made promptly following the later of the Excess Proceeds
Purchase Date or the time of delivery of such X- TRAS. If the Paying
Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Excess Proceeds Purchase Price of such X-TRAS on
the Business Day following the Excess Proceeds Purchase Date, then, on
and after such date, interest will cease accruing, and all other rights
of the Holder shall terminate (other than the right to receive the
Excess Proceeds Purchase Price upon delivery of the X-TRAS).
(d) The Issuer shall comply with the provisions of Regulation
14E and any other tender offer rules under the Exchange Act, which may
then be applicable in connection with any Excess Proceeds Offer.
ARTICLE V
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ADDITIONAL EVENTS OF DEFAULT
WITH RESPECT TO THE X-TRAS
SECTION 5.01. Definition. All of the events specified in
clauses (a) through (h) of Section 5.1 of the Original Indenture shall be
"Events of Default" with respect to the X-TRAS. In addition, each of the
following events that shall have occurred and be continuing shall be an
Event of Default: (i) default in the payment when due of any Applicable Premium
on any of the X-TRAS, whether at maturity, upon redemption, acceleration,
purchase by the Issuer at the option of the Holders or otherwise; and (ii)
default in the payment when due of the ISDA Amount, if any, whether on the
Initial Stated Maturity, upon redemption, acceleration, purchase by the Issuer
at the option of the Holders or otherwise.
SECTION 5.02. Amendments to Section 5.1 of the Original
Indenture. (a) Solely for the purpose of determining Events of Default with
respect to the X-TRAS, paragraphs (e), (f) and (h) of Section 5.1 of the
Original Indenture shall be amended such that each and every reference therein
to the Issuer shall be deemed to mean either the Issuer or Consumers.
(b) Solely for purposes of determining waivers of defaults and
their consequences in respect of the X-TRAS, the penultimate paragraph of
Section 5.1 of the Original Indenture shall be amended such that no such waiver
may be made of any such default in respect of a covenant or provision of the
Sixth Supplemental Indenture which cannot be modified or amended without the
consent of each Holder of the X-TRAS or the Extension Option Buyer without the
consent of such Holder or buyer, respectively.
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(c) Solely for purposes of determining the application of
proceeds in respect of defaults under the X-TRAS, paragraphs SECOND and THIRD
of Section 5.3 of the Original Indenture shall be amended to provide that
proceeds paid thereunder shall be applied on a pro rata basis to (i) the
payment in full of the aggregate unpaid principal amount of the X-TRAS and
all accrued but unpaid interest on the X-TRAS to the Interest Payment Date and
(ii) the payment of the amount due under Section 5.03 of this Sixth
Supplemental Indenture.
SECTION 5.03. Payment of ISDA Amount upon Acceleration of
X-TRAS. If an Event of Default resulting in acceleration of the X-TRAS occurs,
the Issuer shall pay to the Indenture Trustee, in addition to such amounts as
may be due in respect of the principal of, Applicable Premium, if any, and
accrued interest on the X-TRAS pursuant to Article V of the Original Indenture
and this Sixth Supplemental Indenture, an amount equal to the ISDA Amount
as of the date of acceleration of the X-TRAS (as calculated by the Calculation
Agent as of such date and notified to the Issuer, the Indenture Trustee and the
Pass Through Trustee within [five] Business Days thereafter).
ARTICLE VI
DEFEASANCE
SECTION 6.01. General. All of the provisions of Article Ten of
the Original Indenture shall be applicable to the X-TRAS.
SECTION 6.02. Satisfaction and Discharge. The provisions of
Section 10.1(A) of the Original Indenture are amended to provide that, in
addition to the requirements set forth therein for obtaining the satisfaction
and discharge of the Issuer's obligations under the Indenture
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in respect of the X-TRAS, the Issuer shall, on the date of deposit
referred to in Section 10.1(A)(c)(ii) of the Original Indenture, be required to
deliver to the Indenture Trustee for the benefit of the Pass Through Trustee
the ISDA Amount, if any, as determined by the Extension Option Buyer as of
such date and notified to the Issuer, the Indenture Trustee and the Pass
Through Trustee by 10 a.m., New York City time, on such date.
SECTION 6.03. Legal Defeasance. (a) Solely for purposes of a
legal defeasance of the X-TRAS, the requirements for a legal defeasance set
forth in Section 10.1(B) of the Original Indenture are amended to provide that
in addition to the requirements set forth in clauses (a) through (f), the Issuer
shall be required to deliver to the Indenture Trustee on the date of deposit
referred to in Section 10.1(B)(a) of the Original Indenture cash in an amount
equal to the ISDA Amount, if any, as determined by the Extension Option Buyer
as of such date and notified to the Issuer, the Indenture Trustee and the Pass
Through Trustee by 10 a.m., New York City time, on such date.
(b) Upon satisfaction by the Issuer of the requirements of
Section 10.1(B) of the Original Indenture and the foregoing clause (a), in
connection with any legal defeasance of the X-TRAS, the Issuer shall be
released from its obligations under the Original Indenture and under this Sixth
Supplemental Indenture with respect to the X-TRAS, except to the extent
otherwise provided in Section 10.1(b) of the Original Indenture.
SECTION 6.04. Covenant Defeasance. (a) Solely for purposes of
a covenant defeasance of the X-TRAS, the requirements for a covenant defeasance
set forth in Section 10.1(C) of the Original Indenture are amended to provide
that in addition to the requirements
<PAGE> 57
57
set forth in clauses (a) through (f), the Issuer shall be required to
deliver to the Indenture Trustee for the benefit of the Pass Through Trustee on
the date of deposit referred to in Section 10.1(C)(a) of the Original Indenture
cash in an amount equal to the ISDA Amount, if any, as determined by the
Extension Option Buyer as of such date and notified to the Issuer, the
Indenture Trustee and the Pass Through Trustee by 10 a.m. on such date.
(b) Upon satisfaction by the Issuer of the requirements of
Section 10.1(C) of the Original Indenture, in connection with any covenant
defeasance of the X-TRAS, the Issuer shall be released from its obligations
under Article Nine of the Original Indenture and under Articles III and IV of
this Sixth Supplemental Indenture with respect to the X-TRAS.
ARTICLE VII
REDEMPTION
SECTION 7.01. Redemption at the Option of the Issuer. (a) The
provisions of Article XI of the Original Indenture (other than Sections 11.5
and 11.6) shall be applicable to the X-TRAS.
(b) The X-TRAS will be redeemable at any time, at the option of the
Issuer, in whole or in part, on any date on or prior to the Premium Termination
Date on not less than 30 nor more than 60 days' prior notice to the Indenture
Trustee, the Pass Through Trustee and the Extension Option Buyer, at a
redemption price, ("Early Redemption Price") equal to the sum of (i) 100% of
the principal amount of the X-TRAS being redeemed,
<PAGE> 58
58
together with accrued interest, if any, thereon to the Redemption Date
plus the Applicable Premium (but interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holder thereof of
record at the close of business on the relevant Record Date referred to on the
face hereof all as provided in the Indenture) plus (ii) the ISDA Amount, if
any, as determined by the Extension Option Buyer and notified to the Issuer,
the Indenture Trustee and the Pass Through Trustee [five] Business Days prior
to the Redemption Date. In no event will the Redemption Price ever be less
than 100% of the principal amount of the X-TRAS plus accrued interest to the
Redemption Date. The Notional Amount used to determine the ISDA Amount shall
be equal to the aggregate principal amount of X-TRAS redeemed.
(c) If the X-TRAS are extended until the Extended Stated
Maturity, the Issuer shall have the option (the "FD Redemption Option"), in
lieu of permitting the X-TRAS to be remarketed in accordance with Article VIII
of this Sixth Supplemental Indenture, to redeem the X-TRAS in whole on the
Initial Stated Maturity, by irrevocable notice given to the Indenture Trustee,
the Pass Through Trustee, the Extension Option Buyer and the Calculation Agent
not later than the Remarketing Deadline, at a redemption price, payable in
cash, equal to the sum of (i) 100% of the principal amount of the X-TRAS being
redeemed together with accrued interest, if any, thereon to the Initial Stated
Maturity plus (ii) the ISDA
<PAGE> 59
59
Amount, if any, as of the Exercise Date (as calculated by the
Calculation Agent and notified to the Issuer, the Indenture Trustee and the
Pass Through Trustee within five Business Days thereafter), which redemption
price shall be payable at the Initial Stated Maturity. The Notional Amount
used to determine the ISDA Amount shall be the aggregate principal amount of
the X-TRAS outstanding as of the Exercise Date.
SECTION 7.02. Put Option of Holders. If the maturity of the
X-TRAS is extended and for any reason the Pass Through Trustee does not receive
an amount in cash equal to the principal amount of and interest on the
X-TRAS plus the ISDA Amount by the Remarketing on the Initial Stated Maturity,
all of the outstanding X-TRAS at a purchase price equal to 100% of the
principal amount of and accrued interest on the X-TRAS to the Initial Stated
Maturity.
ARTICLE VIII
<PAGE> 60
60
REMARKETING OF X-TRAS
SECTION 8.01. Remarketing of X-TRAS. In the event that the
maturity of the X-TRAS is extended until the Extended Stated Maturity, then,
unless the Issuer exercises the FD Redemption Option (which option the Issuer
shall be entitled to exercise at any time subsequent to the delivery of the
Extension Notice and prior to the earlier of the pricing of the remarketing and
the Remarketing Deadline upon delivery of an irrevocable notice of redemption),
the interest rate borne by the X-TRAS will be reset on the pricing of the
remarketing effective on and as of the date of closing of the remarketing in
order that the X-TRAS may be remarketed so as to yield net proceeds in cash at
least equal to the sum of (i) 100% of the principal amount of the X-TRAS plus
(ii) the ISDA Amount as of the Exercise Date as calculated by the Calculation
Agent and notified to the Issuer, the Indenture Trustee and the Pass Through
Trustee within five Business Days thereafter (collectively, the "Required
Remarketing Proceeds"). As more particularly set forth in the next sentence,
it is intended that the portions of the Required Remarketing Proceeds
representing the principal amount of the X-TRAS, together with the amount
payable by the Issuer pursuant to such sentence, will be sufficient to enable
the Pass Through Trustee to make the Final Distribution on the Certificates.
Accordingly, the Issuer shall be obligated to pay to the Pass Through Trust,
simultaneously with the closing of the remarketing, an amount equal to the
interest
<PAGE> 61
61
that would have accrued on the X-TRAS had they been held by the Pass
Through Trust to the Final Distribution Date. Upon payment of the Final
Distribution to Certificateholders and the ISDA Amount to the Extension Option
Buyer on the Final Distribution Date, the Issuer shall be entitled to receive
any amounts earned in respect of the investment by the Pass Through Trustee of
the Required Remarketing Proceeds and the ISDA Amount in U.S. Government
Obligations pursuant to clause (d) below. In no event shall the Issuer shall
have any obligation to pay the principal amount of the X-TRAS to the Pass
Through Trust on the Initial Stated Maturity.
SECTION 8.02. Remarketing Procedure. The X-TRAS will be
remarketed in accordance with the following procedure (the "Remarketing
Procedure"):
(a) On the Exercise Date and thereafter on the 75th, 60th,
45th, 30th and 15th day prior to the Initial Stated Maturity, Morgan Stanley &
Co. Incorporated (or, subsequent to the Exercise Date, such other investment
banking institution as may be selected as the Remarketing Agent) will provide
the Issuer with non-binding indications of the interest
<PAGE> 62
62
rate and discount or premium at which it believes it could remarket the X-TRAS
in order to yield the Required Remarketing Proceeds.
(b) Morgan Stanley & Co. Incorporated shall act as the
Remarketing Agent for the X-TRAS unless, no later than [60] days prior to the
Initial Stated Maturity, the Issuer shall select another investment banking
institution to remarket the X-TRAS or exercise the FD Redemption Option in
accordance with the provisions of Section 7.01(c) hereof.
(c) No later than 15 days prior to the Remarketing Deadline,
the Remarketing Agent will commence marketing of the X-TRAS to investors.
(d) Pricing and closing of the remarketed X-TRAS shall occur
at any time within 10 days prior to the Remarketing Deadline, subject to then
prevailing market conditions and settlement cycles. Upon completion of the
remarketing, the net proceeds thereof, together with the amount payable by the
Issuer equal to the interest that would have accrued on the X-TRAS had they
been held by the Pass Through Trust to the Initial Stated Maturity, will be
deposited with the Pass Through Trustee and invested in Government Obligations
having a maturity as close as possible equal to the number of days between the
date of such investment and the Initial Stated Maturity.
(e) The Remarketing Agent will be entitled to underwriting
commissions, payable at settlement of the Remarketing Procedure, which
will be determined at the time the Remarketing Procedure is commenced and shall
be consistent with then prevailing market practices. In the event that Morgan
Stanley & Co. Incorporated purchases the X-TRAS pursuant to clause (i) below,
it shall be entitled to underwriting commissions, payable at
<PAGE> 63
63
settlement of such purchase, which will be determined at the time it
gives notice of its offer pursuant to clause (i) below and shall be consistent
with then prevailing market practices.
(f) The Issuer will cooperate with and provide information
reasonably requested by the Remarketing Agent and (in the event of an offer to
purchase by Morgan Stanley & Co. Incorporated made pursuant to clause (i)
below) by Morgan Stanley & Co. Incorporated in connection with the remarketing
or purchase of the X-TRAS, as applicable, including, without limitation, (1)
promptly preparing an offering memorandum or prospectus containing such
disclosures as may be required by applicable law and as may be required by
the Remarketing Agent or Morgan Stanley & Co. Incorporated, as applicable, in
its reasonable judgment, (ii) executing and delivering or causing to be
executed and delivered legal documentation (including a purchase agreement or
underwriting agreement and registration rights agreement with customary
indemnities, covenants, representations and warranties, comfort letters and
legal opinions) in form and substance reasonably satisfactory to the
Remarketing Agent or Morgan Stanley & Co. Incorporated, as applicable, (iii)
providing promptly upon request updated consolidated financial statements to
the date of its latest report filed with the Commission and (iv) to the extent
the Issuer and the Remarketing Agent or Morgan Stanley & Co. Incorporated, as
applicable, deem reasonably necessary for successful completion of the
Remarketing Procedure or the purchase by Morgan Stanley & Co. Incorporated, as
applicable, making available senior management of the Issuer for road show and
one-on-one presentations.
<PAGE> 64
64
(g) The Issuer may, in its sole discretion, elect to cause the
X-TRAS to be remarketed by conducting an underwritten offering or private
placement thereof on a firm-commitment basis. In such event, the Issuer shall
notify the Remarketing Agent of such request no later than [70] days prior to
the Final Distribution Date. The Issuer acknowledges that in no event shall
the Remarketing Agent be deemed by this provision to have made a commitment to
underwrite or place the X-TRAS.
(h) Regardless of whether it has been selected to act as
Remarketing Agent, Morgan Stanley & Co. Incorporated shall at all times be
permitted to make an offer, on not less than [five] Business Days' notice, to
purchase the X-TRAS bearing a reset interest rate specified by Morgan
Stanley & Co. Incorporated on a date not later than the Remarketing Deadline
for net proceeds in cash equal to the Required Remarketing Proceeds, which
offer the Company and the Trustee shall be required to accept, unless, on or
prior to the date for such purchase specified in the notice provided by Morgan
Stanley & Co. Incorporated, (i) the Company shall have delivered an
irrevocable notice of redemption pursuant to Section 7.01(c) of this Sixth
Supplemental Indenture or (B) any other party shall have remarketed the X-TRAS
bearing a reset interest rate lower than or equal to that specified by Morgan
Stanley & Co. Incorporated for net proceeds in cash at least equal to the
Required Remarketing Proceeds.
(i) The remarketed X-TRAS will bear interest at the reset
interest rate commencing upon the date of closing of the remarketing. For the
avoidance of
<PAGE> 65
65
doubt, holders of the remarketed X-TRAS shall not be entitled to
receive any interest thereon for any period prior to the date of closing of the
remarketing.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Effect on Original Indenture. This Sixth
Supplemental Indenture is a supplement to the Original Indenture. As
supplemented by this Sixth Supplemental Indenture, the Original Indenture is in
all respects ratified, approved and confirmed, and the Original Indenture and
this Sixth Supplemental Indenture shall together constitute one and the same
instrument.
SECTION 9.02. Supplemental Indentures without Consent of
Securityholders. The Issuer and the Indenture Trustee may enter into
supplemental indentures to this Sixth Supplemental Indenture without the
consent of the Holders of the X-TRAS for any of the purposes for which
execution of a supplemental indenture without the consent of the Holders of
the X-TRAS is authorized as provided in Section 8.1 of the Original Indenture.
In addition, any such supplemental indentures may be entered into without the
consent of the Holders of the X-TRAS for the purpose of (i) curing any
ambiguity or correcting or supplementing any provision which may be defective
or inconsistent with any other provision in the Original Indenture, the ISDA
Master Agreement or the Pass Through Trust Agreement or (ii) modifying or
amending any of the provisions hereof or of the X-TRAS (A) relating to the
ISDA Master Agreement or (B) that is effective only from and after the closing
of the remarketing of the XTRAS; provided that no such action adversely
affects the interests of
<PAGE> 66
66
the Holders of Securities of any Series; and provided further that no
such supplemental indenture referred to in the first clause of this sentence
and in clauses (a) through (f) of Section 8.1 of the Original Indenture which
has a material adverse effect on the Extension Option Buyer may be entered into
without the consent of the Extension Option Buyer.
