<PAGE> 1
As filed with the Securities and Exchange Commission on June 13, 1997
Registration No. 333-27849
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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<S> <C> <C>
CMS ENERGY CORPORATION CMS ENERGY TRUST I CMS ENERGY TRUST II
(Exact name of registrant (Exact name of registrant (Exact name of registrant
as specified in its charter) as specified in its charter) as specified in its charter)
MICHIGAN DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
38-2726431 TO BE APPLIED FOR TO BE APPLIED FOR
(I.R.S. Employer Identification (I.R.S. Employer or (I.R.S. Employer Identification
No.) Identification No.) No.)
</TABLE>
FAIRLANE PLAZA SOUTH, SUITE 1100
330 Town Center Drive
Dearborn, Michigan 48126
(313) 436-9200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ALAN M. WRIGHT
Senior Vice President, Chief Financial Officer and Treasurer
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
313-436-9560
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
It is respectfully requested that the Commission send copies of all notices,
orders and communications to:
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<C> <C>
MICHAEL D. VAN HEMERT, ESQ. JOHN W. OSBORN, ESQ.
CMS Energy Corporation Skadden, Arps, Slate, Meagher & Flom LLP
Fairlane Plaza South, Suite 1100 919 Third Avenue
330 Town Center Drive New York, New York 10022
Dearborn, Michigan 48126
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement as determined by
market and other conditions.
------------------------
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: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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. [X]
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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
EXPLANATORY NOTE
This Registration Statement contains the following prospectuses: (i) a
"base" prospectus (the "Base Prospectus") to be used in connection with the
offer and sale of securities of CMS Energy Corporation ("CMS Energy"), CMS
Energy Trust I and CMS Energy Trust II (each, a "Trust"); and (ii) a prospectus
supplement to be used in connection with any offer and sale of Convertible
QUIPS(SM), which are referred to as "Preferred Securities" in the base
prospectus.
The Base Prospectus will be used for the offer and sale of all securities
registered pursuant to this Registration Statement, in addition to a prospectus
supplement relating to the specific security or securities to be offered and
sold ("Prospectus Supplement"). CMS Energy plans to consummate, from time to
time, transactions involving the sale of securities registered pursuant to this
Registration Statement, provided that the proceeds therefrom will not exceed an
aggregate of $300,000,000. No decisions have been made as to which securities
will be issued or the timing or size of any offering of such securities. Such
determinations will be made from time to time in the light of market and other
conditions.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 12, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1997
3,000,000 PREFERRED SECURITIES
[CMS ENERGY LOGO] CMS ENERGY TRUST I
% CONVERTIBLE QUARTERLY INCOME PREFERRED SECURITIES
(CONVERTIBLE QUIPS(SM)*)
(LIQUIDATION PREFERENCE $50 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
CMS ENERGY CORPORATION
------------------------
The % convertible quarterly income preferred securities (the "Preferred
Securities") offered hereby represent undivided beneficial interests in the
assets of CMS Energy Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Issuer"). All of the beneficial interests in the
assets of the Issuer represented by common securities of the Issuer (the "Common
Securities" and, together with the Preferred Securities, the "Trust Securities")
are owned by CMS Energy Corporation, a Michigan corporation ("CMS Energy" or the
"Company"). The Issuer exists for the sole purpose of issuing the Preferred
Securities and the Common Securities and investing the proceeds from the
issuance thereof in % Convertible Subordinated Debentures due 2027 having
the terms described herein (the "Debentures") to be issued by CMS Energy. The
Preferred Securities will have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption or
otherwise over the Common Securities. See "Description of the Preferred
Securities -- Subordination of Common Securities".
(continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-16 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSION(1) ISSUER(2)(3)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Per Preferred Security............................. $ (2) $
Total(4)........................................... $ (2) $
</TABLE>
- ---------------
(1) The Issuer and CMS Energy have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Debentures, under the Underwriting
Agreement, CMS Energy will pay to the Underwriters, as compensation
("Underwriters' Compensation") for their arranging the investment therein of
such proceeds, $ per Preferred Security (or $ in the
aggregate). See "Underwriting".
(3) Expenses of the Offering, which are payable by CMS Energy, are estimated to
be $ .
(4) The Issuer and CMS Energy have granted the Underwriters an option for 30
days to purchase up to an additional 450,000 Preferred Securities at the
initial public offering price per Preferred Security solely to cover over-
allotments, if any. If such option is exercised in full, the total initial
public offering price and proceeds to Issuer will be $ and
$ , respectively, and the total underwriting commission paid by CMS
Energy for arranging the investment therein will be $ . See
"Underwriting".
------------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Preferred Securities will be ready for delivery in book-entry form only
through the facilities of DTC in New York, New York on or about ,
1997, against payment therefor in immediately available funds.
- ------------------------
* QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is , 1997.
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES AND COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY
BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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(continued from previous page)
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash distributions from the Issuer at an annual rate of
% of the liquidation preference of $50 per Preferred Security accruing from
the date of original issuance and payable quarterly in arrears on ,
, and of each year, commencing ,
1997 ("Distributions"). The distribution rate and the distribution and other
payment dates for the Preferred Securities will correspond to the interest rate
and interest and other payment dates for the Debentures, which will be the sole
assets of the Issuer. As a result, if principal or interest is not paid on the
Debentures, no amounts will be paid on the Preferred Securities. CMS Energy has
the right to defer payment of interest on the Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarters with respect to
each deferral period (each, an "Extension Period"), provided that no Extension
Period may extend beyond the stated maturity of the Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then due
on any Interest Payment Date (as defined herein), CMS Energy may elect to begin
a new Extension Period subject to the requirements set forth herein. If interest
payments on the Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred and CMS Energy will not be permitted, subject
to certain exceptions set forth herein, to declare or pay any cash distributions
with respect to CMS Energy's capital stock or debt securities that rank pari
passu with or junior to the Debentures. During an Extension Period, interest on
the Debentures will continue to accrue (and the amount of Distributions to which
holders of the Preferred Securities are entitled will accumulate at the stated
rate per annum, compounded quarterly) and holders of Preferred Securities will
be required to accrue interest income for United States federal income tax
purposes. See "Description of the Debentures -- Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount."