SECTION 9.03. Supplemental Indentures with Consent of
Securityholders. The provisions of Section 8.2 of the Original Indenture are
hereby amended to provide that notwithstanding any consent obtained from the
Holders of X-TRAS in respect of any modification, amendment or supplement to
this Sixth Supplemental Indenture requiring the consent of the Holders of the
X-TRAS pursuant to Section 8.2 of the Original Indenture, no modification,
amendment or supplement may be made to this Sixth Supplemental Indenture that
has a material adverse effect on the Extension Option Buyer without the
consent of the Extension Option Buyer.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Provisions of Indenture for the Sole Benefit of
Parties and Holders of Securities and Coupons. The provisions of Section 14.2
of the Original Indenture are hereby amended to provide that, solely for
purposes of the X-TRAS issued under the Sixth Supplemental Indenture, (i) each
of the Extension Option Buyer and Morgan Stanley & Co. Incorporated (as
Remarketing Agent) shall be a third party beneficiary of this Agreement and may
enforce the obligations of the Issuer hereunder running in favor of the
Extension
<PAGE> 67
67
Option Buyer and Morgan Stanley & Co. Incorporated, as applicable,
and (ii) all amounts payable by the Issuer under this Sixth Supplemental
Indenture shall be for the benefit of and enforceable by the Pass Through
Trustee and shall be paid over by the Indenture Trustee to the Pass Through
Trustee promptly upon confirmation of the receipt of funds from the Company by
the Indenture Trustee.
SECTION 10.02. Michigan Law to Govern. This Sixth Supplemental
Indenture and the X-TRAS shall be governed by and deemed to be a contract
under, and construed in accordance with, the laws of the State of Michigan, and
for all purposes shall be construed in accordance with the laws of such State,
except as may otherwise be required by mandatory provisions of law.
TESTIMONIUM
This Sixth Supplemental Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
<PAGE> 68
68
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first written
above.
CMS ENERGY CORPORATION
By:
Attest:
(Corporate Seal)
NBD BANK
as Indenture Trustee
By:
Attest:
(Corporate Seal)
<PAGE> 69
Schedule 4.03(b)(2)
Indebtedness of CMS Energy Corporation outstanding on May 6, 1997
<PAGE> 1
EXHIBIT 4(e)
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
PASS THROUGH TRUST AGREEMENT
Dated as of ___________ __, 199_
among
CMS ENERGY CORPORATION
and
WILMINGTON TRUST COMPANY
as Trustee
and
CERTIFICATE HOLDERS
CMS Energy X-TRAS Pass Through Trust I
____% Series I Pass Through Certificates
- --------------------------------------------------------------------------------
<PAGE> 2
Reconciliation and tie between CMS Energy X-TRAS Pass Through Trust Agreement,
dated as of ___________ __, 1998, and the Trust Indenture Act of 1939. This
reconciliation does not constitute part of the Pass Through Trust Agreement.
<TABLE>
<CAPTION>
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
- ------------------------------- ------------------------------
<S> <C>
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 8.03
314(a) 8.04(a) - (c)
(a)(4) 8.04(d)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(d)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS
1.01. Interpretation and Definitions 2
1.02. Compliance Certificates and Opinions 11
1.03. Form of Documents Delivered to Trustee 12
1.04. Directions of Certificateholders 12
ARTICLE II
ESTABLISHMENT OF THE TRUST,
ORIGINAL ISSUANCE OF CERTIFICATES,
ACQUISITION OF X-TRAS, SALE OF EXTENSION OPTION
2.01. Name 14
2.02. Office of the Trustee; Principal Place of Business 14
2.03. Issuance of Certificates; Acquisition of X-TRAS; Sale of Extension
Option 14
2.04. Declaration of Trust 15
2.05. Authorization to Enter Into Certain Transactions 15
ARTICLE III
THE CERTIFICATES
3.01. Title, Form, Denomination and Execution of Certificates 19
3.02. Restrictive Legends 19
3.03. Authentication of Certificates 20
3.04. Transfer and Exchange 21
3.05. Book-Entry Provisions for the Global Certificate 21
3.06. Special Transfer Provisions 22
3.07. Mutilated, Destroyed, Lost or Stolen Certificates 23
3.08. Persons Deemed Owners 24
3.09. Cancellation 24
3.10. Temporary Certificates 24
3.11. Limitation of Liability for Payments 25
</TABLE>
<PAGE> 4
ii
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS; PAYMENTS TO EXTENSION OPTION BUYER
4.01. Certificate Account and Special Payments Account 25
4.02. Distributions from Certificate Account and Special Payments Account 26
4.03. Statements to Certificateholders 28
4.04. Investment of Special Payment Moneys 29
4.05. Payments from ISDA Payment Account 29
ARTICLE V
THE COMPANY
5.01. Maintenance of Corporate Existence 29
5.02. Consolidation, Merger, Etc. 29
5.03. Change in Control 30
5.04 Excess Proceeds of Asset Sales 33
ARTICLE VI
DEFAULT
6.01. Events of Default 35
6.02. Incidents of Sale of the X-TRAS 36
6.03. Judicial Proceedings Instituted by Trustee 37
6.04. Control by Certificateholders 37
6.05. Waiver of Past Defaults 38
6.06. Right of Certificateholders to Receive Payments Not to Be Impaired 39
6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions 39
6.08. Remedies Cumulative 39
ARTICLE VII
THE TRUSTEE
7.01. Certain Duties and Responsibilities 40
7.02. Notice of Defaults 40
7.03. Certain Rights of Trustee 41
7.04. Not Responsible for Recitals or Issuance of Certificates 42
7.05. May Hold Certificates 42
7.06. Money Held in Trust 42
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
7.07. Compensation and Reimbursement 43
7.08. Corporate Trustee Required; Eligibility 43
7.09. Resignation and Removal; Appointment of Successor 44
7.10. Acceptance of Appointment by Successor 45
7.11. Merger, Conversion, Consolidation or Succession to Business 46
7.12. Maintenance of Agencies 46
7.13. Money for Certificate Payments to Be Held in Trust 47
7.14. [Intentionally Omitted] 48
7.15. Representations and Warranties of Trustee 48
7.16. Withholding Taxes; Information Reporting 49
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
8.01. The Company to Furnish Trustee with Names and Addresses of
Certificateholders 49
8.02. Preservation of Information; Communications to Certificateholders 50
8.03. Reports by Trustee 50
8.04. Reports by the Company 50
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
9.01. Supplemental Agreements Without Consent of Certificateholders 51
9.02. Supplemental Agreements with Consent of Certificateholders 52
9.03. Documents Affecting Immunity or Indemnity 53
9.04. Execution of Supplemental Agreements 53
9.05. Effect of Supplemental Agreements 54
9.06. Conformity with Trust Indenture Act 54
9.07. Reference in Certificates to Supplemental Agreements 54
ARTICLE X
AMENDMENTS TO INDENTURE
10.01. Amendments and Supplements to Indentures 54
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE XI
PAYMENT OF FINAL DISTRIBUTION; TERMINATION OF TRUST
11.01. Payment of Final Distribution 55
11.02. Termination of the Trust 59
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Limitation on Rights of Certificateholders 60
12.02. Certificates Nonassessable and Fully Paid 60
12.03. Notices 60
12.04. Governing Law 62
12.05. Severability of Provisions 62
12.06. Trust Indenture Act Controls 62
12.07. Effect of Headings and Table of Contents 62
12.08. Successors and Assigns 62
12.09. Benefits of Agreement 62
12.10. Legal Holidays 62
12.11. Counterparts 63
12.12. Acceptance of Terms of This Agreement and Indenture 63
</TABLE>
Exhibit A - Form of Certificate
<PAGE> 7
AMENDED AND RESTATED
PASS THROUGH TRUST AGREEMENT
This AMENDED AND RESTATED PASS THROUGH TRUST AGREEMENT, dated as of
_______ __, 1998, among CMS ENERGY CORPORATION, a Michigan corporation,
WILMINGTON TRUST COMPANY, a Delaware banking corporation, and the several
Certificateholders, as hereinafter defined, is made with respect to the
formation of CMS Energy X-TRAS_ Pass Through Trust I and the issuance of ____%
CMS Energy X-TRAS_ Pass Through Certificates representing fractional undivided
interests in the Assigned Trust Property (as defined herein).
WITNESSETH:
WHEREAS, the Company will issue pursuant to an Indenture X-TRAS (as
defined herein) in an aggregate principal amount of [$150,000,000];
WHEREAS, CMS Energy X-TRAS Pass Through Trust I, a business trust under
the Business Trust Act, has been established pursuant to a Trust Agreement dated
as of November 21, 1997 between the Company and the Trustee and a Certificate of
Trust filed with the Secretary of State of the State of Delaware on November 21,
1997;
WHEREAS, all Certificates to be issued by the Trust will evidence
fractional undivided interests in the Trust, will convey rights, benefits or
interests in respect of the Assigned Trust Property and will convey no rights,
benefits or interests in respect of the Excluded Trust Property;
WHEREAS, pursuant to the terms and conditions of this Agreement, the
Trust shall purchase X-TRAS having the same interest rate as, and initial
maturity date not later than the final Regular Distribution Date of, the
Certificates issued hereunder and shall hold such X-TRAS in trust for the
benefit of the Certificateholders;
WHEREAS, to facilitate the sale of X-TRAS to, and the purchase of
X-TRAS by, the Trust, the Company has duly authorized the execution and delivery
of this Agreement as the "issuer", as such term is defined in and solely for
purposes of the Securities Act of 1933, as amended, of the Certificates to be
issued pursuant hereto and as the "obligor", as such term is defined in and
solely for purposes of the Trust Indenture Act of 1939, as amended, with respect
to all such Certificates and is undertaking to perform certain administrative
and ministerial duties hereunder and is also undertaking to pay the ongoing fees
and expenses of the Trustee;
<PAGE> 8
2
WHEREAS, all of the conditions and requirements necessary to make this
Agreement, when duly executed and delivered, a valid, binding and legal
instrument, enforceable in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof have been in
all respects duly authorized;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Interpretation and Definitions. For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or by the rules
promulgated under the Trust Indenture Act, have the meanings assigned to
them therein;
(3) all references in this Agreement to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision; and
(5) unless the context otherwise requires, whenever the words
"including", "include" or "includes" are used herein, it shall be deemed
to be followed by the phrase "without limitation".
Affiliate: Means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under common
control with such Person. For purposes of this definition, "control"
means the power, directly or indirectly, to direct the management and
policies of such Person, whether through the ownership of
<PAGE> 9
3
voting securities or by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
Agent Members: Has the meaning specified in Section 3.05.
Applicable Discount: [Means the discount from par at which the
Certificates are sold, determined on the basis of the number of basis
points used in calculating the option premium paid by the Extension
Option Buyer pursuant to the ISDA Master Agreement.]
Assigned Trust Property: Means (i) the X-TRAS held as the property
of the Trust and all monies at any time paid thereon and all monies due
and to become due thereunder (other than any monies paid thereon or due
or to become due thereunder in respect of the ISDA Amount) and (ii) funds
from time to time deposited in the Certificate Account and the Special
Payments Account.
Authorized Agent: Means any Paying Agent or Registrar for the
Certificates.
Avoidable Tax: Means a state or local tax (i) upon (w) the Trust,
(x) the Assigned Trust Property, (y) Certificateholders or (z) the
Trustee for which the Trustee is entitled to seek reimbursement from the
Company, and (ii) which would be avoided if the Trustee were located in
another state, or jurisdiction within a state, within the United States.
A tax shall not be an Avoidable Tax if the Company shall agree to pay,
and shall pay, such tax.
Business Day: Means any day other than a Saturday, a Sunday or a
day on which commercial banks are required or authorized to close in
______, ______, New York, New York, or, so long as any Certificate is
outstanding, the city and state in which the Trustee or the Indenture
Trustee maintains its Corporate Trust Office or receives and disburses
funds.
Business Trust Act: Means Chapter 38 of Title XII of the Delaware
Code, 12 Del. C. Section 3801 et seq. as it many be amended from time to
time, or any successor legislation.
Calculation Agent: Means the Calculation Agent under the ISDA
Master Agreement, which initially shall be Morgan Stanley Capital
Services, Inc., and shall include any successor thereunder.
Certificate: Means any one of the Certificates and any such
Certificates issued in exchange therefor or replacement thereof pursuant
to this Agreement.
<PAGE> 10
4
Certificate Account: Means the account or accounts created and
maintained pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a
Certificate is registered in the Register.
Certificates: Means the certificates issued and authenticated
hereunder substantially in the form of Exhibit A hereto.
Change in Control: Shall have the meaning set forth in the Indenture.
Change in Control Purchase Date: Shall have the meaning set forth
in Section 5.03 of this Agreement.
Code: Mean the Internal Revenue Code of 1986, as amended.
Company: Means CMS Energy Corporation, a Michigan corporation, or
its successor in interest pursuant to Section 5.02, or any other obligor
(within the meaning of the Trust Indenture Act) with respect to the
Certificates.
Corporate Trust Office: With respect to the Trustee or the
Indenture Trustee, means the office of such trustee in the city at which
at any particular time its corporate trust business shall be principally
administered.
Depositary: Means The Depository Trust Company, its nominees and
their respective successors.
Direction: Has the meaning specified in Section 1.04(a).
Distribution Date: Means any Regular Distribution Date or Special
Distribution Date.
ERISA: Means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any successor federal statute.
Event of Default: Means an Indenture Default under the Indenture
pursuant to which X-TRAS held by the Trust were issued.
Excess Proceeds: Shall have the meaning set forth in the Indenture.
Excess Proceeds Offer: Means an offer made by the Company under
Section 4.05 of the Indenture.
<PAGE> 11
5
Exchange Act: Means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
Excluded Trust Property: Means all rights of the Trust and the
Trustee under the ISDA Master Agreement and (solely with respect to
obligations relating to payment of the ISDA Amount) as a holder of X-TRAS
under the Indenture, including, without limitation, (i) all rights to
receive certain payments under the ISDA Master Agreement and (solely with
respect to obligations relating to payment of the ISDA Amount) as a
holder of X-TRAS under the Indenture and (ii) all monies paid to the
Trustee on behalf of the Trust by the Extension Option Buyer pursuant to
the ISDA Master Agreement and by the Company (solely with respect to
obligations relating to payment of the ISDA Amount) pursuant to the
Indenture.
Exercise Date: Means the 90th day prior to the Final Distribution
Date.
Extension Notice: Means the notice required to be delivered by the
Extension Option Buyer to the Company, the Trustee and the Indenture
Trustee in the event that the Extension Option is exercised.
Extension Option: Means the option sold by the Trust and purchased
by the Extension Option Buyer under the ISDA Master Agreement.
Extension Option Buyer: Means Morgan Stanley Capital Services, Inc.
Final Distribution: Means, with respect to the X-TRAS, the final
distribution paid to Certificateholders in respect of the principal and
accrued interest on the X-TRAS in accordance with Section 11.01.
Final Distribution Date: Means the date on which the Final
Distribution is paid to Certificateholders pursuant to Section 11.01.
Fractional Undivided Interest: Means the fractional undivided
interest in the Trust (to the extent of the Assigned Trust Property) that
is evidenced by a Certificate.
Global Certificate: Has the meaning specified in Section 3.01.
Global Certificates: Has the meaning assigned to such term in
Section 3.01.
ISDA Amount: Means such amount as is required to be paid under the
ISDA Master Agreement in accordance with the terms thereof.
<PAGE> 12
6
ISDA Master Agreement: Means the ISDA Master Agreement, Schedule
and Confirmation dated as of ______ __, 1998 entered into by the Trust
and the Extension Option Buyer, as amended from time to time.
ISDA Payment: Means any payment made by the Company under the
Indenture in respect of any ISDA Amount which may be due under the
provisions thereof.
ISDA Payment Account: Means the account or accounts created and
maintained pursuant to Section 4.01(d).
ISDA Stated Maturity: Shall have the meaning set forth in the
Indenture.
Indenture: Means the Indenture dated as of September 15, 1992 as
supplemented by the Sixth Supplemental Indenture, dated as of ________
__, 1998, between the Company and NBD Bank, a Michigan banking
corporation (formerly known as NBD Bank, National Association), as
Indenture Trustee, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms in respect of the
series of securities issued thereunder known as X-TRAS.
Indenture Default: With respect to any Indenture, means any Event
of Default (as such term is defined in such Indenture).
Indenture Trustee: With respect to any X-TRAS or the Indenture,
means the bank or trust company designated as indenture trustee under
such Indenture, together with any successor to such Indenture Trustee
appointed pursuant thereto.
Initial Regular Distribution Date: Means the first Regular
Distribution Date on which a Scheduled Payment is to be made.
Initial Stated Maturity: Shall have the meaning set forth in the
Indenture.
Institutional Accredited Investor: Means an institutional investor
that is an "accredited investor" within the meaning set forth in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
Issuance Date: Means the date of the issuance of the Certificates.
1940 Act: Means the Investment Company Act of 1940, as amended from
time to time, or any successor legislation.
<PAGE> 13
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Officer's Certificate: Means a certificate signed (a) in the case
of the Company, by (i) the Chairman or Vice Chairman of the Board of
Directors, the President, any Executive Vice President, any Senior Vice
President or the Treasurer of the Company, signing alone, or (ii) any
Vice President of the Company signing together with the Secretary, the
Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company or (b) in the case of the Indenture Trustee, by a Responsible
Officer of such Indenture Trustee, as the case may be.
Opinion of Counsel: Means a written opinion of legal counsel who
(a) in the case of counsel for the Company, may be (i) a senior attorney
of the Company one of whose principal duties is furnishing advice as to
legal matters or (ii) such other counsel designated by the Company and
reasonably acceptable to the Trustee and (b) in the case of counsel for
the Indenture Trustee, may be such counsel as may be designated by it
whether or not such counsel is its employee, and who shall be reasonably
acceptable to the Trustee.
Outstanding: When used with respect to Certificates, means, as of
the date of determination, all Certificates theretofore authenticated and
delivered under this Agreement, except:
(i) Certificates theretofore cancelled by the Registrar or
delivered to the Trustee or the Registrar for cancellation;
(ii) Certificates for which money in the full amount required
to make the final distribution with respect to such Certificates
pursuant to Section 11.01 hereof has been theretofore deposited
with the Trustee in trust for the Holders of such Certificates as
provided in Section 4.01 pending distribution of such money to such
Certificateholders pursuant to payment of such final distribution;
and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement.
Paying Agent: Means the paying agent maintained and appointed for
the Certificates pursuant to Section 7.12.
Permitted Investments: Means obligations of the United States of
America or agencies or instrumentalities thereof the payment of which is
backed by the full faith and credit of the United States of America and
which mature in not more than 60 days after the date of acquisition
thereof or such lesser time as is required for the distribution of any
Special Payments on a Special Distribution Date or the Final Distribution
on the Final Distribution Date.
<PAGE> 14
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Person: Means any person, including any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
trustee, unincorporated organization, or government or any agency or
political subdivision thereof.
Purchase Agreement: Means the Purchase Agreement dated as of
__________, 1998 by and among the Underwriters, the Company and the
Trust.
Purchase Date: Means the date of purchase of the X-TRAS by the
Trust and of the Certificates by the Underwriters.
QIB: Means a qualified institutional buyer as defined in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be distributed on
any Regular Distribution Date, other than the final distribution, the
first day of the calendar month in which such Regular Distribution Date
occurs (whether or not a Business Day) preceding such Regular
Distribution Date, and (ii) for Special Payments to be distributed on any
Special Distribution Date, other than the final distribution, the 15th
day (whether or not a Business Day) preceding such Special Distribution
Date.
Register and Registrar: Mean the register maintained and the
registrar appointed pursuant to Sections 3.04 and 7.12.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of the Certificates, means each date
designated as a Regular Distribution Date in this Agreement, until
payment of all the Scheduled Payments to be made under the X-TRAS held in
the Trust have been made; provided, however, that, if any such day shall
not be a Business Day, the related distribution shall be made on the next
succeeding Business Day without additional interest.
Remarketing Agent: Means Morgan Stanley & Co. Incorporated or such
other investment banking institution as shall be selected in accordance
with Section 10.02 of the Indenture in connection with a remarketing of
the X-TRAS.
Remarketing Deadline: Means the fifteenth day prior to the Final
Distribution Date or such earlier date as may be mutually agreed by the
Company, the Indenture Trustee, the Trustee and the Extension Option
Buyer.
Remarketing Procedure: Shall have the meaning set forth in Section
11.01(a) hereof.
<PAGE> 15
9
Required Remarketing Proceeds: Shall have the meaning set forth in
Section 11.01(a) hereof.
Responsible Officer: With respect to the Trustee and the Indenture
Trustee means any officer in the Corporate Trust Office of the Trustee
or Indenture Trustee or any other officer customarily performing
functions similar to those performed by the persons who at the time shall
be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with a particular
subject.
Rule 3a-7: Means Rule 3a-7 under the 1940 Act and any successor
rule thereto.
Rule 144A: Means Rule 144A under the Securities Act and any
successor rule thereto.
Scheduled Payment: With respect to any X-TRAS, means any payment of
principal and interest on such X-TRAS (other than any such payment which
is not in fact received by the Trustee within five Business Days of the
date on which such payment is scheduled to be made) due from the obligor
thereon, which payment represents the repayment of principal at the
stated maturity of such repayment of principal on such X-TRAS, the
payment of regularly scheduled interest accrued on the unpaid principal
amount of such X-TRAS, or both; provided that any payment of principal,
premium, if any, or interest resulting from (i) the redemption or
purchase of any X-TRAS (other than pursuant to the FD Redemption Option)
or (ii) the acceleration of the X-TRAS pursuant to the terms of the
Indenture shall not constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from time to
time constituted or created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties on
such date.
Securities Act: Means the United States Securities Act of 1933, as
amended from time to time, or any successor thereto.
Settlement Date: Means the settlement date under the ISDA Master
Agreement.
<PAGE> 16
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Special Distribution Date: Means each date on which a Special
Payment made under clause (i) (to the extent of a redemption of all of
the X-TRAS) and (iv) of the definition thereof is to be distributed to
the Certificateholders as specified in this Agreement; provided, however,
that, if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business Day without
additional interest.
Special Payment: With respect to any X-TRAS, means (i) any payment
of principal, the Applicable Premium and interest resulting from the
redemption of any X-TRAS by the Company pursuant to its exercise of the
Early Redemption Option pursuant to Section 7.01(b) of the Indenture,
(ii) any payment of principal, premium, if any, and interest resulting
from the repurchase of any X-TRAS by the Company pursuant to a
Certificateholder's exercise of its right, in the event of a Change in
Control, to direct the Trustee to require the Company to repurchase all
or any part of the X-TRAS beneficially owned by such Certificateholder,
(iii) any payment of principal and interest resulting from the repurchase
by the Company of any X-TRAS beneficially owned by a Certificateholder
that has presented for cancellation all or a portion of its Certificates
within the time period required to accept an Excess Proceeds Offer made
in compliance with Section 4.05 under the Indenture, (iv) any payment of
principal and interest resulting from the acceleration of the stated
maturity of the X-TRAS following an Indenture Event of Default, and (v)
any other payment (other than a Scheduled Payment) in respect of, or any
proceeds of, any X-TRAS.
Special Payments Account: Means the account or accounts created and
maintained pursuant to Section 4.01(b).
Specified Investments: Means (i) obligations of, or guaranteed by,
the United States Government or agencies thereof, (ii) open market
commercial paper of any corporation incorporated under the laws of the
United States of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or its
equivalent by Standard & Poor's Ratings Group, (iii) certificates of deposit
issued by commercial banks organized under the laws of the United States or
of any political subdivision thereof having a combined capital and surplus
in excess of $100,000,000, which banks or their holding companies have a
short-term deposit rating of P1 by Moody's Investors Service, Inc. or its
equivalent by Standard & Poor's Ratings Group; provided, however, that the
aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not exceed 5% of such bank's capital and
surplus, (iv) U.S. dollar denominated offshore certificates of deposit
issued by, or offshore time deposits with, any commercial bank described in
clause (iii) above or any subsidiary thereof and (v) repurchase agreements
with any financial institution having combined capital and surplus of at
least $100,000,000 with respect to any of the obligations described in
clauses (i) through (iv) above as
<PAGE> 17
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collateral; provided further that if all of the above investments are
unavailable, all amounts to be invested may be used to purchase Federal
Funds from an entity described in clause (iii) above.
Subsidiary: Means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or
by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
Trust: Means the Delaware business trust created by this Agreement,
the estate of which consists of the Assigned Trust Property and the
Excluded Trust Property.
Trust Indenture Act: Except as otherwise provided in Section 9.06,
means the United States Trust Indenture Act of 1939 as in force at the
date hereof.
Trustee: Means Wilmington Trust Company, or its successor in
interest, and any successor or other trustee appointed as provided
herein.
Underwriters: Means Morgan Stanley & Co. Incorporated, Salomon
Brothers Inc, Donaldson Lufkin & Jenrette Securities Corporation and
Goldman Sachs & Co.
X-TRAS: Means Extendible Tenor Rate-Adjusted Securities, as issued
by the Company pursuant to the Indenture.
X-TRAS Paying Agent: Means the paying agent maintained and
appointed for the X-TRAS pursuant to the Indenture (which initially shall
be the Indenture Trustee).
Certain terms, used principally in Articles V and XI of this Agreement,
are defined in those Articles.
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company or the Indenture Trustee to the Trustee to
take any action under any provision of this Agreement, the Company or the
Indenture Trustee, as the case may be, shall furnish to the Trustee (i) an
Officer's Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such
<PAGE> 18
12
documents is specifically required by any provision of this Agreement relating
to such particular application or request, no additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement (other than a certificate
provided pursuant to Section 8.04(d)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Agreement relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement or, in respect of the Certificates, this
Agreement, they may, but need not, be consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a) Any direction,
consent, request, demand, authorization, notice, waiver or other action provided
by this Agreement to be given or taken by Certificateholders (a "Direction") may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required pursuant to this
<PAGE> 19
13
Agreement, to the Company or the Indenture Trustee. Proof of execution of any
such instrument or of a writing appointing any such agent or proxy shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Company and the Indenture Trustee, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
Direction under this Agreement, Certificates owned by the Company or any
Affiliate thereof shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates which the
Trustee knows to be so owned shall be so disregarded. Notwithstanding the
foregoing, (i) if any such Person owns 100% of the Certificates Outstanding,
such Certificates shall not be so disregarded, and (ii) if any amount of
Certificates so owned by any such Person have been pledged in good faith, such
Certificates shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Company or any Affiliate thereof.
(d) The Company may at its option, by delivery of an Officer's
Certificate to the Trustee, set a record date to determine the
Certificateholders entitled to give any Direction. Notwithstanding Section
316(c) of the Trust Indenture Act, such record date shall be the record date
specified in such Officer's Certificate, which shall be a date not more than 30
days prior to the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be given before
or after such record date, but only the Certificateholders of record at the
close of business on such record date shall be deemed to be Certificateholders
for the purposes of determining whether Certificateholders of the requisite
proportion of Outstanding Certificates have authorized or agreed or consented to
such Direction, and for that purpose the Outstanding Certificates shall be
computed as of such record date; provided that no such Direction by the
Certificateholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not later than one
year after such record date.
<PAGE> 20
14
(e) Any Direction by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Certificates.
ARTICLE II
ESTABLISHMENT OF THE TRUST,
ORIGINAL ISSUANCE OF CERTIFICATES,
ACQUISITION OF X-TRAS, SALE OF EXTENSION OPTION
Section 2.01. Name. The Trust created hereby shall be known as CMS
Energy X-TRAS Pass Through Trust Series I, as such name may be modified from
time to time by the Trustee following written notice to the Holders, in which
name the Trustee may conduct the business of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued.
Section 2.02. Office of the Trustee; Principal Place of Business.
The address of the Trustee in the State of Delaware is c/o Wilmington Trust
Company, 1100 North Market Street, Wilmington, Delaware 19801-0001, Attention:
Corporate Trust Administration, or at such other address in the State of
Delaware as the Trustee may designate by written notice to the Holders and the
Company. The principal executive office of the Trust is c/o CMS Energy
Corporation, Fairlane Plaza South, Suite 1100, Dearborn, Michigan 48126.
Section 2.03. Issuance of Certificates; Acquisition of X-TRAS; Sale of
Extension Option. (a) Upon request of the Company and the satisfaction of the
closing conditions specified in the Purchase Agreement, the Trust shall, on the
Purchase Date, execute, deliver and authenticate Certificates equalling in the
aggregate the aggregate principal amount of the X-TRAS to be purchased by the
Trust pursuant to the Purchase Agreement and evidencing the entire ownership
interest in the Assigned Trust Property. The Trust shall issue and sell such
Certificates, in authorized denominations and in such Fractional Undivided
Interests, so as to result in the receipt by the Trustee of consideration in an
amount equal to the aggregate face amount of such Certificates less the
Applicable Discount and, concurrently therewith, the Trust shall purchase the
X-TRAS from the Company at a purchase price equal to the sum of (x) the amount
of such consideration so received for the sale of the Certificates and (y) the
amount of consideration received by the
<PAGE> 21
15
Trust for the sale of Extension Option to the Extension Option Buyer. Except
as provided in Sections 3.04 and 3.07 hereof, the Trust shall not execute,
authenticate or deliver Certificates in excess of the aggregate amount
specified in this paragraph.
(b) Concurrently with the execution of the Purchase Agreement, the
Trust shall enter into the ISDA Master Agreement with the Extension Option
Buyer. On the Issuance Date, the Trust shall issue and sell to the Extension
Option Buyer the Extension Option pursuant to the terms of the ISDA Master
Agreement for consideration in the amount provided thereunder. The
consideration so received by the Trust for the sale of the Extension Option
shall be paid by the Trust to the Company in partial consideration for the
X-TRAS, as provided under subsection (a) above. The Trust's rights under the
ISDA Master Agreement and the monies received by the Trust under the ISDA
Master Agreement (whether from the Extension Option Buyer or the Company) shall
constitute Excluded Trust Property which shall not be assigned for the benefit
of Certificateholders.
Section 2.04. Declaration of Trust. The exclusive purposes and
functions of the Trust are: (a) to issue and sell Certificates and use the
proceeds from such sales to acquire the X-TRAS and (b) to engage in those
activities necessary or incidental thereto. The Company hereby appoints the
Trustee as trustee of the Trust, to have all the rights, powers and duties to
the extent set forth herein, and the Trustee hereby accepts such appointment.
The Trustee hereby declares that it will hold the Assigned Trust Property in
trust upon and subject to the conditions set forth herein for the benefit of
the Trust and the Holders. The Trustee shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust.
Section 2.05. Authorization to Enter Into Certain Transactions. (a)
The Trustee shall conduct the affairs of the Trust in accordance with the terms
of this Agreement. Subject to the limitations set forth in paragraph (b) of
this section, and in accordance with the following provisions, the Trustee
shall have the authority to enter into all transactions and agreements
determined by the Trustee to be appropriate in exercising the authority,
express or implied, otherwise granted to the Trustee under this Trust
Agreement, and to perform all acts in furtherance thereof, including, without
limitation, the following:
(i) to execute and file the Certificate of Trust filed with the
Secretary of State of the State of Delaware on November 21, 1997;
(ii) the issuance and sale of the certificates;
(iii) to cause the Trust to enter into, and to execute, deliver and
perform on behalf of the Trust, the ISDA Master Agreement;
<PAGE> 22
16
(iv) assist in the registration of the Certificates under the
Securities Act of 1933, as amended, and under state securities or blue
sky laws and the qualification of this Agreement as a trust indenture
under the Trust Indenture Act;
(v) assist in the listing, if any, of the Certificates upon such
securities exchange or exchanges or automated quotation system or systems
as shall be determined by the Company and the registration of the
Certificates under the Exchange Act and the preparation and filing of all
periodic and other reports and other documents pursuant to the foregoing;
(vi) the establishment of the Certificate Account, the Special
Payments Account and the ISDA Payment Account;
(vii) the receipt of the X-TRAS;
(viii) the collection of interest, principal and any other payment
made in respect of the X-TRAS in the Certificate Account;
(ix) the distribution through the Paying Agent of amounts owed to
the Certificate Holders in respect of the Certificates;
(x) the exercise of all the rights, powers and privileges of a
Holder of X-TRAS;
(xi) the sending of notices and other information regarding the
Certificates and the X-TRAS to the Certificateholders in accordance with
this Agreement;
(xii) the appointment of a Paying Agent, Authenticating Agent and
Securities Registrar in accordance with this Agreement;
(xiii) registering transfer of the Certificates in accordance with
this Agreement;
(xiv) to the extent provided in this Agreement, the winding up of
the affairs of and liquidation of the Trust and the preparation,
execution and filing of the Certificate of Cancellation with the
Secretary of State of the State of Delaware;
(xv) the distribution of the Assigned Trust Property in accordance
with the terms of this Agreement;
(xvi) after an Event of Default, the taking of any action incidental
to the foregoing (A) as the Trustee may from time to time determine is
necessary or
<PAGE> 23
17
advisable, or as the Trustee may be directed by the Certificateholders to
take, in order to give effect to the terms of the Agreement and protect and
conserve the Assigned Trust Property for the benefit of the
Certificateholders (without consideration of the effect of any such action
on any particular Certificateholder) or (B) as the Trustee may from time to
time determine is necessary or advisable, or as the Trustee may be directed
by the Extension Option Buyer to take, in order to give effect to the terms
of the ISDA Master Agreement and enforce the rights of the Extension Option
Buyer;
(xvii) unless otherwise determined by the Company or is otherwise
required by the Business Trust Act or the Trust Indenture Act, to execute
on behalf of the Trust any documents that the Trustee has the power to
execute pursuant to this Agreement; and
(xviii) the taking of any action incidental to the foregoing as the
Trustee may from time to time determine is necessary or advisable to give
effect to the terms of this Agreement for the benefit of the
Certificateholders (without consideration of the effect of any such
action on any particular Certificateholder).