Each Preferred Security is convertible in the manner described herein at
the option of the holder, at any time prior to the Conversion Expiration Date
(as defined herein), into shares of common stock, $.01 par value per share, of
CMS Energy ("CMS Energy Common Stock" or "Common Stock") at the rate of
shares of CMS Energy Common Stock for each Preferred Security
(equivalent to a conversion price of $ per share of CMS Energy Common
Stock), subject to adjustment in certain circumstances. See "Description of the
Preferred Securities -- Conversion Rights" herein and "Description of Securities
- -- Common Stock" in the accompanying Prospectus. The last reported sale price of
CMS Energy Common Stock, which is listed under the symbol "CMS" on the New York
Stock Exchange, on June 11, 1997 was $33.75 per share. See "Price Range of CMS
Energy Common Stock and Dividends."
At any time on or after , 2001, CMS Energy may, at its option,
cause the rights of holders of the Preferred Securities to convert the Preferred
Securities into CMS Energy Common Stock to expire. CMS Energy may exercise this
option only if for 20 trading days within any period of 30 consecutive trading
days, including the last trading day of such period, the Current Market Price
(as defined herein) of CMS Energy Common Stock exceeds 115% of the conversion
price of the Preferred Securities, subject to adjustment in certain
circumstances. In order to exercise its option to terminate the conversion
rights of the Preferred Securities, CMS Energy must issue a press release
announcing the date upon which conversion rights will expire prior to the
opening of business on the second trading day after any period in which the
condition in the preceding
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sentence has been met, but in no event prior to , 2001. The date on
which such conversion rights will expire (the "Conversion Expiration Date")
shall be a date not less than 30 and not more than 60 days following the date of
the issuance of the press release described above. See "Description of the
Preferred Securities -- Conversion Rights -- Expiration of Conversion Rights."
Except as provided below, the Preferred Securities may not be redeemed by
the Issuer prior to , 2001. The Preferred Securities are subject to
redemption, in whole or in part, on or after such date, at redemption prices set
forth herein, upon any permitted redemption by CMS Energy of Debentures, in a
principal amount not to exceed the amount of the proceeds derived by CMS Energy
or its subsidiaries from the issuance and sale of common stock within three
years preceding the date fixed for redemption. See "Description of the Preferred
Securities -- Optional Redemption." In the event that, at any time after the
Conversion Expiration Date, less than 5% of the Preferred Securities remains
outstanding, such Preferred Securities shall be redeemable at the option of the
Issuer, in whole but not in part, at a redemption price equal to the liquidation
preference for such Preferred Securities and all accrued and unpaid
Distributions. See "Description of the Preferred Securities -- Optional
Redemption." In addition, the Preferred Securities are subject to mandatory
redemption upon the repayment at maturity or as a result of acceleration of the
Debentures. See "Description of the Preferred Securities -- Mandatory
Redemption."
Under certain circumstances following the occurrence of a Special Event (as
herein defined), the Preferred Securities are also subject to (i) exchange, at
the option of the Issuer in the manner described herein, for Debentures (see
"Description of the Preferred Securities -- Special Event Exchange or
Redemption") or (ii) redemption, in whole or in part, on or after ,
2001, if such Special Event constitutes a Tax Event (as defined herein). At any
time, CMS Energy will have the right to terminate the Issuer and cause the
Debentures to be distributed to the holders of the Preferred Securities in
liquidation of the Issuer. See "Description of the Preferred Securities --
Distribution of Debentures."
CMS Energy has, through the Guarantee, the Trust Agreement, the Debentures
and the Indenture (each, as defined herein), taken together, fully, irrevocably
and unconditionally guaranteed all of the Issuer's obligations under the
Preferred Securities. See "Description of the Guarantee," "CMS Energy Trust I"
and "Description of the Debentures," respectively. The Guarantee of CMS Energy
guarantees the payment of Distributions and payments on liquidation or
redemption of the Preferred Securities, but only in each case to the extent of
funds held by the Issuer, as described herein (the "Guarantee"). See
"Description of the Guarantee." If CMS Energy does not make interest payments on
the Debentures held by the Issuer, the Issuer will have insufficient funds to
pay Distributions on the Preferred Securities. The Guarantee does not cover
payment of Distributions when the Issuer does not have sufficient funds to pay
such Distributions. In such event, a holder of Preferred Securities may
institute a legal proceeding directly against CMS Energy to enforce payment
under the Debentures of such Distributions to such holder. The obligations of
CMS Energy under the Guarantee are subordinate and junior in right of payment to
all other liabilities of CMS Energy and will rank pari passu with any guarantee
now or hereafter entered into by CMS Energy in respect of any preferred or
preference stock of any affiliate of CMS Energy (as defined in "Description of
the Debentures -- Subordination").