(b) So long as this Agreement remains in effect, the Trust (or the
Trustee acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustee shall not:
(i) acquire any investments or engage in any activities not
authorized by this Agreement;
(ii) sell, assign, transfer, exchange, mortgage, pledge, set off or
otherwise dispose of any of the Assigned Trust Property or interests
therein, including to Certificateholders, except as expressly provided
herein;
(iii) take any action that would cause the Trust to be classified as
an association taxable as a corporation or as other than a grantor trust
for United States federal income tax purposes;
(iv) incur any indebtedness for borrowed money or issue any other
debt; or
(v) take or consent to any action that would result in the
placement of a Lien on any of the Assigned Trust Property. The Trustee
shall defend all claims and demands of all Persons at any time claiming any
Lien on any of the Assigned Trust Property adverse to the interest of the
Trust or the Certificateholders in their capacities as Certificateholders.
<PAGE> 24
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(c) In connection with the issue and sale of the Certificates, the
Company shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (any such actions
taken by the Company in furtherance of the following prior to the date of this
Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the SEC and the
execution on behalf of the Trust of a Registration Statement on the
appropriate form in relation to the Certificates, including any
amendments thereto;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Certificates,
and the determination of any and all such acts, other than such actions
which must be taken by or on behalf of the Trust, and the advice to the
Trustee of actions it must take on behalf of the Trust, and the
preparation for execution and filing of any documents to be executed and
filed by the Trust or on behalf of the Trust, as the Company deems
necessary or advisable in order to comply with the applicable laws of any
such states;
(iii) the preparation for filing by the Trust and the execution on
behalf of the Trust of an application to the New York Stock Exchange or
any other national stock exchange or the NASDAQ National Market or any
other automated quotation system for listing upon notice of issuance of
any Certificates and filing with such exchange or self-regulatory
organization such notifications and documents as may be necessary from
time to time to maintain such listing;
(iv) the preparation for filing by the Trust with the SEC and the
execution on behalf of the Trust of a Registration Statement on Form 8-A
relating to the registration of the Certificates under Section 12(b) or
12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution and delivery
of, the Purchase Agreement on behalf of the Trust providing for the sale
of the Certificates; and
(vi) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Trustee is
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that the Trust will not be deemed to be an "investment company" or
required to be registered under the 1940 Act, or to be classified as an
association taxable as a corporation or is other than a grantor trust for
United States federal income tax purposes and so that the Certificates will be
<PAGE> 25
19
treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Company and the Trustee are authorized to
take any action, not inconsistent with applicable law, the Certificate of Trust
or this Agreement, that each of the Company and the Trustee determines in its
discretion to be necessary or desirable for such purposes, as long as such
action does not adversely affect in any material respect the interests of the
Certificateholders.
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of Certificates.
(a) The Certificates shall be known as the " % Pass Through Certificates
Series I" of the Trust. Each Certificate will represent a fractional undivided
interest in the Assigned Trust Property and shall be substantially in the form
set forth as Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as evidenced by their
execution of the Certificates. Any portion of the text of any Certificate may
be set forth on the reverse thereof, with an appropriate reference thereto on
the face of the Certificate.
(b) The Certificates shall be issued only in fully registered form
without coupons and only in denominations of $[250,000] or integral multiples
of $1,000 in excess thereof. Each Certificate shall be dated the date of its
authentication. The aggregate Fractional Undivided Interest of Certificates
shall not at any time exceed $[150,000,000].
(c) Certificates offered and sold to QIBs and to Institutional
Accredited Investors in reliance on Rule 3a-7 shall be issued in the form of a
single permanent global Certificate in registered form, substantially in the
form set forth as Exhibit A hereto (the "Global Certificate"), duly executed
and authenticated by the Trustee as hereinafter provided. The Global
Certificate will be registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The aggregate
principal amount of the Global Certificate may from time to time be increased
or decreased by adjustments made on the records of the Depositary or its
nominee, or of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
(d) Definitive Certificates shall be in registered form and shall be
typed, printed, lithographed or engraved or produced by any combination of
these methods or may be produced in any other manner, all as determined by the
officers executing such Certificates, as evidenced by their execution of such
Certificates.
<PAGE> 26
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Section 3.02. Restrictive Legends. (a) The Global Certificate shall
bear the following legend (the "Permanent Legend") on the face thereof:
THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE CERTIFICATEHOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2)
AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE
EXCEPT (A) TO THE COMPANY, (B) TO A QUALIFIED INSTITUTIONAL BUYER, OR (C)
TO AN INSTITUTIONAL ACCREDITED INVESTOR, AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
(b) The Global Certificate shall also bear the following legend on the
face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
<PAGE> 27
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Section 3.03. Authentication of Certificates. (a) The Trustee shall
duly execute, authenticate and deliver Certificates in authorized denominations
equalling in the aggregate the aggregate principal amount of the X-TRAS to be
purchased by the Trustee pursuant to the Purchase Agreement and evidencing the
entire ownership of the Trust.
(b) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. (a) The Trustee shall cause to
be kept at the office or agency to be maintained by it in accordance with the
provisions of Section 7.12 of this Agreement a register (the "Register") for
the Certificates in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the Certificates
and of transfers and exchanges of the Certificates as herein provided. The
Trustee shall initially be the registrar (the "Registrar") for the purpose of
registering the Certificates and transfers and exchanges of the Certificates as
herein provided. A Certificateholder may transfer a Certificate by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Agreement, including providing a
written certificate or other evidence of compliance with any restrictions on
transfer. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Certificateholder only upon, final acceptance and
registration of the transfer by the Registrar in the Register. Prior to the
registration of any transfer by a Certificateholder as provided herein, the
Trustee shall treat the person in whose name the Certificate is registered as
the owner thereof for all purposes, and the Trustee shall not be affected by
notice to the contrary. Furthermore, the Depositary shall, by acceptance of a
Global Certificate, agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system maintained by the
Depositary (or its agent), and that ownership of a beneficial interest in the
Certificate shall be required to be reflected in a book entry. When
Certificates are presented to the Registrar with a request to register the
transfer or to exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met. To
permit registrations of transfers and exchanges in accordance with the terms,
conditions and restrictions hereof, the Trustee shall execute and authenticate
Certificates at the Registrar's request. No service charge shall be made for
any registration of transfer or exchange of the Certificates, but the Trustee
may require payment by the transferor of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
any such transfer taxes or other similar governmental charges payable upon
exchanges pursuant to Section 3.10 or 9.07).
<PAGE> 28
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Section 3.05. Book-Entry Provisions for the Global Certificate. (a)
Members of, or participants in, the Depositary ("Agent Members") shall have no
rights under this Agreement with respect to the Global Certificate held on
their behalf by the Depositary, or the Trustee as its custodian, and the
Depositary may be treated by the Trustee and any agent of the Trustee as the
absolute owner of such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any
agent of the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly appointed agent
shall record a nominee of the Depositary as the registered holder of such
Global Certificate.
(b) Transfers of any Global Certificate shall be limited to transfers
of such Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees. Beneficial interests
in the Global Certificate may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 3.06. Beneficial
interests in the Global Certificate shall be delivered to all beneficial owners
in the form of definitive Certificates if (i) the Depositary notifies the
Trustee that it is unwilling or unable to continue as Depositary for the Global
Certificate and a successor depositary is not appointed by the Trustee within
90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depositary to
issue definitive Certificates.
(c) In connection with the transfer of the entire Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05,
the Global Certificate shall be deemed to be surrendered to the Trustee for
cancellation, and the Trustee shall execute, authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Certificate an equal aggregate principal amount of
definitive Certificates of authorized denominations.
(d) Any Physical Certificate delivered in exchange for an interest in
the Global Certificate pursuant to paragraph (b) of this Section 3.05 shall,
except as otherwise provided by paragraph (f) of Section 3.06, bear the
Permanent Legend.
(e) The registered holder of the Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and Persons that
may hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. The following provisions
shall apply to the Certificates:
<PAGE> 29
23
(a) Transfers to Non-QIB Institutional Accredited Investors. The
Registrar shall register the transfer of any Certificate to any Institutional
Accredited Investor.
(b) Transfers to QIBs. The Registrar shall register the transfer of
any Certificate to any QIB.
(c) Permanent Legend. Upon the transfer, exchange or replacement of
Certificates bearing the Permanent Legend, the Registrar shall deliver only
Certificates that bear the Permanent Legend unless there is delivered to the
Registrar an Opinion of Counsel to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the 1940 Act.
(d) General. By its acceptance of any Certificate bearing the
Permanent Legend, each Holder of such a Certificate acknowledges the
restrictions on transfer of such Certificate set forth in this Agreement and
agrees that it will transfer such Certificate only as provided in this
Agreement. The Registrar shall not register a transfer of any Certificate
unless such transfer complies with the restrictions on transfer of such
Certificate set forth in this Agreement. In connection with any transfer of
Certificates, each Certificateholder agrees by its acceptance of the
Certificates to furnish the Registrar or the Trustee such certifications or
other information as either of them may reasonably require; provided that the
Registrar shall not be required to determine the sufficiency of any such
certifications, legal opinions or other information.
Until such time as no Certificates remain Outstanding, the Registrar
shall retain copies of all letters, notices and other written communications
received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not
the Registrar at such time, shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Registrar or the Registrar
receives evidence to its satisfaction of the mutilation, destruction, loss or
theft of any Certificate and (b) there is delivered to the Registrar and the
Trustee such security, indemnity or bond, as may be required by them to save
each of them and any Paying Agent harmless, then, in the absence of notice to
the Registrar or the Trustee that such destroyed, lost or stolen Certificate
has been acquired by a bona fide purchaser, and provided that the requirements
of Section 8-405 of the Uniform Commercial Code in effect in any applicable
jurisdiction are met, then, upon payment by the Certificateholder of any
applicable expenses, the Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized denominations and
of like Fractional Undivided Interest and bearing a number not
contemporaneously outstanding.
<PAGE> 30
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In connection with the issuance of any new Certificate under this
Section 3.07, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto
and any other expenses (including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 3.07 shall
constitute conclusive evidence of the appropriate Fractional Undivided Interest
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due presentment of a
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent may treat the Person in whose name any Certificate is registered
(as of the day of determination) as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent
shall be affected by any notice to the contrary.
Section 3.09. Cancellation. All Certificates surrendered for payment
or transfer or exchange shall, if surrendered to the Trustee or any agent of
the Trustee other than the Registrar, be delivered to the Registrar for
cancellation and shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates cancelled as
provided in this Section, except as expressly permitted by this Agreement. All
cancelled Certificates held by the Registrar shall be destroyed and a
certification of their destruction delivered to the Trustee.
Section 3.10. Temporary Certificates. Until definitive Certificates
are ready for delivery, the Trustee shall authenticate temporary Certificates.
Temporary Certificates shall be substantially in the form of definitive
Certificates but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the officers executing the temporary
Certificates, as evidenced by their execution of such temporary Certificates.
If temporary Certificates are issued, the Trustee will cause definitive
Certificates to be prepared without unreasonable delay. After the preparation
of definitive Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary Certificates at the
office or agency of the Trustee designated for such purpose pursuant to Section
7.12, without charge to the Certificateholder. Upon surrender for cancellation
of any one or more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount of definitive
<PAGE> 31
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Certificates of authorized denominations. Until so exchanged, the temporary
Certificates shall be entitled to the same benefits under this Agreement as
definitive Certificates.
Section 3.11. Limitation of Liability for Payments. All payments and
distributions made to Certificateholders shall be made only from the Assigned
Trust Property and only to the extent that the Trustee shall have sufficient
income or proceeds from the Assigned Trust Property to make such payments in
accordance with the terms of Article IV of this Agreement. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will look
solely to the income and proceeds from the Assigned Trust Property for any
payment or distribution due to such Certificateholder pursuant to the terms of
this Agreement and that it will not have any recourse to the Company, the
Trustee or the Indenture Trustee except as otherwise expressly provided.
The Company is a party to this Agreement solely for purposes of meeting
the requirements of the Trust Indenture Act, and therefore shall not have any
right, obligation or liability hereunder (except as otherwise expressly
provided herein).
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS; PAYMENTS TO EXTENSION OPTION BUYER
Section 4.01. Certificate Account, Special Payments Account and ISDA
Payment Account . (a) The Trustee shall establish and maintain on behalf of
the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the Certificate Account
in trust for the benefit of the Certificateholders, and shall make or permit
withdrawals therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Indenture, the Trustee upon
receipt thereof shall immediately deposit the aggregate amount of such
Scheduled Payment in the Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders a Special Payments Account as one or more accounts, which
shall be non-interest bearing except as provided in Section 4.04. The Trustee
shall hold the Special Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when one or more Special Payments are
made to the Trustee, the Trustee, upon receipt thereof, shall immediately
deposit the aggregate amount of such Special Payments in the Special Payments
Account.
<PAGE> 32
26
(c) The Trustee shall present to the Indenture Trustee the X-TRAS on
the date of their stated final maturity or, in the case of any X-TRAS which are
to be redeemed in whole pursuant to the Indenture, on the applicable redemption
date under such Indenture.
(d) The Trustee shall establish and maintain on behalf of the Extension
Option Buyer an ISDA Payment Account as one or more accounts, which shall be
non-interest bearing. The Trustee shall hold the ISDA Payment Account in trust
for the benefit of the Extension Option Buyer and shall make withdrawals
therefrom as provided in the ISDA Master Agreement. On each day when an ISDA
Payment is made to the Trustee by the Company pursuant to the Indenture, the
Trustee, upon receipt thereof, shall immediately deposit such ISDA Payment in
the ISDA Payment Account.
Section 4.02. Distributions from Certificate Account and Special
Payments Account. (a) On each Regular Distribution Date, the Trustee shall
distribute out of the Certificate Account to the Certificateholders all
Scheduled Payments the receipt of which is confirmed by the Trustee on such
date. There shall be so distributed to each Certificateholder of record on the
Record Date with respect to such Regular Distribution Date (other than as
provided in Section 11.01 concerning the final distribution) by check mailed to
such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Assigned Trust Property held by such Certificateholder) of the total
amount in the Certificate Account, except that, with respect to Certificates
registered on the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), such distribution shall be made by
wire transfer in immediately available funds to the account designated by such
nominee. If a Scheduled Payment is not received by the Trustee on the Register
Distribution Date but is received within [five] Business Days thereafter, it
will be distributed on the date so received by the Trustee to such holders of
record. If it is received after such [five] day period, it will be treated as
a Special Payment and distributed as described in paragraph (b) below.
(b) With respect to any Special Payment made under clause (i) of the
definition thereof (to the extent redemption of less than all of the X-TRAS is
made), the Trustee shall select, in such a manner as it shall deem appropriate
and fair, the particular Certificates or portions thereof representing
beneficial ownership of the X-TRAS to be redeemed. Notice of redemption shall
be given by mail not less than 20 nor more than 60 days prior to the date fixed
for redemption of the X-TRAS to the Certificateholders whose Certificates
represent beneficial ownership of the X-TRAS to be redeemed. Upon a redemption
of less than all of the X-TRAS, Certificates representing beneficial ownership
of the X-TRAS selected for redemption will be required to be presented to the
Trustee for cancellation. Upon such presentation, all payments of principal
of, Applicable Premium, and interest on the X-TRAS paid by the Company to the
Trust will be paid to the holders of such Certificates. With respect to any
Special Payment made under clause (ii) or (iii) of the
<PAGE> 33
27
definition thereof, there shall be paid to each Certificateholder who has duly
presented for cancellation and not withdrawn its Certificates in compliance
with the provisions of Sections 5.03 and 5.04 an amount equal to the aggregate
purchase price applicable to the X-TRAS beneficially owned by such
Certificateholder in respect of which it has tendered its Certificates. With
respect to any Special Payment made under clauses (i) (to the extent of a
redemption of all of the X-TRAS), (ii) and (iv) of the definition thereof, the
entire amount of such Special Payment deposited in the Special Payments Account
pursuant to Section 4.01(b) will be distributed on, in the case of an early
redemption of all of the X-TRAS, the date of such early redemption, which shall
be a Business Day, and otherwise 20 days after the Trustee has confirmed
receipt of the funds for such Special Payment (or the next Business Day after
such 20th day if such date is not a Business Day). With respect to any such
Special Payment, there shall be distributed to each Certificateholder of record
on the Record Date with respect to such Special Distribution Date (other than
as provided in Section 11.01 concerning the final distribution) by check mailed
to such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder) of the total amount in the Special
Payments Account on account of such Special Payment, except that, with respect
to Certificates registered on the Record Date in the name of the nominee of the
Depositary (initially, such nominee to be Cede & Co.), such distribution shall
be made by wire transfer in immediately available funds to the account
designated by such nominee. The Trustee will mail notice to the
Certificateholders not less than 20 days prior to the Special Distribution Date
on which any Special Payment is scheduled to be distributed by the Trustee
stating such anticipated Special Distribution Date. Each distribution of a
Special Payment, other than the Final Distribution, on a Special Distribution
Date will be made by the Trustee to Certificateholders of record on the 15th
day next preceding such Special Distribution Date.
(c) The Trustee shall, at the expense of the Company, cause notice of
each Special Payment to be mailed to each Certificateholder at his address as
it appears in the Register. In the event of redemption or purchase of X-TRAS
held in the Trust, such notice shall be mailed not less than 20 days prior to
the Special Distribution Date for the Special Payment resulting from such
redemption or purchase, which Special Distribution Date shall be the date of
such redemption or purchase. In the case of any other Special Payments, such
notice shall be mailed as soon as practicable after the Trustee has confirmed
that it has received funds for such Special Payment, stating the Special
Distribution Date for such Special Payment which shall occur not less than 20
days after the date of such notice and as soon as practicable thereafter.
Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor
(except as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000 face amount
Certificate (taking into account any payment to be made by the Company
pursuant to
<PAGE> 34
28
Section 2.03(b)) and the amount thereof constituting principal, premium, if
any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a Regular
Distribution Date, the total amount to be received on such date for each
$1,000 face amount Certificate.
If the amount of premium, if any, payable upon the redemption or
purchase of an X-TRAS has not been calculated at the time that the Trustee
mails notice of a Special Payment, it shall be sufficient if the notice sets
forth the other amounts to be distributed and states that any premium received
will also be distributed.
If any redemption of the X-TRAS held in the Trust is cancelled, the
Trustee, as soon as possible after learning thereof, shall cause notice thereof
to be mailed to each Certificateholder at its address as it appears on the
Register.
Section 4.03. Statements to Certificateholders. (a) On each
Distribution Date, the Trustee will include with each distribution to
Certificateholders of a Scheduled Payment or Special Payment, as the case may
be, a statement setting forth the following information (per $1,000 face amount
Certificate as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to premium, if any; and
(ii) the amount of such distribution allocable to interest.
With respect to the Certificates registered in the name of Cede & Co.,
as nominee for the Depositary, on the Record Date prior to each Distribution
Date, the Trustee will request from the Depositary a Securities Position
Listing setting forth the names of all Agent Members reflected on the
Depositary's books as holding interests in the Certificates on such Record
Date. On each Distribution Date, the Trustee will mail to each such Agent
Member the statement described above and will make available additional copies
as requested by such Agent Member for forwarding to holders of interests in the
Certificates.
(b) Within a reasonable period of time after the end of each calendar
year but not later than the latest date permitted by law, the Trustee shall
furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar year, for such
portion of such
<PAGE> 35
29
year, and such other items as are readily available to the Trustee and which a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns. Such
statement and such other items shall be prepared on the basis of information
supplied to the Trustee by the Agent Members and shall be delivered by the
Trustee to such Agent Members to be available for forwarding by such Agent
Members to the holders of interests in the Certificates in the manner described
in Section 4.03(a).
Section 4.04. Investment of Special Payment Moneys. Any money
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Investments by the Trustee pending
distribution of such Special Payment pursuant to Section 4.02. Any investment
made pursuant to this Section 4.04 shall be in such Permitted Investments
having maturities not later than the date that such moneys are required to be
used to make the payment required under Section 4.02 on the applicable Special
Distribution Date and the Trustee shall hold any such Permitted Investments
until maturity. The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by reason of the
willful misconduct or negligence of the Trustee. All income and earnings from
such investments shall be distributed on such Special Distribution Date as part
of such Special Payment.
Section 4.05. Payments from ISDA Payment Account. With respect to an
ISDA Payment received by the Trust on the Final Distribution Date and deposited
in the ISDA Payment Account, the Trustee shall withdraw such ISDA Payment from
the ISDA Payment Account and pay such amount by wire transfer on the Final
Distribution Date to the Extension Option Buyer to an account designated by it
pursuant to the ISDA Master Agreement. With respect to all other ISDA Payments
deposited in the ISDA Payment Account, the Trustee shall withdraw such ISDA
Payment from the ISDA Payment Account and pay such amount by wire transfer to
the Extension Option Buyer to the account designated by it pursuant to the ISDA
Master Agreement on the following dates: (i) in the event of an ISDA Payment
made pursuant to the Company's exercise of its right of redemption pursuant to
Section 7.01(b) of the Indenture, on the date of payment of the redemption
price thereunder; (ii) in the event of an ISDA Payment made pursuant to Section
5.03 of this Agreement, on the Change of Control Purchase Date; (iii) in the
event of an ISDA Payment made pursuant to Section 5.04 of this Agreement, on
the Excess Proceeds Purchase Date; (iv) in the event of an ISDA Payment made
pursuant to Sections 6.02, 6.03 or 6.04 of the Indenture, on the date of
deposit referred to therein; and (v) in the event of an ISDA Payment made
pursuant to Section 5.03 of the Indenture, on the date of deposit of such
payment with the Trust.
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ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company, at its
own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
Section 5.02. Covenant of the Company Not to Merger, Consolidate, Sell
or Convey Property Except Under Certain Conditions. Nothing contained in this
Agreement or in any of the Certificates shall prevent any consolidation of the
Company with, or merger of the Company into, any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers to which the Company or its successor or successors
shall be a party or parties, shall prevent any sale, lease or conveyance of the
property of the Company as an entirety or substantially as an entirety, shall
prevent any consolidation of any Person with, or the merger of any Person into,
the Company or shall prevent any sale, lease or conveyance of the property of
any Person as an entirety or substantially as an entirety to the Company;
provided that, and the Company hereby covenants and agrees, upon any such
consolidation, merger, sale, lease or conveyance, the due and punctual
performance and observance of each covenant and condition of this Agreement to
be performed or observed by the Company, shall be expressly assumed, by an
agreement in form and substance reasonably satisfactory to the Trustee, duly
authorized, executed and delivered to the Trustee by the corporation formed by
such consolidation, or into which the Company shall have been merged, or which
shall have acquired such property; provided further that the corporation formed
by such consolidation or into which the Company merged or the Person which
acquired by conveyance or sale, or which leases, the properties and assets of
the Company as an entirety or substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia; provided further that
immediately after giving effect to such transaction, and treating any
indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing.
In case of any consolidation, merger, sale, lease or conveyance
referred to in, and in accordance with, Section 5.02, and following such an
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it
had been named herein as Company.
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The Trustee, subject to the provisions of Sections 7.1 and 7.3, may
receive an Opinion of Counsel from the Company as conclusive evidence that any
such consolidation, merger, sale, lease or conveyance, and any such assumption,
and any such liquidation or dissolution, complies with the applicable
provisions of this Agreement and that all conditions precedent herein provided
for relating to such transactions have been complied with.
Section 5.03. Change in Control. Upon the occurrence of a Change in
Control (the effective date of such Change in Control being the "Change in
Control Date"), each Certificateholder shall have the right to direct the
Trustee to require the Company to repurchase (a "Required Repurchase") all or
any part of the X-TRAS beneficially owned by such Certificateholder at a
repurchase price payable in cash equal to 101% of the principal amount of such
X-TRAS together with accrued interest to the Change in Control Purchase Date
(as defined below) (the "Change in Control Purchase Price"), plus (in the
aggregate with all other beneficially owned X-TRAS repurchased pursuant to this
Section 5.03) the ISDA Amount, if any, as of the Change in Control Purchase
Date as determined by the Extension Option Buyer and notified to the Company,
the Indenture Trustee and the Trustee by 10:00 a.m., New York City time, on
such date.
(a) Within 30 days following the Change in Control Date, the Company
shall mail a notice (the "Required Repurchase Notice") to each
Certificateholder with copies to the Indenture Trustee, the Trust and the
Extension Option Buyer stating:
(i) that a Change in Control has occurred and that such
Certificateholder has the right to direct the Trustee to require the
Company to repurchase all or any part of the X-TRAS beneficially owned by
such Certificateholder at the Change in Control Purchase Price upon
presentation for cancellation of the related Certificates;
(ii) the Change in Control Purchase Price;
(iii) the date on which any Required Repurchase shall be made (which
shall be no earlier than 60 days nor later than 90 days from the date
such notice is mailed) (the "Change in Control Purchase Date");
(iv) the name and address of the Paying Agent; and
(v) the procedures that Certificateholders must follow to cause the
X-TRAS beneficially owned by them to be repurchased, which shall be
consistent with this Section and the Indenture.
(b) Certificateholders electing to have X-TRAS beneficially owned by
them repurchased must deliver a written notice (the "Change in Control Purchase
Notice") to the X-TRAS Paying Agent (initially the Indenture Trustee) at its
corporate trust office in Detroit,
<PAGE> 38
32
Michigan, or any other office of the X-TRAS 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 X-TRAS beneficially owned by the Certificateholder to
be repurchased, which portion must be $1,000 or an integral multiple thereof;
(ii) that such X-TRAS are to be repurchased by the Company pursuant to the
change in control provisions of the Indenture and the Trust Agreement; and
(iii) unless the Certificates evidencing beneficial ownership of the X-TRAS to
be repurchased are represented by one or more Global Certificates, the
certificate numbers of the Certificates to be delivered by the
Certificateholder thereof the X-TRAS in respect of which are to be repurchased
by the Company. Any Change in Control Purchase Notice may be withdrawn by the
Certificateholder 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 of
beneficially owned X-TRAS as to which the withdrawal notice relates and the
principal amount of such beneficially owned X-TRAS, if any, which remains
subject to a Change in Control Purchase Notice.
If Certificates are represented by a Global Note (as described in
Section 3.05), the Depositary or its nominee will be the Holder of such
Certificates and therefore will be the only entity that may elect a Required
Repurchase of the beneficially owned X-TRAS in respect of such Certificates.
To obtain repayment pursuant to this Section 5.03 with respect to the X-TRAS in
respect of such Certificates, the beneficial owner of such Certificates must
provide to the broker or other entity through which it holds the beneficial
interest in such Certificates (i) the 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. 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 Depositary of such beneficial
owner's desire to obtain repayment pursuant to this Section 5.03. Such broker
or other entity will provide to the Paying Agent (i) the Change in Control
Purchase Notice received from such beneficial owner and (ii) a certificate
satisfactory to the X-TRA Paying Agent from such broker or other entity stating
that it represents such beneficial owner. Such broker or other entity will be
responsible for disbursing any payments it receives pursuant to this Section
3.01 to such beneficial owner.
(c) Payment to a Certificateholder of the Change in Control Purchase
Price for X-TRAS beneficially owned by it for which a Change in Control
Purchase Notice has been delivered and not withdrawn is conditioned (except in
the case of Certificates represented by one or more Global Certificates) upon
presentation for cancellation of the Certificates in respect of such X-TRAS
(together with necessary endorsements) to the X-TRAS Paying Agent at its office
in Detroit, Michigan, or any other office of the X-TRAS 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
<PAGE> 39
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Notice. Payment of the Change in Control Purchase Price for the Certificates
in respect of such X-TRAS will be made promptly following the later of the
Change in Control Purchase Date or the time of presentation for cancellation of
such Certificates. If the X-TRAS Paying Agent holds, in accordance with the
terms of the Indenture, money sufficient to pay the Change in Control Purchase
Price of the Certificates in respect of such X-TRAS on the Business Day
following the Change in Control Purchase Date, then, on and after such date,
interest will cease accruing on such X-TRAS, whether or not such Certificates
are delivered to the X-TRAS Paying Agent, and all other rights of the
Certificateholder shall terminate (other than the right to receive the Change
in Control Purchase Price upon delivery of the Certificates in respect of such
X-TRAS).
(d) The Company shall comply with the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act which may then be
applicable in connection with any offer by the Company to repurchase X-TRAS
beneficially owned by a Certificateholder at the option of Certificateholder
upon a Change in Control.
(e) No beneficially owned X-TRAS may be repurchased by the Company
as a result of a Change in Control if there has occurred and is continuing an
Event of Default (other than a default in the Payment of the Change in Control
Purchase Price with respect to the X-TRAS).
(f) Upon receipt by the Trustee of the ISDA Amount payable pursuant
to the first sentence of this Section 5.03, such amount shall be deposited in
the ISDA Payment Account and thereafter promptly paid to the Extension Option
Buyer.
Section 5.04 Excess Proceeds of Asset Sales. In the event that the
Company is required under Section 4.05 of the Indenture to make an offer to
purchase from holders of X-TRAS on a pro rata basis an aggregate principal
amount of X-TRAS equal to the Excess Proceeds resulting from an Asset Sale,
each Certificateholder shall have the right to direct the Trustee to require
the Company to repurchase a pro rata portion of the X-TRAS beneficially owned
by such Certificateholder at a repurchase price payable in cash equal to 100%
of the principal amount or portion thereof of X-TRAS to be repurchased together
with accrued and unpaid interest, if any, to the Excess Proceeds Purchase Date
(as defined herein), plus the ISDA Amount, if any, as of the Excess Proceeds
Purchase Date as determined by the Extension Option Buyer as of such date and
notified to the Company, the Indenture Trustee and the Trustee by 10 a.m., New
York City time, on such date.
(a) Within 30 days after the end of the Application Period, the
Company shall mail a notice (the "Excess Proceeds Repurchase Notice") to
each Holder with copies to the Indenture Trustee, Pass Through Trustee
and Extension Option Buyer stating:
<PAGE> 40
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(i) that the Company is making an Excess Proceeds Offer
pusuant to Section 3.01 of the Sixth Supplemental Indenture;
(ii) the Excess Proceeds Purchase Price;
(iii) the date on which any Exceeds Proceeds Repurchase shall
be made (which shall be no earlier than 60 days nor later than 90
days from the date such notice is mailed) (the "Excess Proceeds
Purchase Date");
(iv) the name and address of the X-TRAS Paying Agent; and
(v) the procedures that Holders must follow to cause the
X-TRAS to be repurchased, which shall be consistent with this
Section and the Indenture.
(b) Certificateholders electing to have X-TRAS beneficially owned by
them repurchased must deliver a written notice (the "Excess Proceeds
Purchase Notice") to the X-TRAS Paying Agent at its corporate trust
office in Detroit, Michigan, or any other office of the X-TRAS Paying
Agent maintained for such purposes, not later than 30 days prior to the
Excess Proceeds Purchase Date. The Excess Proceeds Purchase Notice shall
state: (i) the portion of the principal amount of any beneficially owned
X-TRAS of the Certificateholder to be repurchased, which portion must be
$1,000 or an integral multiple thereof; (ii) that such X-TRAS are to be
repurchased by the Company pursuant to the Exceeds Proceeds Offer
provisions of the Indenture; and (iii) unless the Certificates evidencing
beneficial ownership of the X-TRAS to be repurchased are represented by
one or more Global Certificates, the certificate numbers of the
Certificates to be delivered by the Certificateholder thereof for
repurchase by the Company. Any Excess Proceeds Purchase Notice may be
withdrawn by the Certificateholder by a written notice of withdrawal
delivered to the X-TRAS Paying Agent not later than three Business Days
prior to the Excess Proceeds Purchase Date. The notice of withdrawal
shall state the principal amount of beneficially owned X-TRAS as to which
the withdrawal notice relates and the principal amount of such beneficially
owned X-TRAS, if any, which remains subject to a Excess Proceeds Purchase
Notice.
If Certificates are represented by a Global Note (as described in
Section 3.05), the Depositary or its nominee will be the Holder of such
Certificates and therefore will be the only entity that may elect an
Excess Proceeds Repurchase of the beneficially owned X-TRAS in respect of
such Certificates. To obtain repayment pursuant to this Section 5.04
with respect to the X-TRAS in respect of such Certificates, the
beneficial owner of such Certificates must provide to the broker or other
entity through which it holds the beneficial interest in such
Certificates (i) the Excess Proceeds Purchase Notice signed by such
beneficial owner, and such signature
<PAGE> 41
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must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. 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 Depositary of such beneficial owner's desire to obtain repayment
pursuant to this Section 5.04. Such broker or other entity will provide to
the X-TRAS Paying Agent (i) the Excess Proceeds Purchase Notice received
from such beneficial owner and (ii) a certificate satisfactory to the
X-TRAS Paying Agent from such broker or other entity stating that it
represents such beneficial owner. Such broker or other entity will be
responsible for disbursing any payments it receives pursuant to this
Section 3.01 to such beneficial owner.
(c) Payment to a Certificateholder of the Excess Proceeds Purchase
Price for beneficially owned X-TRAS for which a Excess Proceeds Purchase
Notice has been delivered and not withdrawn is conditioned (except in the
case of Certificates represented by one or more Global Certificates) upon
presentation for cancellation of the Certificates in respect of such
X-TRAS (together with necessary endorsements) to the X-TRAS Paying Agent
at its office in Detroit, Michigan, or any other office of the X-TRAS
Paying Agent maintained for such purpose, at any time (whether prior to,
on or after the Excess Proceeds Purchase Date) after the delivery of such
Excess Proceeds Purchase Notice. Payment of the Excess Proceeds Purchase
Price for the Certificates in respect of such X-TRAS will be made
promptly following the later of the Excess Proceeds Purchase Date or the
time of delivery of such Certificates. If the X-TRAS Paying Agent
holds, in accordance with the terms of the Indenture, money sufficient to
pay the Excess Proceeds Purchase Price of the Certificates in respect of
such X-TRAS on the Business Day following the Excess Proceeds Purchase
Date, then, on and after such date, interest will cease accruing, and all
other rights of the Holder shall terminate (other than the right to
receive the Excess Proceeds Purchase Price upon delivery of the X-TRAS).
(d) The Company shall comply with the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act, which may then
be applicable in connection with any Excess Proceeds Offer.
(e) Upon receipt by the Trustee of the ISDA Amount payable pursuant
to the first sentence of this Section 5.04, such amount shall be
deposited in the ISDA Payment Account and thereafter promptly paid to the
Extension Option Buyer.