The Debentures are subordinate and junior in right of payment to all Senior
Indebtedness (as defined herein) of CMS Energy. The terms of the Debentures
place no limitation on the amount of Senior Indebtedness that may be incurred by
CMS Energy or the amount of indebtedness that may be incurred by its
subsidiaries. As of May 31, 1997, CMS Energy had indebtedness of $1,612 million,
all of which comprised Senior Indebtedness of CMS Energy. CMS Energy will have
the right from time to time on or after , 2001, to redeem, in whole or
in part, the Debentures at the redemption prices set forth herein, provided that
the principal amount so redeemed may not exceed the amount of proceeds derived
from CMS Energy or its subsidiaries from the issuance and sale of common stock
within three years preceding the date fixed for redemption.
S-3
<PAGE> 6
In the event of the termination of the Issuer, after satisfaction of the
creditors of the Issuer as provided by applicable law, the holders of the
Preferred Securities will be entitled to receive a liquidation preference of $50
per Preferred Security plus accumulated and unpaid Distributions thereon to the
date of payment, which may be in the form of a distribution of such amount in
Debentures, subject to certain exceptions. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Termination."
Prior to the offering made hereby there has been no public market for the
Preferred Securities. Application will be made to list the Preferred Securities
on the New York Stock Exchange ("NYSE") under the symbol "CMS PrZ."
Except as provided herein, the Preferred Securities will be evidenced by
one or more certificates in registered, global form (collectively, the "Global
Certificate") which will be deposited with the Property Trustee (as defined
herein) as custodian for The Depository Trust Company ("DTC") and registered in
the name of Cede & Co. ("Cede") as DTC's nominee. Except as set forth herein,
record ownership of the Global Certificate may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
See "Description of the Preferred Securities -- Form, Transfer, Exchange and
Book-Entry Procedures."
S-4
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus
Supplement, including information under "Risk Factors," and in the accompanying
Prospectus.
CMS ENERGY CORPORATION
CMS Energy, incorporated 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 CMS Energy. Consumers' customer base includes a mix of
residential, commercial and diversified industrial customers, the largest of
which is the automotive industry. Enterprises is engaged in several 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 customers; (iv) transmission, storage and processing of
natural gas; and (v) international energy distribution.
CMS Energy 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
transmission, storage 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. CMS Energy and its subsidiaries
routinely evaluate, invest in, acquire and divest energy-related assets and/or
companies both domestically and internationally. Consideration for such
transactions may involve the delivery of cash or securities.
CMS Energy'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 major share of CMS Energy's total assets, revenue and income. The
unconsolidated share of non-utility electric generation, gas transmission and
storage and international energy distribution revenue for 1996 was $557 million.
Consumers is a public utility serving gas or electricity to almost six
million of Michigan's nine and a half million residents in all of the 68
counties in Michigan's Lower Peninsula. Industries in Consumers' service area
include automotive, metal, chemical, food and wood products and a diversified
group of other industries. Consumers' 1996 consolidated operating revenue of
$3,770 million was derived approximately 65% ($2,446 million) from its electric
utility business and approximately 34% ($1,282 million) from its gas utility
business. Consumers' rates and certain other aspects of its business are subject
to the jurisdiction of the Michigan Public Service Commission ("MPSC") and the
Federal Energy Regulatory Commission.
RECENT DEVELOPMENTS
On June 11, 1997, Consumers announced that one of its two nuclear power
plants, Big Rock Point, will permanently cease operations on August 30, 1997
after 35 years of service. Big Rock Point was capable of producing 67 megawatts
of electricity. The plant closure will have no impact on Consumers' electric
rates. The process to decommission the plant will begin in September 1997, and a
decommissioning fund with a current balance of $170 million, together with
future funds to be
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collected and future fund earnings, is expected to be adequate for plant
decommissioning expenses.
On June 5, 1997, the MPSC issued an order related to the restructuring of
the electric power industry in Michigan largely endorsing, with some
modification, a restructuring plan developed the previous year by the MPSC Staff
reflecting the principles and concepts for restructuring espoused by Michigan
Governor John Engler. The key elements of the plan include (i) recovery of
transition costs (often referred to as stranded costs) through a transmission
surcharge applicable through the year 2007 for all retail customers choosing
alternate generation suppliers; (ii) securitization of a transition cost
recovery surcharge for all retail customers; (iii) the ability of all retail
customers to choose their electric generator beginning in the year 2002; and
(iv) an annual phase-in of 2.5 percent of each utility's load (150 megawatts for
Consumers) for competition beginning later in 1997 through 2001. The Michigan
legislature must take action on certain elements of the plan, with action
expected in the fall of 1997. The MPSC will commence proceedings to confirm the
components of the MPSC Staff plan and their implementation, and to review
proposals for base rates, including a rate freeze, transition cost recovery,
performance based rates and other rates issues. CMS Energy and Consumers are
currently studying this order.
On May 12, 1997, a consortium led by CMS Energy completed its successful
bid in the Australian State of Victoria's privatization of its Loy Yang A power
facility. Loy Yang A is a 2,000-megawatt, brown coal-fueled plant with an
associated coal mine which supplies fuel to Loy Yang A and Loy Yang B. Loy Yang
A is Victoria's largest electric generating plant and Australia's lowest-cost
electric generating facility. The purchase price was approximately $3.67 billion
with 77 percent of the acquisition cost project financed by a group of banks and
the remaining 23 percent comprised of partner equity. Subsidiaries of CMS
Generation Co., a wholly owned subsidiary of Enterprises, hold a 50 percent
ownership interest in the Loy Yang A consortium. CMS Generation made an equity
contribution of approximately $500 million to acquire such ownership interest,
derived in part from proceeds of CMS Energy's $350 million note issuance and in
part from drawings under CMS Energy's revolving Credit Agreement (as defined
herein), each of which are described below. Certain management and operating
services for Loy Yang A will be provided by CMS Generation affiliates.