<PAGE> 42
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ARTICLE VI
DEFAULT
Section 6.01. Events of Default. If any Indenture Default under the
Indenture (an "Event of Default") shall occur and be continuing, then, and in
each and every case, so long as such Event of Default shall be continuing, the
Trustee may vote the X-TRAS, and upon the direction of Certificateholders
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Assigned Trust Property, the Trustee shall vote, in favor of
directing the Indenture Trustee to declare the unpaid principal amount of the
X-TRAS then outstanding and accrued interest thereon to be due and payable
under, and in accordance with the provisions of, the Indenture. In addition,
if an Indenture Default shall have occurred and be continuing under the
Indenture, the Trustee may in accordance with the Indenture vote the X-TRAS to
direct the Indenture Trustee regarding the exercise of remedies provided in
Article IV of the Indenture. Notwithstanding the provisions of Section 4.02,
if in connection with any Event of Default as to which moneys are collected by
the Trustee the amounts paid by the Company are less than the amounts due in
respect of (i) the principal of and interest on the X-TRAS and (ii) the ISDA
Amount, if any, the amounts received by the Trustee will be distributed on a
pro rata basis to the Certificateholders, on the one hand, and the Extension
Option Buyer, on the others; provided that no such distribution shall affect
the rights of the Trustee to demand and receive payment in full of all amounts
due from the Company.
In addition, after an Event of Default shall have occurred and be
continuing with respect to the X-TRAS, the Trustee may in its discretion, and
upon the direction of the Certificateholders evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Assigned
Trust Property shall, by such officer or agent as it may appoint, sell, convey,
transfer and deliver the X-TRAS, without recourse to or warranty by the Trustee
or any Certificateholder, to any Person. In any such case, the Trustee shall
sell, assign, contract to sell or otherwise dispose of and deliver the X-TRAS
at public or private sale, at any location at the option of the Trustee, all
upon such terms and conditions as it may reasonably deem advisable and at such
prices as it may reasonably deem advisable, for cash. If the Trustee so decides
or is required to sell or otherwise dispose of the X-TRAS pursuant to this
Section, the Trustee shall take such of the actions described above as it may
reasonably deem most effectual to complete the sale or other disposition of the
X-TRAS, so as to provide for the payment in full of all amounts due on the
Certificates. The Trustee shall give notice to the Company promptly after any
such sale. Notwithstanding the foregoing, any action taken by the Trustee
under this Section shall not, in the reasonable judgment of the Trustee, be
adverse to the best interests of the Certificateholders.
<PAGE> 43
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Section 6.02. Incidents of Sale of the X-TRAS. Upon any sale of the
X-TRAS made either under the power of sale given under this Trust Agreement or
otherwise for the enforcement of this Trust Agreement, the following shall be
applicable:
(1) Certificateholders and Trustee May Purchase the X-TRAS. Any
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase the X-TRAS, and upon compliance
with the terms of sale, may hold, retain, possess and dispose of the
X-TRAS in their or its or his own absolute right without further
accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of
the Trustee or of the officer making such sale shall be a sufficient
discharge to any purchaser for his purchase money, and, after paying such
purchase money and receiving such receipt, such purchaser or his personal
representative or assigns shall not be obliged to see to the application
of such purchase money, or be in any way answerable for any loss,
misapplication or non-application thereof.
(3) Application of Moneys Received upon Sale. Any moneys collected
by the Trustee upon any sale made either under the power of sale given by
this Agreement or otherwise for the enforcement of this Agreement, shall
be applied as provided in Section 4.02. If in connection with any Event
of Default as to which moneys are collected by the Trustee the amounts
collected are less than the amounts due in respect of (i) the principal
of and interest on the X-TRAS and (ii) the ISDA Amount, if any, the
amounts received by the Trustee will be distributed on a pro rata basis
to the Certificateholders, on the one hand, and the Extension Option
Buyer, on the others; provided that no such distribution shall affect the
rights of the Trustee to demand and receive payment in full of all
amounts due from the Company.
Section 6.03. Judicial Proceedings Instituted by Trustee. (a)
Trustee May Bring Suit. If there shall be a failure to make payment of the
principal of, premium, if any, or interest on any X-TRAS, then the Trustee, as
holder of such X-TRAS, to the extent permitted by and in accordance with the
terms of the Indenture, shall be entitled and empowered to institute any suits,
actions or proceedings at law, in equity or otherwise, for the collection of
the sums so due and unpaid on such X-TRAS and may prosecute any such claim or
proceeding to judgment or final decree with respect to the whole amount of any
such sums so due and unpaid.
(b) Trustee May File Proofs of Claim; Appointment of Trustee as
Attorney-in-Fact in Judicial Proceedings. The Trustee in the name of the Trust
or as attorney-in-fact for the Certificateholders, or in any one or more of
such capacities (irrespective of whether distributions on the Certificates
shall then be due and payable, or the payment of the principal on the X-TRAS
shall then be due and payable, as therein expressed
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or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand to the Indenture Trustee for the payment of overdue
principal, premium (if any) or interest on the X-TRAS), shall be entitled and
empowered to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trust and of the
Certificateholders allowed in any receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial proceedings
relative to the Company, its creditors or property. Any receiver, assignee,
trustee, liquidator, sequestrator (or similar official) in any such judicial
proceeding is hereby authorized by each Certificateholder to make payments in
respect of such claim to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Certificateholders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Nothing contained in this Agreement shall be deemed to give to the Trustee any
right to accept or consent to any plan of reorganization or otherwise by action
of any character in any such proceeding to waive or change in any way any right
of any Certificateholder.
Section 6.04. Control by Certificateholders. Subject to Section 6.03
and the Indenture, the Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the Assigned Trust Property shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
with respect to the Trust or pursuant to the terms of the Indenture, or
exercising any trust or power conferred on the Trustee under this Agreement or
the Indenture, including any right of the Trustee as holder of the X-TRAS,
provided that
(1) such Direction shall not be in conflict with any rule of law or
with this Agreement and would not involve the Trustee in personal
liability or expense,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Certificateholders not taking part
in such Direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such Direction.
Section 6.05. Waiver of Past Defaults. Subject to the Indenture, the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Assigned
Trust Property (i) may on behalf of all of the Certificateholders waive any
past Event of Default hereunder and its consequences or (ii) may direct the
Trustee to instruct the Indenture Trustee to waive any past Indenture Default
under the Indenture and its consequences and thereby annul any Direction given
by such Certificateholders or the Trustee to the Indenture Trustee with respect
thereto, except a default:
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(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates, or
(2) in the payment of the principal of (premium, if any) or interest
on the X-TRAS, or
(3) in respect of a covenant or provision hereof which under Article
X cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate affected thereby or
the Extension Option Buyer.
Upon any such waiver, such default shall cease to exist with respect to
the Certificates and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose and any direction given by the Trustee on
behalf of the Certificateholders to the Indenture Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon. Upon
any such waiver, the Trustee shall vote the X-TRAS issued under the relevant
Indenture to waive the corresponding Indenture Default.
Section 6.06. Right of Certificateholders to Receive Payments Not to
Be Impaired. Anything in this Agreement to the contrary notwithstanding,
including, without limitation, Section 6.07 hereof, but subject to the
Indenture, the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the Certificates when due,
or to institute suit for the enforcement of any such payment on or after the
applicable Regular Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such Certificateholder.
Section 6.07. Certificateholders May Not Bring Suit Except Under
Certain Conditions. A Certificateholder shall not have the right to institute
any suit, action or proceeding at law or in equity or otherwise with respect to
this Agreement, for the appointment of a receiver or for the enforcement of any
other remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given written
notice to the Trustee of a continuing Event of Default;
(2) Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than 25% of the Assigned Trust
Property shall have requested the Trustee in writing to institute such
action, suit or proceeding and shall have offered to the Trustee
indemnity as provided in Section 7.03(e);
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(3) the Trustee shall have refused or neglected to institute such an
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Assigned Trust
Property.
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatsoever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Assigned Trust Property or the lien of any
Indenture on any property subject thereto, or the rights of the
Certificateholders or the holders of the X-TRAS, (ii) obtain or seek to obtain
priority over or preference with respect to any other such Certificateholder or
(iii) enforce any right under this Agreement, except in the manner herein
provided and for the equal, ratable and common benefit of all the
Certificateholders subject to the provisions of this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given hereunder to
the Trustee or to any of the Certificateholders shall not be exclusive of any
other remedy or remedies, and every such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default, the Trustee undertakes to perform such
duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustee.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of its
own affairs.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
<PAGE> 47
41
(1) this Subsection shall not be construed to limit the effect of
subsection (a) of this Section; and
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(d) Whether or not herein expressly so provided, every provision of
this Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 7.02. Notice of Defaults. As promptly as practicable after,
and in any event within 90 days after, the occurrence of any default (as such
term is defined below) hereunder, the Trustee shall transmit by mail to the
Company, the Indenture Trustee and the Certificateholders in accordance with
Section 313(c) of the Trust Indenture Act, notice of such default hereunder
known to the Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the payment of the
principal, premium, if any, or interest on any X-TRAS, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Certificateholders. For the purpose of this
Section, the term "default" means any event that is, or after notice or lapse
of time or both would become, an Event of Default.
Section 7.03. Certain Rights of Trustee. Subject to the provisions of
Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a written description of the subject matter
thereof accompanied by an Officer's Certificate and an Opinion of Counsel
as provided in Section 1.02 of this Agreement;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein
<PAGE> 48
42
specifically prescribed) may, in the absence of bad faith on its part, rely
upon an Officer's Certificate of the Company or the Indenture Trustee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the Direction of any
of the Certificateholders pursuant to this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security
or indemnity against the cost, expenses and liabilities which might be
incurred by it in compliance with such Direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or
by or through agents or attorneys, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
Direction of the Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the Assigned Trust Property relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement; and
(i) the Trustee shall not be required to expend or risk its own
funds in the performance of any of its duties under this Agreement, or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.04. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except the
certificates of authentication, shall not be taken as the statements of the
Trustee, and the Trustee assumes no responsibility for their correctness.
Subject to Section 7.15, the Trustee makes no representations as to the
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43
validity or sufficiency of this Agreement, any X-TRAS or the Certificates,
except that the Trustee hereby represents and warrants that this Agreement has
been [and the Registration Rights Agreement] and each Certificate will be,
executed, authenticated and delivered by one of its officers who is duly
authorized to execute, authenticate and deliver such document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any Paying Agent,
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity may become the owner or pledgee of
Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture
Act, if applicable, may otherwise deal with the Company or the Indenture
Trustee with the same rights it would have if it were not Trustee, Paying
Agent, Registrar or such other agent.
Section 7.06. Money Held in Trust. Money held by the Trustee or the
Paying Agent in trust hereunder need not be segregated from other funds except
to the extent required herein or by law and neither the Trustee nor the Paying
Agent shall have any liability for interest upon any such moneys except as
provided for herein.
Section 7.07. Compensation and Reimbursement. The Company agrees:
(a) to pay, or cause to be paid, to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder as the
Company and the Trustee shall agree in writing (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust); and
(b) except as otherwise expressly provided herein, to reimburse, or
cause to be reimbursed, the Trustee upon its request for all reasonable
out-of-pocket expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Agreement (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence, willful misconduct or bad faith or
as may be incurred due to the Trustee's breach of its representations and
warranties set forth in Section 7.15; and
(c) to the fullest extent permitted by law, to indemnify the Trustee
or any predecessor Trustee for, and to hold the Trustee harmless against,
any loss, damage, claim, liability, penalty or reasonable expenses
incurred without negligence, bad faith or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
this Agreement, the Certificates, the ISDA Master Agreement or the
Purchase Agreement, including the reasonable costs and expenses
(including reasonable counsel fees and expenses) of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties
<PAGE> 50
44
hereunder, except any such cost or expense as may be attributable to the
Trustee's negligence, bad faith or willful misconduct.
The Trustee shall be entitled to reimbursement from the Company for any
tax incurred without negligence, bad faith or willful misconduct, on its part,
arising out of or in connection with the acceptance or administration of such
Trust (other than any tax attributable to the Trustee's compensation for
serving as such), including any reasonable costs and expenses incurred in
contesting the imposition of any such tax.
Section 7.08. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be eligible to act as a trustee
under Section 310(a) of the Trust Indenture Act and shall have a combined
capital and surplus of at least $75,000,000 (or a combined capital and surplus
in excess of $5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000). If such corporation
publishes reports of conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 7.08, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.08 to act as Trustee, the
Trustee shall resign immediately as Trustee in the manner and with the effect
specified in Section 7.09.
Section 7.09. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as trustee by giving prior
written notice thereof to the Company, the Authorized Agents and the Indenture
Trustee. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Indenture Trustee and
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Assigned
Trust Property delivered to the Trustee, the Company and the Indenture
Trustee.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act, if applicable, after written request therefor by the
Company or by any Certificateholder who has been a bona fide
Certificateholder for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder who has been a bona fide Certificateholder for at least six
months may, on behalf of itself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax which has been or is likely to be asserted, the
Trustee shall promptly notify the Company and shall, within 30 days of such
notification, resign hereunder unless within such 30-day period the Trustee
shall have received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a jurisdiction where
there are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become incapable of
acting or if a vacancy shall occur in the office of the Trustee for any cause,
the Company shall promptly appoint a successor Trustee. If, within one year
after such resignation, removal or incapability, or other occurrence of such
vacancy, a successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Assigned
Trust Property delivered to the Company, the Indenture Trustee and the
retiring Trustee, and the Company approves such appointment, which approval
shall not be unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed as provided above. If no
successor Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may, on behalf of
himself and all others
<PAGE> 52
46
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(g) The successor Trustee shall give notice of the resignation and
removal of the Trustee and appointment of the successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Certificateholders as their names and addresses appear in the Register. Each
notice shall include the name of such successor Trustee and the address of its
Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute and deliver to the Company, the
Authorized Agents and the Indenture Trustee and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all such rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all Assigned Trust Property held by such
retiring Trustee hereunder, subject nevertheless to its lien, if any, provided
for in Section 7.07. Upon request of any such successor Trustee, the Company,
the retiring Trustee and such successor Trustee shall execute and deliver any
and all instruments containing such provisions as shall be necessary or
desirable to transfer and confirm to, and for more fully and certainly vesting
in, such successor Trustee all such rights, powers and trusts.
No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article VII.
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VII, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Certificates shall have
been executed or authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such execution or authentication and deliver
the Certificates so executed or authenticated with the same effect as if such
successor Trustee had itself executed or authenticated such Certificates.
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Section 7.12. Maintenance of Agencies. (a) There shall at all times
be maintained an office or agency in the location set forth in Section 12.03
where Certificates may be presented or surrendered for registration of transfer
or for exchange, and for payment thereof and where notices and demands to or
upon the Trustee in respect of such certificates or this Agreement may be
served; provided, however, that, if it shall be necessary that the Trustee
maintain an office or agency in another location (e.g., the Certificates shall
be represented by definitive Certificates and shall be listed on a national
securities exchange), the Trustee will make all reasonable efforts to establish
such an office or agency. Written notice of the location of each such other
office or agency and of any change of location thereof shall be given by the
Trustee to the Company, the Indenture Trustee (at its address as may be
notified to the Trustee) and the Certificateholders. In the event that no such
office or agency shall be maintained or no such notice of location or of change
of location shall be given, presentations and demands may be made and notices
may be served at the Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent
hereunder with respect to the Certificates. Each such Authorized Agent shall
be a bank or trust company, shall be a corporation organized and doing business
under the laws of the United States or any state, with a combined capital and
surplus of at least $75,000,000, or, if the Trustee shall be acting as the
Registrar or Paying Agent hereunder, a corporation having a combined capital
and surplus in excess of $5,000,000, the obligations of which are guaranteed by
a corporation organized and doing business under the laws of the United States
or any state, with a combined capital and surplus of at least $75,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by federal or state authorities. The Trustee shall initially be
the Paying Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the Trustee, at
stated intervals of not more than six months, and at such other times as the
Trustee may request in writing, a copy of the Register maintained by such
Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or such Authorized Agent or such successor
corporation.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company and the Indenture Trustee.
The Company may, and at the request of the Trustee shall, at any time terminate
the agency of any Authorized Agent by giving written notice of termination to
such Authorized Agent and to the Trustee.
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48
Upon the resignation or termination of an Authorized Agent or in case at any
time any such Authorized Agent shall cease to be eligible under this Section
(when, in either case, no other Authorized Agent performing the functions of
such Authorized Agent shall have been appointed), the Company shall promptly
appoint one or more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the Authorized Agent
which has resigned or whose agency has been terminated or who shall have ceased
to be eligible under this Section. The Company shall give written notice of
any such appointment made by it to the Trustee and the Indenture Trustee; and
in each case the Trustee shall mail notice of such appointment to all
Certificateholders as their names and addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid, from time to time
to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses.
Section 7.13. Money for Certificate Payments to Be Held in Trust. All
moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect to which such
money was deposited.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.14. [Intentionally Omitted].