On May 6, 1997, CMS Energy issued $350 million of senior unsecured notes
due 2002 at an interest rate of 8.125 percent. Proceeds were used in part to pay
down debt, with the remainder, together with drawings under the Credit
Agreement, used to fund a portion of CMS Generation's equity contribution in the
acquisition of the Loy Yang A ownership interest.
The Company is negotiating with a group of banks to replace the Credit
Agreement and the Term Loan (as defined herein) with a credit facility
consisting of a combination of unsecured revolving credit and term loan
tranches. The Company expects that the aggregate borrowing capacity under the
new facility may range from $725 million to $1.125 billion. The Company expects
to enter into such new credit facility in June of 1997.
CMS ENERGY TRUST I
CMS Energy Trust I is a statutory business trust formed under the Delaware
Business Trust Act (the "Trust Act") pursuant to (i) a trust agreement, dated as
of May 22, 1997, executed by CMS Energy, as sponsor (the "Sponsor"), and the
trustees of CMS Energy Trust I (the "CMS Trustees") and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on May
22, 1997. Such trust agreement will be amended and restated in its entirety (as
so amended and restated, the "Trust Agreement") substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). CMS Energy will directly or indirectly acquire Common
Securities in an aggregate liquidation amount equal to approximately 3% of the
total
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<PAGE> 9
capital of CMS Energy Trust I. CMS Energy Trust I exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of CMS Energy Trust I and investing the gross proceeds
of the Trust Securities in the Debentures; (ii) distributing the Trust's income;
and (iii) engaging in only those other activities necessary or incidental
thereto. CMS Energy Trust I has a term of approximately 30 years, but may
terminate earlier as provided in the Trust Agreement.
Pursuant to the Trust Agreement, the number of CMS Trustees will initially
be three. Two of the CMS Trustees (the "Administrative Trustees") will be
persons who are employees or officers of or who are affiliated with CMS Energy.
The third trustee will be a financial institution that is unaffiliated with CMS
Energy, which trustee will serve as institutional trustee under the Trust
Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). Initially, The
Bank of New York, a New York banking corporation, will be the Property Trustee
until removed or replaced by the holder of the Common Securities. For the
purpose of compliance with the provisions of the Trust Indenture Act, The Bank
of New York will also act as trustee (the "Guarantee Trustee") under the
Guarantee and The Bank of New York (Delaware) will act as the Delaware Trustee
for the purposes of the Trust Act, until removed or replaced by the holder of
the Common Securities. See "Description of the Guarantees" and "Description of
the Preferred Securities -- Voting Rights."
The Property Trustee will hold title to the Debentures for the benefit of
the holders of the Trust Securities and the Property Trustee will have the power
to exercise all rights, powers and privileges under the Indenture (as defined
herein) as the holder of the Debentures. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the Debentures
for the benefit of the holders of the Trust Securities. The Property Trustee
will make payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the Property
Account. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Preferred Securities. CMS Energy, as the direct or indirect
holder of all the Common Securities, will have the right to appoint, remove or
replace any CMS Trustee and to increase or decrease the number of CMS Trustees;
provided, that the number of CMS Trustees shall be at least three, a majority of
which shall be Administrative Trustees. CMS Energy will pay all fees and
expenses related to CMS Energy Trust I and the offering of the Trust Securities.
See "Description of the Debentures -- Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Trust Act and the Trust Indenture Act. See "Description of the
Preferred Securities."
The trustee in the State of Delaware is The Bank of New York (Delaware),
White Clay Center, Route 273, Newark, Delaware 19711. The principal place of
business of the Issuer shall be c/o CMS Energy Corporation, Fairlane Plaza
South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126-2712.
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SUMMARY FINANCIAL INFORMATION OF CMS ENERGY CORPORATION
The following is a summary of certain financial information of CMS Energy
and its consolidated subsidiaries and is qualified in its entirety by, and
should be read in conjunction with, the detailed information and consolidated
financial statements, including notes thereto, which are incorporated in the
accompanying Prospectus by reference. See "Incorporation of Certain Documents By
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
----------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue............ $ 1,313 $ 1,283 $ 4,333 $ 3,890 $ 3,614 $ 3,476 $ 3,142
Pretax operating income...... $ 213 $ 219 $ 691 $ 619 $ 515 $ 447 $ 239
Net income (loss)............ $ 84 $ 88 $ 240 $ 204 $ 179 $ 155 $ (297)
Earnings (loss) per average
common share -- CMS Energy
Common Stock............... $ .79 $ .83 $ 2.45 $ 2.27 $ 2.09 $ 1.90 $ (3.72)
Earnings per average common
share -- Class G Common
Stock...................... $ 1.18 $ 1.50 $ 1.82 $ .38 -- -- --
Average shares of CMS Energy
Common Stock outstanding
(in thousands)............. 94,899 91,644 92,462 88,810 85,888 81,251 79,877
Average shares of Class G
Common Stock outstanding
(in thousands)............. 7,901 7,627 7,727 7,511 -- -- --
Cash dividends declared per
share of CMS Energy Common
Stock...................... $ .27 $ .24 $ 1.02 $ .90 $ .78 $ .60 $ .48
Cash dividends declared per
share of Class G Common
Stock...................... $ .295 $ .28 $ 1.15 $ .56 -- -- --
BALANCE SHEET DATA:
Net plant and property....... $ 5,279 $ 5,052 $ 5,280 $ 5,074 $ 4,814 $ 4,583 $ 4,326
Total assets................. $ 8,403 $ 8,033 $ 8,615 $ 8,143 $ 7,378 $ 6,958 $ 6,842
Long-term debt(1)............ $ 2,728 $ 3,192 $ 2,945 $ 3,012 $ 2,817 $ 2,520 $ 2,823
Notes payable................ $ 88 $ 38 $ 333 $ 341 $ 339 $ 259 $ 215
Other liabilities............ $ 3,356 $ 2,806 $ 3,179 $ 2,965 $ 2,759 $ 3,050 $ 2,914
Company-obligated mandatorily
redeemable preferred
securities of Consumers
Power Company Financing
I.......................... $ 100 $ 100 $ 100 -- -- -- --
Preferred stock of
subsidiary................. $ 356 $ 356 $ 356 $ 356 $ 356 $ 163 $ 163
Common stockholders'
equity..................... $ 1,775 $ 1,541 $ 1,702 $ 1,469 $ 1,107 $ 966 $ 727
</TABLE>
- ---------------
(1) Includes capital leases; excludes current maturities.