Section 7.15. Representations and Warranties of Trustee. The Trustee
hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation organized and
validly existing in good standing under the laws of the State of
Delaware;
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Agreement and has taken all necessary
action to authorize the execution, delivery, and performance by it of
this Agreement;
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49
(c) the execution, delivery and performance by the Trustee of this
Agreement (i) will not violate any provision of United States federal law
or the law of the state of the United States where it is located
governing the banking and trust powers of the Trustee or any order, writ,
judgment, or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) will not violate any
provision of the articles of association or by-laws of the Trustee, or
(iii) will not violate any provision of, or constitute, with or without
notice or lapse of time, a default under, or result in the creation or
imposition of any lien on any properties included in the Assigned Trust
Property pursuant to the provisions of any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation,
default or lien could reasonably be expected to have an adverse effect on
the Trustee's performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or therein;
(d) the execution and delivery by the Trustee of this Agreement will
not require the authorization, consent, or approval of, the giving of
notice to, the filing or registration with, or the taking of any other
action in respect of, any governmental authority or agency of the United
States or the state of the United States where it is located regulating
the banking and corporate trust activities of the Trustee; and
(e) this Agreement has been duly executed and delivered by the
Trustee and, assuming due execution and delivery thereof by the other
parties thereto, constitutes the legal, valid, and binding agreement of
the Trustee, enforceable against it in accordance with its terms,
provided that enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar
laws affecting the rights of creditors generally and (ii) general
principles of equity.
Section 7.16. Withholding Taxes; Information Reporting. The Trust and
the Trustee shall exclude and withhold from each distribution of principal,
premium, if any, and interest and other amounts due under this Agreement or
under the Certificates any and all withholding taxes applicable thereto as
required by law. The Trust shall request, and the Certificateholders shall
provide to the Trust, such forms or certificates as are necessary to establish
an exemption from withholding with respect to each Certificateholder, and any
representations and forms that shall be reasonably required by the Trust to
assist it in determining the extent of, and in fulfilling, its withholding
obligations. The Trustee shall file required forms with applicable
jurisdictions and, unless an exemption from withholding is properly established
by a Certificateholder, shall remit amounts withheld with respect to the
Certificateholder to the applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Certificateholder, the amount
withheld shall be deemed to be a distribution in the amount of the withholding
to the Certificateholder. In the event of any claimed over-
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50
withholding, Certificateholders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not
withheld from actual distributions made, the Trust may reduce subsequent
distributions by the amount of such withholding.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and Addresses
of Certificateholders. The Company will furnish to the Trustee within 15 days
after each Record Date with respect to a Scheduled Payment, and at such other
times as the Trustee may request in writing within 30 days after receipt by the
Company of any such request, a list, in such form as the Trustee may reasonably
require, of all information in the possession or control of the Company as to
the names and addresses of the Certificateholders, in each case as of a date
not more than 15 days prior to the time such list is furnished; provided,
however, that so long as the Trustee is the sole Registrar, no such list need
be furnished; and provided further, however, that no such list need be
furnished for so long as a copy of the Register is being furnished to the
Trustee pursuant to Section 7.12.
Section 8.02. Preservation of Information; Communications to
Certificateholders. The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Certificateholders contained
in the most recent list furnished to the Trustee as provided in Section 7.12 or
Section 8.01, as the case may be, and the names and addresses of
Certificateholders received by the Trustee in its capacity as Registrar, if so
acting. The Trustee may destroy any list furnished to it as provided in
Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so
furnished.
Section 8.03. Reports by Trustee. Within 60 days after May 15 of each
year commencing with the first full year following the issuance of the
Certificates, the Trustee shall transmit to the Certificateholders, as provided
in Section 313(c) of the Trust Indenture Act, a brief report dated as of such
May 15, if required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company shall:
(a) file with the Trust, within 30 days after the Company is
required to file the same with the SEC, copies of the annual reports and
of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may from time to time by
rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934, as amended; or, if the Company is not required to
file
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51
information, documents or reports pursuant to either of such sections,
then to file with the Trustee and the SEC, in accordance with rules
and regulations prescribed by the SEC, such of the supplementary
and periodic information, documents and reports which may be required
pursuant to section 13 of the Securities Exchange Act of 1934, as
amended, in respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and regulations;
(b) file with the Trust and the SEC, in accordance with the rules
and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Agreement, as may be
required by such rules and regulations, including, in the case of annual
reports, if required by such rules and regulations, certificates or
opinions of independent public accountants;
(c) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such
summaries of any information, documents and reports required to be filed
by the Company pursuant to subsections (a) and (b) of this Section 8.04
as may be required by rules and regulations prescribed by the SEC; and
(d) furnish to the Trust, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Agreement (it being understood that for purposes of this paragraph (d),
such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders. Without the consent of the Certificateholders, the Company
may (but will not be required to), and the Trust (subject to Section 9.03)
shall, at any time and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the ISDA Master Agreement in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein contained; or
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(2) to add to the covenants, restrictions or obligations of the
Company or Trustee; or
(3) to add to or supplement any security for the benefit of any
Certificateholders; or
(4) to cure any ambiguity or correct or supplement any provision
which may be defective or inconsistent with any other provision in the
Agreement, Indenture or the ISDA Master Agreement or to make such other
provisions as the Company deems necessary or desirable with respect to
matters or questions arising under the Agreement, provided that no such
action materially adversely affects the interests of any
Certificateholders; or
(5) to modify, eliminate or add to the provisions of this Agreement
to such extent as shall be necessary to continue the qualification of
this Agreement (including any supplemental agreement) under the Trust
Indenture Act or under any similar federal statute hereafter enacted, and
to add to this Agreement such other provisions as may be expressly
permitted by the Trust Indenture Act, excluding, however, the provisions
referred to in Section 316(a)(2) of the Trust Indenture Act as in effect
at the date as of which this instrument was executed or any corresponding
provision in any similar federal statute hereafter enacted; or
(6) to evidence and provide for the acceptance of appointment under
this Agreement by the Trustee of a successor Trustee and to add to or
change any of the provisions of this Agreement as shall be necessary to
provide for or facilitate the administration of the Trust, pursuant to the
requirements of Section 7.10; or
(7) to provide the information required under Section 7.12 and
Section 12.03 as to the Trustee; or
(8) to modify or amend any provision of the Agreement that relates
to the ISDA Master Agreement or the Remarketing Procedure so long as such
modification or amendment does not have a material adverse effect on the
Certificateholders; or
(9) to comply with the requirements of the Code;
provided further that no such amendment referred to in the foregoing clauses
(1) through (9) which has a material adverse effect on the Extension Option
Buyer may be entered into without the consent of the Extension Option Buyer,
and no such amendment, as evidenced by an Opinion of Counsel, shall alter the
status of the Trust as a grantor trust under the Code or result in an actual or
constructive sale or exchange of any Certificate for tax purposes.
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Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders holding
Certificates evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Assigned Trust Property, by Direction of
said Certificateholders delivered to the Company and the Trustee, the Company
may, and the Trustee (subject to Section 9.03) shall, enter into an agreement
or agreements for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying
in any manner the rights and obligations of such Certificateholders under this
Agreement, provided, however, that no such agreement which has a material
adverse effect on the Extension Option Buyer may be entered into without the
consent of the Extension Option Buyer; provided further that no such agreement
shall, without the consent of the Certificateholder of each Outstanding
Certificate affected thereby, be entered into which:
(1) alters in any manner the amount or timing of any receipt by the
Trustee of payments on the X-TRAS held in the Trust or distributions that
are required to be made herein on any Certificate, or changes any date of
payment on any Certificate, or changes the place of payment where, or the
coin or currency in which, any Certificate is payable, or impairs the
right to institute suit for the enforcement of any such payment or
distribution on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permits the disposition of any X-TRAS included in the Assigned
Trust Property except as permitted by this Agreement, or otherwise
deprives such Certificateholder of the benefit of the ownership of the
X-TRAS in the Trust; or
(3) reduces the percentage of the aggregate Fractional Undivided
Interests of the Assigned Trust Property which is required for any such
supplemental agreement which adversely affects in any material respect
the interests of the Certificateholders, or reduces such percentage
required for any waiver of compliance with certain provisions of this
Agreement or certain defaults hereunder and their consequences provided
for in this Agreement; or
(4) modifies any of the provisions of this Section 9.02 or Section
6.05, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without
the consent of the Certificateholder of each Certificate affected
thereby; or
(5) results in the exchange or substitution of any Certificates
pursuant to a plan for the refunding or refinancing of such Certificates;
<PAGE> 60
54
unless such vote or consent would not, based on the Opinion of Counsel, alter
the status of the Trust as a grantor trust under the Code or result in an
actual or constructive sale or exchange of any X-TRAS for tax purposes.
It shall not be necessary for any Direction of Certificateholders under
this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Direction shall approve the
substance thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in the
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity
or indemnity in favor of the Trustee under this Agreement, the Trustee may in
its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements. In executing, or
accepting the additional trusts created by, any agreement permitted by this
Article or the modifications thereby of the trusts created by this Agreement,
the Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the execution
of any agreement supplemental to this Agreement under this Article, this
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every
Holder of a Certificate theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.06. Conformity with Trust Indenture Act. Every supplemental
agreement executed pursuant to this Article shall conform to the requirements
of the Trust Indenture Act as then in effect.
Section 9.07. Reference in Certificates to Supplemental Agreements.
Certificates authenticated and delivered after the execution of any
supplemental agreement pursuant to this Article may bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.
<PAGE> 61
55
ARTICLE X
AMENDMENTS TO INDENTURE
Section 10.01. Amendments and Supplements to Indentures. The Trustee,
as holder of the X-TRAS, has the right to vote and give consents and waivers in
respect of the X-TRAS and enforce such other rights of a holder of the X-TRAS
except as otherwise limited by this Agreement or the Indenture. Each
Certificateholder shall be entitled to direct the Trustee to vote a principal
amount of the X-TRAS corresponding to the principal amount of the Certificates
held by such Certificateholder in the manner directed by the Certificateholder.
In the event that the Trust, as holder of any X-TRAS, receives from the Company
or, if applicable, any depositary with respect to the X-TRAS, a request for the
Trustee's consent to any amendment, modification of the X-TRAS, or any document
thereunder, or relating thereto or waiver or receives any other solicitation
for any action with respect to the X-TRAS, the Trustee shall within five
Business Days mail a notice of such proposed amendment, modification, waiver or
solicitation to each Certificateholder registered on the Register as of the
date of such request. The Trustee shall request from the Certificateholders a
Direction as to (a) whether or not to take or refrain from taking any action
which a holder of such X-TRAS has the option to direct, (b) whether or not to
give or execute any waivers, consents, amendments, modifications or supplements
as a holder of such X-TRAS and (c) how to vote any X-TRAS if a vote has been
called for with respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or casting any vote or
giving any consent as the holder of any X-TRAS, the Trust shall consent or
vote, or refrain from consenting or voting, in the same proportion as that of
(i) the aggregate face amounts of all Certificates actually voted or not voted
in favor of or for giving consent to such action by such Direction of
Certificateholders to (ii) the aggregate face amount of all Outstanding
Certificates, as of the date determined by the Trustee prior to the date such
vote or consent as a holder of X-TRAS is required; provided, however, that, the
Trustee shall at no time, without the consent of each Certificateholder, vote
in favor or consent to any matter (i) unless such vote or consent would not,
based on an Opinion of Counsel, alter the status of the Trust as a grantor
trust under the Code or result in an actual or constructive sale or exchange of
any X-TRAS for tax purposes, (ii) which would alter the timing or amount of any
payment on the X-TRAS, or (iii) which would result in the exchange or
substitution of any X-TRAS pursuant to a plan for the refunding or refinancing
of such X-TRAS, and without the written consent of the Company. The Trustee
shall have no liability for any failure to act resulting from the
Certificateholders' late return of, or failure to return, directions requested
by the Trustee from the Certificateholders. For purposes of the second
immediately preceding sentence, a Certificate shall have been "actually voted"
if the Holder of such Certificate has delivered to the Trustee an instrument
evidencing such Holder's consent to such Direction prior to two Business Days
before the Trustee directs such action or casts such vote or gives such
consent. Notwithstanding the foregoing, but subject to Section 6.04 and the
Indenture, (i) the Trustee may, in its own
<PAGE> 62
56
discretion and at its own direction, consent and notify the Indenture Trustee
of such consent to any amendment, modification, waiver or supplement under the
Indenture (including, without limitation, in respect of the obligations
relating to payment of the ISDA Amount and the provisions of Article X), if an
Event of Default hereunder shall have occurred and be continuing, or if such
amendment, modification or waiver will not adversely affect the interests of
the Certificateholders and (ii) no such amendment, modification or waiver shall
be made that adversely affects in any material respect the interests of the
Extension Option Buyer without its consent.
ARTICLE XI
PAYMENT OF FINAL DISTRIBUTION; TERMINATION OF TRUST
Section 11.01. Payment of Final Distribution. (a) If the X-TRAS are
extended until the Extended Stated Maturity, then, unless the Company exercises
its option to redeem the X-TRAS under Section 7.01(c) of the Indenture (which
option the Company shall be entitled to exercise at any time subsequent to the
delivery of the Extension Notice and prior to the earlier of the pricing of the
remarketing and the Remarketing Deadline upon delivery of an irrevocable notice
of redemption), the interest rate borne by the X-TRAS will be reset on the
pricing of the remarketing effective on and as of the date of closing of the
remarketing in order that the X-TRAS may be remarketed so as to yield net
proceeds in cash at least equal to the sum of (i) 100% of the principal amount
of the X-TRAS plus (ii) the ISDA Amount as of the Exercise Date as calculated
by the Calculation Agent and notified to the Issuer, the Trustee and the
Indenture Trustee within five Business Days thereafter (collectively, the
"Required Remarketing Proceeds"). As more particularly set forth in the next
sentence, it is intended that the portions of the Required Remarketing Proceeds
representing the principal amount of the X-TRAS, together with the amount
payable by the Company pursuant to such sentence, will be sufficient to enable
the Trustee to make the Final Distribution on the Certificates. Accordingly,
the Company shall be obligated to pay to the Trust, simultaneously with the
closing of the remarketing, an amount equal to the interest that would have
accrued on the X-TRAS had they been held by the Trust to the Final Distribution
Date. Upon payment of the Final Distribution to Certificateholders and the
ISDA Amount to the Extension Option Buyer on the Final Distribution Date, the
Company shall be entitled to receive any amounts earned in respect of the
investment by the Trustee of the Required Remarketing Proceeds and the ISDA
Amount in Permitted Investments pursuant to clause (iv) below. In the event
the X-TRAS are remarketed, the Company shall have no obligation to pay the
principal amount of the X-TRAS to the Trust on the Initial Stated Maturity. The
X-TRAS will be remarketed in accordance with the following procedure (the
"Remarketing Procedure"):
<PAGE> 63
57
(i) On the Exercise Date and thereafter on the 75th, 60th, 45th,
30th and 15th day prior to the Initial Stated Maturity, Morgan Stanley &
Co. Incorporated (or, subsequent to the Exercise Date, such other
investment banking institution as may be selected as the Remarketing Agent)
will provide the Company with non-binding indications of the interest rate
at which and proceeds for which it believes it could remarket the X-TRAS in
order to yield the Required Remarketing Proceeds.
(ii) Morgan Stanley & Co. Incorporated shall act as the Remarketing
Agent for the X-TRAS unless, no later than 60 days prior to the Final
Distribution Date, the Company shall select another investment banking
institution to remarket the X-TRAS.
(iii) No later than 15 days prior to the Remarketing Deadline, the
Remarketing Agent will commence marketing of the X-TRAS to investors.
(iv) Pricing and closing of the remarketed X-TRAS shall occur at any
time within 10 days prior to the Remarketing Deadline, subject to then
prevailing market conditions and settlement cycles. The Trustee shall
have no obligation to release the X-TRAS for delivery to the purchasers
thereof pursuant to this Section 11.01(a) unless the proceeds from such
purchase shall at least equal the Required Remarketing Proceeds. Upon
completion of the remarketing, the net proceeds thereof, together with
the amount equal to the interest that would have accrued on the X-TRAS
had they been held by the Trust to the Final Distribution Date payable by
the Company pursuant to the first paragraph of this Section 11.01, will
be deposited with the Trustee and invested by the Trustee in Permitted
Investments pending their distribution on the Final Distribution Date.
(v) On the Final Distribution Date, the Trustee shall distribute (x)
an amount equal to 100% of the aggregate principal amount of the X-TRAS
plus accrued interest from the last Interest Payment Date (as defined in
the Indenture) until the Final Distribution Date assuming the X-TRAS had
been outstanding and held by the Trust until such date to the
Certificateholders and (y) an amount equal to the ISDA Amount to the
Extension Option Buyer in accordance with the ISDA Master Agreement.
(vi) The Remarketing Agent will be entitled to underwriter discounts
and commissions, payable at settlement of the Remarketing Procedure,
which will be determined at the time the Remarketing Procedure is
commenced and shall be consistent with then prevailing market practices.
In the event that Morgan Stanley & Co. Incorporated purchases the X-TRAS
pursuant to clause (ix) below, it shall be entitled to underwriter
discounts and commissions, payable at settlement of such purchase, which
will be determined at the time it gives notice of its offer pursuant to
clause (ix) below and shall be consistent with then prevailing market
practices.
<PAGE> 64
58
(vii) The Company will cooperate with and provide information
reasonably requested by the Remarketing Agent and (in the event of an
offer to purchase by Morgan Stanley & Co. Incorporated made pursuant to
clause (ix) below) by Morgan Stanley & Co. Incorporated in connection with
the remarketing or purchase of the X-TRAS, as applicable, including,
without limitation, (A) promptly preparing an offering memorandum or
prospectus containing such disclosures as may be required by applicable law
and as may be required by the Remarketing Agent or Morgan Stanley & Co.