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<PAGE> 11
THE OFFERING
Securities Offered............ 3,000,000 of the Issuer's % convertible
quarterly income preferred securities,
liquidation preference of $50 per security (the
"Preferred Securities"). Additionally, CMS
Energy and the Issuer have granted the
Underwriters an option for 30 days to purchase
up to an additional 450,000 Preferred
Securities at the initial offering price solely
to cover over-allotments, if any.
Issuer........................ CMS Energy Trust I, a statutory business trust
created under the laws of the State of
Delaware.
Distributions................. Distributions on the Preferred Securities will
be cumulative from the date of original
issuance of the Preferred Securities and will
be payable at the annual rate of % of the
liquidation preference of $50 per Preferred
Security. Distributions will be made quarterly
in arrears on , ,
and commencing on
, 1997 when and to the extent that
funds of the Issuer are available therefor. The
proceeds from the Offering will be invested in
the Debentures. Interest payment periods on the
Debentures are quarterly, but may be deferred
from time to time by CMS Energy for periods of
up to 20 consecutive quarters, so long as no
Debenture Event of Default (as defined herein)
has occurred and is continuing. In the event of
such a deferral, the Issuer would be unable to
make quarterly Distribution payments on the
Preferred Securities during the period of any
such deferral. During any such deferral period,
interest on the Debentures will continue to
accrue (and the amount of Distributions to
which holders of the Preferred Securities are
entitled will accumulate at the stated rate per
annum set forth herein, compounded quarterly)
and holders of Preferred Securities will be
required to accrue interest income for United
States federal income tax purposes. See
"Description of the Debentures -- Option to
Extend Interest Payment Period" and "Certain
Federal Income Tax Consequences -- Interest
Income and Original Issue Discount."
Distribution Deferral
Provisions.................... CMS Energy has the right to defer payment of
interest on the Debentures at any time or from
time to time for a period not exceeding 20
consecutive quarters with respect to each
deferral period (each, an "Extension Period"),
provided that no Extension Period may extend
beyond the stated maturity of the Debentures.
Upon the termination of any such Extension
Period and the payment of all amounts then due
on any Interest Payment Date, CMS Energy may
elect to begin a new Extension Period subject
to the requirements set forth herein. If
interest payments on the Debentures are so
deferred, Distributions on the Preferred
Securities will also be deferred and CMS Energy
will not be permitted, subject to certain
exceptions set forth herein, to declare or pay
any cash distributions with respect to CMS
Energy capital stock or debt securities
(including guarantees of indebtedness for
S-9
<PAGE> 12
borrowed money) that rank pari passu with or
junior to the Debentures.
Liquidation Preference........ $50 per Preferred Security, and all accrued and
unpaid Distributions.
Conversion into CMS Energy
Common Stock................ Each Preferred Security is convertible in the
manner described below at the option of the
holder, at any time prior to the Conversion
Expiration Date, into shares of CMS Energy
Common Stock at the rate of shares of
CMS Energy Common Stock for each Preferred
Security (equivalent to a conversion price of
$ per share of CMS Energy Common
Stock), subject to adjustment in certain
circumstances. A holder of Preferred Securities
wishing to exercise its conversion right shall
surrender any or all of such Preferred
Securities, together with an irrevocable
conversion notice, to the paying, conversion
and exchange agent acting on behalf of the
holders of Preferred Securities (the
"Conversion Agent"), which shall exchange the
Preferred Securities for a portion (equal to
the aggregate liquidation preference of the
Preferred Securities being so converted) of the
Debentures held by the Issuer and immediately
convert such Debentures into CMS Energy Common
Stock. A holder generally will not recognize
taxable gain or loss upon the exchange through
the Conversion Agent of the Preferred
Securities for a proportionate share of the
Debentures, followed immediately thereafter by
the conversion of the Debentures into CMS
Energy Common Stock. See "Certain Federal
Income Tax Consequences -- Conversion of
Preferred Securities into CMS Energy Common
Stock."
Termination of Conversion
Rights........................ At any time on or after , 2001,
CMS Energy may, at its option, cause the
conversion rights of holders of the Preferred
Securities to expire. CMS Energy may exercise
this option only if for 20 trading days within
any period of 30 consecutive trading days,
including the last trading day of such period,
the Current Market Price of CMS Energy Common
Stock exceeds 115% of the conversion price of
the Preferred Securities, subject to adjustment
in certain circumstances. In order to exercise
its option to terminate the conversion rights
of the Preferred Securities, CMS Energy must
issue a press release for publication on the
Dow Jones News Service announcing the date upon
which conversion rights will expire prior to
the opening of business on the second trading
day after any period in which the condition in
the preceding sentence has been met, but in no
event prior to , 2001. The date
upon which such conversion rights are to expire
(the "Conversion Expiration Date") shall be a
date not less than 30 and not more than 60 days
following the date of such press release. The
press release shall announce the Conversion
Expiration Date and provide the current
conversion price and Current Market Price of
CMS Energy Common Stock, in each case as of the
close of
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<PAGE> 13
business on the trading day next preceding the
date of the press release. Written notice will
be mailed by first-class mail by the Property
Trustee to each holder of Preferred Securities
not more than four Business Days after issuance
of the press release. In the event of any
redemption of the Preferred Securities, the
conversion rights with respect to the Preferred
Securities will expire two Business Days prior
to the scheduled date for the mandatory
redemption of the Preferred Securities if CMS
Energy has not exercised its option to
terminate the conversion rights of the
Preferred Securities. See "Description of the
Preferred Securities -- Conversion Rights --
Expiration of Conversion Rights."
Redemption.................... Except as provided below, the Preferred
Securities may not be redeemed by the Issuer
prior to , 2001.
From time to time on or after such date, the
Preferred Securities will be subject to
redemption, in whole or in part, at the
redemption prices set forth herein (together
with all accrued and unpaid Distributions, to
the date fixed for redemption) upon any
permitted redemption by CMS Energy of
Debentures, in a principal amount not to exceed
the amount of proceeds derived by CMS Energy or
its subsidiaries from the issuance and sale of
common stock within three years preceding the
date fixed for redemption. See "Description of
the Preferred Securities -- Optional
Redemption" and "Description of the Debentures
-- Optional Redemption."
If at any time following the Conversion
Expiration Date, less than 5% of the Preferred
Securities remains outstanding, such Preferred
Securities shall be redeemable at the option of
the Issuer, in whole but not in part, at a
redemption price of $50 per Preferred Security
together with accumulated and unpaid
Distributions (whether or not earned or
declared) through the date of redemption. The
Preferred Securities are subject to mandatory
redemption upon the repayment at maturity or as
a result of acceleration of the Debentures. See
"Description of Preferred Securities -- Trust
Agreement Events of Default; Notice" and
"Description of the Preferred Securities --
Mandatory Redemption."
Special Event Exchange or
Redemption.................. Upon the occurrence of a Tax Event (as defined
below) or an Investment Company Event (as
defined below), the CMS Trustees shall direct
the Conversion Agent to exchange all
outstanding Preferred Securities for
Debentures, provided that, in the case of a Tax
Event, the CMS Trustees shall have the right to
direct that less than all of the Preferred
Securities be so exchanged if and for so long
as CMS Energy shall have elected to pay
Additional Sums (as defined below) such that
the amounts received by the holders of
Preferred Securities that remain outstanding
are not reduced thereby and shall not have
revoked any such election or failed to make
such payments. Upon the occurrence of a Tax
Event,
S-11
<PAGE> 14
the Debentures may be redeemed by CMS Energy on
or after , 2001 at 100% of the
principal amount thereof, plus accrued and
unpaid interest thereon. In the event the
Debentures are redeemed by CMS Energy, the
Preferred Securities will be redeemed by the
CMS Trustees at $50 per Preferred Security
together with accrued and unpaid Distributions
thereon. See "Description of the Preferred
Securities -- Special Event Exchange or
Redemption."
A "Special Event" means a Tax Event or an
Investment Company Event. A "Tax Event" means
the receipt by the Property Trustee, on behalf
of the Issuer, of an opinion of counsel,
rendered by a law firm having a national tax
and securities practice (which opinion shall
not have been rescinded by such law firm), to
the effect that, as a result of any amendment
to, or change (including any announced
prospective change) in, the laws (or any
regulations thereunder) of the United States or
any political subdivision or taxing authority
thereof or therein affecting taxation, or as a
result of any official administrative
pronouncement or judicial decision interpreting
or applying such laws or regulations, which
amendment or change is effective or such
pronouncement or decision is announced on or
after the date of issuance of the Preferred
Securities under the Trust Agreement, there is
more than an insubstantial risk in each case
after the date hereof that (i) the Issuer is,
or will be within 90 days of the date thereof,
subject to United States federal income tax
with respect to income received or accrued on
the Debentures, (ii) interest payable by CMS
Energy on such Debentures is not, or within 90
days of the date thereof will not be,
deductible by CMS Energy, in whole or in part,
for United States federal income tax purposes;
or (iii) the Issuer is, or will be within 90
days of the date thereof, subject to more than
a de minimis amount of other taxes, duties or
other governmental charges. "Investment Company
Event" means the receipt by the Property
Trustee, on behalf of the Issuer, of an opinion
of counsel, rendered by a law firm having a
recognized national tax and securities practice
(which opinion shall not have been rescinded by
such law firm), to the effect that, as a result
of the occurrence of a change in law or
regulation or a change in interpretation or
application of law or regulation by any
legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act
Law"), that there is more than an insubstantial
risk that the Issuer is or will be considered
an "investment company" that is required to be
registered under the Investment Company Act of
1940, as amended (the "Investment Company
Act"), which Change in 1940 Act Law becomes
effective on or after the date of original
issuance of the Preferred Securities.
"Additional Sums" means the additional amounts
as may be necessary in order that the amount of
Distributions then due and payable by the
Issuer on the outstanding Preferred
S-12
<PAGE> 15
Securities and Common Securities of the Issuer
shall not be reduced as a result of any
additional taxes, duties and other governmental
charges to which the Issuer has become subject
as a result of a Tax Event.