Incorporated, as applicable, in its reasonable judgment, (B) executing and
delivering or causing to be executed and delivered legal documentation
(including a purchase agreement or underwriting agreement and registration
rights agreement with customary indemnities, covenants, representations and
warranties, comfort letters and legal opinions) in form and substance
reasonably satisfactory to the Remarketing Agent or Morgan Stanley & Co.
Incorporated, as applicable, (C) providing promptly upon request updated
consolidated financial statements to the date of its latest report filed
with the SEC and (D) to the extent the Company and the Remarketing Agent or
Morgan Stanley & Co. Incorporated, as applicable, deem reasonably necessary
for successful completion of the Remarketing Procedure or the purchase by
Morgan Stanley & Co. Incorporated, as applicable, making available senior
management of the Company for road show and one-on-one presentations.
(viii) The Company may, in its sole discretion, elect to cause the
X-TRAS to be remarketed by conducting an underwritten offering or private
placement thereof on a firm-commitment basis. In such event, the Company
shall notify the Remarketing Agent of such request no later than 70 days
prior to the Final Distribution Date. The Company acknowledges that in
no event shall the Remarketing Agent be deemed by this provision to have
made a commitment to underwrite or place the X-TRAS.
(ix) Regardless of whether it has been selected to act as
Remarketing Agent, Morgan Stanley & Co. Incorporated shall at all times
be permitted to make an offer, on not less than [five] Business Days'
notice, to purchase the X-TRAS on a date not later than the Remarketing
Deadline and bearing a reset interest rate specified by Morgan Stanley &
Co. Incorporated that would result in proceeds in cash equal to the
Required Remarketing Proceeds, which offer the Company and the Trustee
shall be required to accept, unless, on or prior to the date for such
purchase specified in the notice provided by Morgan Stanley & Co.
Incorporated, (A) the Company shall have delivered an irrevocable notice
of redemption pursuant to Section 7.01(c) of the Indenture and Section
11.01(b) of this Agreement or (B) any other party shall have remarketed
the X-TRAS bearing a reset interest rate less than or equal to that
specified by Morgan Stanley & Co. Incorporated for net proceeds in cash
equal to the Required Remarketing Proceeds.
<PAGE> 65
59
(x) The Trustee shall be entitled to an indemnity, in form and
substance reasonably satisfactory to it, from the Company against any
loss, liability, damage, claim or expense that it may incur in connection
with the Remarketing Procedure, whether or not the X-TRAS are remarketed,
including liabilities under the Securities Act, and to contribution from
the Company in respect of any payments that the Trustee may be required to
make in respect of any such loss, liability, damage, claim or expense. In
addition, any definitive documentation executed and delivered in connection
with any remarketing of the X-TRAS shall be in form and substance
reasonably satisfactory to the Trustee and its legal counsel.
(xi) The remarketed X-TRAS will bear interest at the reset interest
rate commecing upon the date of closing of the remarketing. For the
avoidance of doubt, holders of the remarketed X-TRAS shall not be
entitled to receive any interest thereon for any period prior to the date
of closing of the remarketing.
(b) If the X-TRAS are extended until the Extended Stated Maturity, the
Company may, in lieu of permitting the X-TRAS to be remarketed, exercise its
option under Section 7.01(c) of the Indenture to redeem the X-TRAS, in whole,
on the Final Distribution Date, by irrevocable notice given to the Indenture
Trustee, the Trustee, the Extension Option Buyer, Morgan Stanley & Co.
Incorporated and the Calculation Agent not later than the Remarketing Deadline,
at a redemption price equal to the sum of (i) 100% of the aggregate principal
amount thereof together with accrued interest, if any, thereon to the Final
Distribution Date plus (ii) the ISDA Amount as of the Exercise Date as
calculated by the Calculation Agent and notified to the Company, the Indenture
Trustee and the Trustee within five Business Days thereafter, in which case the
X-TRAS will not be remarketed. Out of such amount, the Trustee will
distribute on the Final Distribution Date (x) an amount equal to 100% of the
aggregate principal amount of the X-TRAS plus accrued interest to the
Certificateholders and (y) an amount equal to the ISDA Amount to the Extension
Option Buyer in accordance with the ISDA Master Agreement.
(c) If the X-TRAS are extended until the Extended Stated Maturity and
the Trustee does not receive on or prior to the Remarketing Deadline an amount
in cash equal to sum of (i) 100% of the aggregate principal amount of the
X-TRAS plus accrued interest to the Final Distribution Date plus (ii) the ISDA
Amount because the X-TRAS have not been successfully remarketed and the Company
has not exercised its option under Section 7.01(c) of the Indenture to redeem
the X-TRAS, the Trustee shall exercise its option to require the Company to
repurchase (the "Put Option"), on the Final Distribution Date, all of the
outstanding X-TRAS at a purchase price equal to 100% of the aggregate principal
amount of and accrued interest on the X-TRAS to the Final Distribution Date.
The Trustee will distribute such entire amount to the Certificateholders.
<PAGE> 66
60
Section 11.02. Termination of the Trust. The respective obligations
and responsibilities of the Company, the Trust and the Trustee (i) which are
for the benefit of the Certificateholders shall terminate upon the distribution
to all of the Certificateholders and the Trustee of all amounts required to be
distributed to them pursuant to this Agreement and the disposition of all
property held as part of the Assigned Trust Property and (ii) which are for the
benefit of the Extension Option Buyer shall terminate upon the payment to the
Extension Option Buyer of all amounts due to it under the ISDA Master
Agreement; provided, however, that in no event shall the Trust continue beyond
one hundred ten (110) years following the date of the earliest execution of
this Trust Agreement.
Notice of any termination, specifying the Regular Distribution Date (or
Special Distribution Date, as the case may be) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
on the Final Distribution Date and cancellation, shall be mailed promptly by
the Trustee to Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date specifying (A)
the Regular Distribution Date (or Special Distribution Date, as the case may
be) upon which the proposed final payment of the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein specified, (B) the amount of any such proposed final payment,
and (C) that the Record Date otherwise applicable to such Regular Distribution
Date (or Special Distribution Date, as the case may be) is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office or agency of the Trustee therein specified. The Trustee shall give
such notice to the Registrar at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates in
accordance with such notice, the Trustee shall cause to be distributed to
Certificateholders such final payments.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. No
additional interest shall accrue on the Certificates after the Regular
Distribution Date (or Special Distribution Date, as the case may be) specified
in the first written notice. In the event that any money held by the Trustee
for the payment of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Trustee shall be satisfied, after sixty
days' notice from the Company, is one month prior to the escheat period
provided under applicable law) after the final distribution date with respect
thereto, the Trustee shall pay to each Indenture Trustee the appropriate amount
of money relating to such Indenture Trustee and shall give written notice
thereof to the Company.
<PAGE> 67
61
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations, and liabilities of the
parties hereto or any of them.
Section 12.02. Certificates Nonassessable and Fully Paid. Except as
set forth in the last sentence of this Section 12.02, Certificateholders shall
not be personally liable for obligations of the Trust, the Fractional Undivided
Interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and Certificates, upon
authentication thereof by the Trustee pursuant to Section 3.03, are and shall
be deemed fully paid. No Certificateholder shall have any right (except as
expressly provided herein) to vote or in any manner otherwise control the
operation and management of the Assigned Trust Property, the Trust, or the
obligations of the parties hereto, nor shall anything set forth herein, or
contained in the terms of the Certificates, be construed so as to constitute
the Certificateholders from time to time as partners or members of an
association.
Section 12.03. Notices. (a) Unless otherwise specifically provided
herein, all notices required under the terms and provisions of this Agreement
shall be in English and in writing, and any such notice may be given by United
States mail, courier service or telecopy, and any such notice shall be
effective when delivered or received or, if mailed, three days after deposit in
the United States mail with proper postage for ordinary mail prepaid,
<PAGE> 68
62
if to the Company, to:
CMS Energy Corporation
Fairlane Plaza South, Suite 1100
Dearborn, MI 48126
Attention: Chief Financial Officer and
General Counsel
Facsimile: (313) 436-9560
if to the Trust, to:
CMS Energy X-TRAS Pass Through Trust I
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Facsimile: (302) 651-1576
Telephone: (302) 651-1000
(b) The Company or the Trust, by notice to the other, may designate
additional or different addresses for subsequent notices or communications.
(c) Any notice or communication to Certificateholders shall be mailed
by first-class mail to the addresses for Certificateholders shown on the
Register kept by the Registrar. Failure so to mail a notice or communication
or any defect in such notice or communication shall not affect its sufficiency
with respect to other Certificateholders.
(d) If a notice or communication is mailed in the manner provided above
within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the
Certificateholders, it shall mail a copy to the Trust and to the Paying Agent
at the same time.
(f) Notwithstanding the foregoing, all communications or notices to the
Trust shall be deemed to be given only when received by a Responsible Officer
of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy of any
demand, notice or written communication received by the Trust hereunder from
any Certificateholder or Indenture Trustee.
<PAGE> 69
63
Section 12.04. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE CERTIFICATEHOLDERS, THE TRUST AND THE TRUSTEE WITH
RESPECT TO THIS AGREEMENT AND THE CERTIFICATES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. THE PROVISIONS OF SECTIONS 3540 AND 3561 OF TITLE
12 OF THE DELAWARE CODE ANNOTATED SHALL NOT APPLY TO THE TRUST.
Section 12.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or the Trust, or of
the Certificates or the rights of the Certificateholders thereof.
Section 12.06. Trust Indenture Act Controls. This Agreement is
subject to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions.
Section 12.07. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.08. Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by the Trustee and the Company
shall bind and, to the extent permitted hereby, shall inure to the benefit of
and be enforceable by their respective successors and assigns, whether so
expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this Agreement or in
the Certificates, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Certificateholders, any
benefit or any legal or equitable right, remedy or claim under this Agreement,
except that each of the Extension Option Buyer and Morgan Stanley & Co.
Incorporated (as Remarketing Agent) shall be a third party beneficiary of this
Agreement and may enforce the obligations of the Company running in favor of
the Extension Option Buyer and Morgan Stanley & Co. Incorporated, as
applicable.
Section 12.10. Legal Holidays. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate
shall not be a Business Day, then (notwithstanding any other provision of this
Agreement) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect
<PAGE> 70
64
as if made on such Regular Distribution Date or Special Distribution Date, and
no interest shall accrue during the intervening period.
Section 12.11. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 12.12. Acceptance of Terms of This Agreement and Indenture.
THE RECEIPT AND ACCEPTANCE OF A CERTIFICATE OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A CERTIFICATEHOLDER OR ANY BENEFICIAL HOLDER, WITHOUT ANY SIGNATURE
OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE CERTIFICATEHOLDER AND ALL OTHERS HAVING A BENEFICIAL
INTEREST IN SUCH CERTIFICATE OF ALL THE TERMS AND PROVISIONS OF THIS AGREEMENT,
AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH CERTIFICATEHOLDER AND
SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE BINDING,
OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH CERTIFICATEHOLDER AND
SUCH OTHERS.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
CMS ENERGY CORPORATION
By
------------------------
Name:
Title:
WILMINGTON TRUST COMPANY
as Trustee
By
------------------------
Name:
Title:
<PAGE> 71
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED
No. ______________
THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
CERTIFICATEHOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT
WILL NOT RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A)
TO THE COMPANY, (B) TO A QUALIFIED INSTITUTIONAL BUYER, OR (C) TO
AN INSTITUTIONAL ACCREDITED INVESTOR, AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC
<PAGE> 72
A-2
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF
THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.
[GLOBAL CERTIFICATE]
CMS ENERGY X-TRAS PASS THROUGH TRUST I
CMS ENERGY Pass Through Certificate
Series I
Final Distribution Date: _______ __, 2005
evidencing a fractional undivided interest in a trust, certain property of
which includes certain notes of CMS Energy Corporation.
$________ Fractional Undivided Interest
representing . _______% of the Trust per $1,000 face amount
CMS Energy X-TRAS Pass Through Trust I, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), hereby certifies
that ___________, for value received, is the registered owner of a $__________
(___________ dollars) Fractional Undivided Interest in the Assigned Trust
Property (as defined herein) created pursuant to an Amended and Restated Pass
Through Trust Agreement, dated as of ___________ __, 1998 (the "Agreement"),
between Wilmington Trust Company (the "Trustee") and CMS Energy, a corporation
incorporated under Michigan law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "CMS Energy Pass Through Certificates Series I"
(herein called the "Certificates"). This Certificate is issued under and is
subject to the terms, provisions, and conditions of the Agreement. By virtue
of its acceptance hereof the Certificateholder of this Certificate assents to
and agrees to be bound by the provisions of the Agreement. The property of the
Trust includes certain X-TRAS and all rights of the Trust to receive payments
under the Indenture, except as set forth therein with respect to the ISDA
Amount under the ISDA Master Agreement (the "Assigned Trust Property").
The Certificates represent fractional undivided interests in the
Assigned Trust Property, and have no rights, benefits or interest in respect of
any assets or property other than the Assigned Trust Property.
<PAGE> 73
A-3
Subject to and in accordance with the terms of the Agreement and the
Indenture from and to the extent of funds then available to the Trustee, in
respect of the Assigned Trust Property, there will be distributed on each _____
__ and _______ __ (a "Regular Distribution Date"), commencing on ______, 1998,
to the Person in whose name this Certificate is registered at the close of
business on the first day of the calendar month (whether or not a Business Day)
preceding the Regular Distribution Date, an amount in respect of the Scheduled
Payments on the X-TRAS due on such Regular Distribution Date, the receipt of
which has been confirmed by the Trustee, equal to the product of the percentage
interest in the Assigned Trust Property evidenced by this Certificate and an
amount equal to the sum of such Scheduled Payments. Subject to and in
accordance with the terms of the Agreement and the Indenture, in the event that
Special Payments on the X-TRAS are received by the Trustee, from funds in
respect of the Assigned Trust Property then available to the Trustee, there
shall be distributed on the applicable Special Distribution Date, to the Person
in whose name this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in respect of such
Special Payments on the X-TRAS, the receipt of which has been confirmed by the
Trustee, equal to the product of the percentage interest in the Trust evidenced
by this Certificate and an amount equal to the sum of such Special Payments so
received. If a Regular Distribution Date or Special Distribution Date is not a
Business Day, distribution shall be made on the immediately following Business
Day with the same force and effect as if made on such Regular Distribution Date
or Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each Special Payment and
the Special Distribution Date therefor to the Certificateholder of this
Certificate.
Except as otherwise provided in the Agreement and notwithstanding the
above, the final distribution on this Certificate will be made after notice
mailed by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency of the
Trust specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
Reference is hereby made to the further provisions of this Certificate
set forth in the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE> 74
A-4
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: CMS ENERGY X-TRAS(sm)
PASS THROUGH TRUST 1997-1
By: Wilmington Trust Company
Attest: By: _____________________________
Name:
Title:
____________________
Authorized Signature
<PAGE> 75
A-5
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY
not in its individual capacity but
solely as Trustee
By:________________________________
Authorized Officer
<PAGE> 76
A-6
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
of their affiliates. The Certificates are limited in right or payment, all as
more specifically set forth on the face hereof and in the Agreement. All
payments or distributions made to Certificateholders under the Agreement shall
be made only from the Assigned Trust Property and only to the extent that the
Trust shall have sufficient income or proceeds from the Assigned Trust Property
to make such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Assigned Trust Property to
the extent available for distribution to such Certificateholder as provided in
the Agreement. This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced
hereby. A copy of the Agreement may be examined during normal business hours
at the principal office of the Trustee, and at such other places, if any,
designated by the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any
time by the Company and the Trust with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Assigned Trust Property. Any such
consent by the Certificateholder of this Certificate shall be conclusive and
binding on such Certificateholder and upon all future Certificateholders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof,
in certain limited circumstances, without the consent of the Certificateholders
of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Register upon
surrender of this Certificate for registration of transfer at the offices or
agencies maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New York, duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized
in writing, and thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided Interest in
the Trust will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in minimum denominations of $250,000 Fractional Undivided Interest and
integral multiples of $1,000 in excess thereof. As provided in the Agreement
and subject to certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized
<PAGE> 77
A-7
denominations evidencing the same aggregate Fractional Undivided Interest in
the Assigned Trust Property, as requested by the Certificateholder surrendering
the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee shall require payment by the Holder of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trust, the Trustee, the Registrar and any agent of the Trust, the
Trustee or the Registrar may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and the Trust, the Trustee,
the Registrar or any such agent shall not be affected by any notice to the
contrary.
The obligations and responsibilities for the benefit of the
Certificateholders created by the Agreement and the Trust created thereby shall
terminate upon the distribution to Certificateholders of all amounts required
to be distributed to them pursuant to the Agreement and the disposition of all
property held as part of the Assigned Trust Property.
<PAGE> 78
A-8
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- -------------------------------
- -------------------------------
please print or typewrite name and address including zip code of assignee
- -------------------------------
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
- -------------------------------
attorney to transfer said Certificate on the books of the Trust with full power
of substitution in the premises.
Date: [Name of Transferor
----------------------------------------
NOTE: The signature must
correspond with the name as
written upon the face of the
within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