Distribution of Debentures.... At any time, CMS Energy will have the right to
terminate the Issuer and, after satisfaction of
the liabilities of creditors of the Issuer as
provided by applicable law, cause the
Debentures to be distributed to the holders of
the Preferred Securities in liquidation of the
Issuer. See "Description of the Preferred
Securities -- Distribution of the Debentures."
Guarantee..................... Pursuant to the Guarantee, CMS Energy will
irrevocably agree, on a subordinated basis, to
guarantee the payment in full of (a) the
Distributions payable by the Issuer on the
Preferred Securities, if and to the extent the
Issuer has funds on hand available therefor,
(b) the redemption price (together with
accumulated and unpaid Distributions) of the
Preferred Securities, to the extent the Issuer
has funds on hand available therefor, and (c)
payments on liquidation with respect to the
Preferred Securities (unless the Debentures are
distributed to the holders of the Preferred
Securities), to the extent that there are
assets of the Issuer available for distribution
to holders of the Preferred Securities. A
holder of Preferred Securities may enforce CMS
Energy's obligations under the Guarantee
directly against CMS Energy, and CMS Energy
waives any right to require that an action be
brought against the Issuer or any other person
before proceeding against CMS Energy. The
Guarantee will constitute an unsecured
obligation of CMS Energy and will rank
subordinate and junior in right of payment to
all liabilities of CMS Energy and pari passu
with any guarantee now or hereinafter entered
into by CMS Energy in respect of any preferred
or preference stock of any affiliate of CMS
Energy. See "Risk Factors -- Ranking of
Subordinated Obligations Under the Guarantee
and the Debentures" and "-- Structural
Subordination" and "Description of the
Guarantee."
Voting Rights................. Holders of Preferred Securities will generally
have limited voting rights relating only to the
modification of the Preferred Securities.
Holders of Preferred Securities will not be
entitled to vote to appoint, remove or replace
the CMS Trustees, which voting rights are
vested exclusively in the holder of the Common
Securities. The CMS Trustees and CMS Energy may
amend the Trust Agreement without the consent
of holders of Preferred Securities to ensure
that the Issuer will be classified for United
States federal income tax purposes as a grantor
trust even if such action adversely affects the
interests of such holders. See "Description of
the Preferred Securities -- Voting Rights;
Amendment of the Trust Agreement."
Debentures.................... The Debentures will have a maturity of 30 years
from the date of original issuance and will
bear interest at the rate of % per annum
payable quarterly in arrears. CMS Energy
S-13
<PAGE> 16
has the right from time to time to select an
interest payment period or periods longer than
one quarter (during which period or periods
interest will compound quarterly), provided
that no such deferral of interest payments will
exceed 20 consecutive quarters and provided
further that no such deferral of interest
payments may extend beyond the stated maturity
of the Debentures. Accordingly, Distribution
payments on the Preferred Securities may not be
deferred beyond the stated maturity of the
Debentures. If CMS Energy defers interest
payments longer than one quarter, subject to
certain exceptions, it will be prohibited from
paying dividends on any of its capital stock
and making certain other restricted payments
until quarterly interest payments are resumed
and all accrued and unpaid interest on the
Debentures is brought current. CMS Energy will
have the right to make partial payments of such
interest during a deferral of interest
payments. The Debentures are convertible into
shares of CMS Energy Common Stock at the option
of the holders thereof at a conversion rate of
shares of CMS Energy Common Stock for
each $50 in principal amount of Debentures
(equivalent to a conversion price of
$ per share of CMS Energy Common
Stock) subject to certain adjustments set forth
herein. The Issuer will covenant not to convert
Debentures except pursuant to a notice of
conversion delivered to the Conversion Agent by
a holder of Preferred Securities.
In addition, on and after , 2001, the
Debentures are redeemable at the option of CMS
Energy at any time, in whole or in part, at the
redemption prices set forth herein, together
with accrued and unpaid interest to the date
fixed for redemption. See "Description of the
Debentures -- Optional Redemption." The
Debentures are also redeemable, in whole or in
part, upon the occurrence and continuation of a
Tax Event. See "Description of the Preferred
Securities -- Special Event Exchange or
Redemption."
The payment of the principal and interest on
the Debentures will be subordinated in right of
payment to all Senior Indebtedness of CMS
Energy. As of May 31, 1997, CMS Energy had
approximately $1,612 million of indebtedness,
all of which comprised Senior Indebtedness. See
"Risk Factors -- Ranking of Subordinate
Obligations Under the Guarantee and the
Debentures" and "-- Structural Subordination."
While the Preferred Securities are outstanding,
the Issuer will not have the right to amend the
Indenture or the terms of the Debentures in a
way that materially adversely affects the
holders of the Preferred Securities or to waive
a Debenture Event of Default without the
consent of holders of at least a majority in
aggregate liquidation preference of the
Preferred Securities and, in certain cases, the
Common Securities then outstanding. See
"Description of the Debentures -- Modification
of Indenture."
S-14
<PAGE> 17
Use of Proceeds............... All of the proceeds from the sale of the
Preferred Securities and the Common Securities
will be invested by the Issuer in Debentures of
CMS Energy pursuant to the Indenture described
herein and ultimately will be used by CMS
Energy for general corporate purposes,
including capital expenditures, investment in
subsidiaries, working capital and repayment of
debt.
S-15
<PAGE> 18
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters:
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE DEBENTURES
The obligations of CMS Energy under the Guarantee issued by CMS Energy for
the benefit of the holders of Preferred Securities are unsecured and rank
subordinate and junior in right of payment to all other liabilities of CMS
Energy and pari passu with any guarantee now or hereafter entered into by CMS
Energy in respect of any preferred or preference stock of any affiliate of CMS
Energy. The obligations of CMS Energy under the Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness of CMS
Energy. As of May 31, 1997, CMS Energy had indebtedness of $1,612 million, all
of which comprised Senior Indebtedness of CMS Energy. The ability of the Issuer
to pay amounts due on the Preferred Securities is solely dependent upon CMS
Energy's making payments on the Debentures as and when required. Neither the
Indenture, the Guarantee nor the Trust Agreement places any limitation on the
amount of secured or unsecured debt, including Senior Indebtedness, that may be
incurred by CMS Energy and its subsidiaries. See "Description of the Guarantee
- -- Status of the Guarantee" and "Description of the Debentures --
Subordination."
STRUCTURAL SUBORDINATION
CMS Energy is a holding company and its assets consist primarily of
investments in its subsidiaries. The Debentures will be obligations exclusively
of CMS Energy. CMS Energy's ability to service its indebtedness, including the
Debentures, is dependent primarily upon the earnings of its subsidiaries and the
distribution or other payment of such earnings to CMS Energy in the form of
dividends, loans or advances, and repayment of loans and advances from CMS
Energy. The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. See "Price Range of CMS Energy Common Stock and Dividends --
Restrictions on Dividends" herein and "Description of Securities -- Primary
Source of Funds of CMS Energy; Restrictions on Sources of Dividends" in the
accompanying Prospectus.
In addition, creditors of CMS Energy's subsidiaries would be entitled to a
claim on the assets of such subsidiaries prior to any claims by CMS Energy.
Consequently, in the event of a liquidation or reorganization of any subsidiary,
creditors of such subsidiary are likely to be paid in full before any
distribution is made to CMS Energy, except to the extent that CMS Energy itself
is recognized as a creditor of such subsidiary, in which case the claims of CMS
Energy would still be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by CMS
Energy. As of May 31, 1997, the aggregate indebtedness (including capital lease
obligations, and excluding intercompany indebtedness) of the consolidated
subsidiaries of CMS Energy was approximately $2,616 million. See "Description of
the Preferred Securities -- Distributions" and "Description of the Debentures --
Option to Extend Interest Payment Period."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
CMS Energy has the right under the Indenture to defer the payment of
interest on the Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period,
provided that no Extension Period may extend beyond the stated maturity of the
Debentures. Upon the termination of any Extension Period and the payment of all
amounts then due, CMS Energy may select a new Extension Period and terminate the
payments of all amounts then due, subject to the requirements described herein.
As a consequence of any such deferral, quarterly Distributions on the Preferred
Securities by the Issuer will be deferred (and the
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<PAGE> 19
amount of Distributions to which holders of the Preferred Securities are
entitled will accumulate additional Distributions) during any such Extension
Period.
Should an Extension Period occur, a holder of Preferred Securities will
accrue income (in the form of original issue discount ("OID")) in respect of its
pro rata share of the deferred interest allocable to the Debentures held by the
Issuer for United States federal income tax purposes. As a result, a holder of
Preferred Securities will include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash related to such income from the Issuer if the holder disposes
of the Preferred Securities prior to the record date for the payment of
Distributions. See "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount." Moreover, if a holder of Preferred Securities
converts its Preferred Securities into CMS Energy Common Stock during an
Extension Period, the holder will not receive any cash related to the deferred
Distribution. Additionally, during the pendency of any Extension Period, CMS
Energy will not be permitted, subject to certain exceptions set forth herein, to
declare or pay any cash distribution with respect to CMS Energy capital stock or
debt securities (including guarantees of indebtedness for money borrowed) that
rank pari passu with or junior to the Debentures. See "Description of the
Preferred Securities -- Distributions."
CMS Energy has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Debentures.
However, should CMS Energy elect to exercise such right in the future, the
market price of the Preferred Securities is likely to be affected. A holder that
disposes of its Preferred Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its Preferred Securities. In addition, as a result of the existence of
CMS Energy's right to defer interest payments, the market price of the Preferred
Securities (which represent preferred undivided beneficial interests in the
Debentures) may be more volatile than the market prices of other securities that
are not subject to such deferrals.
EXPIRATION OF CONVERSION RIGHTS
On and after , 2001, CMS Energy may, subject to certain
conditions, at its option, cause the conversion rights of holders of the
Preferred Securities to expire, provided that the Current Market Price of CMS
Energy Common Stock exceeds 115% of the conversion price of the Preferred
Securities for a specified period. See "Description of the Preferred Securities
- -- Conversion Rights -- Expiration of Conversion Rights."
SPECIAL EVENT EXCHANGE OR REDEMPTION
Upon certain circumstances following the occurrence and continuation of a
Special Event, the Preferred Securities are also subject to (i) exchange in
whole or, in the case of a Tax Event, in whole or in part, in the manner
described herein, for the Debentures or (ii) redemption, in whole or in part, on
or after , 2001 in the case of a Tax Event. See "Description of
the Preferred Securities -- Special Event Exchange or Redemption."
There can be no assurance as to the market prices for Preferred Securities
or Debentures that may be distributed in exchange for Preferred Securities if a
liquidation of the Issuer occurs or if the Preferred Securities are exchanged
for Debentures in connection with a Special Event. Accordingly, the Preferred
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Debentures that a holder of Preferred
Securities may receive on liquidation of the Issuer, may trade at a discount to
the price that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Debentures on
termination of the Issuer or if the Preferred Securities are exchanged for
Debentures in connection with a Special Event, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Debentures and should carefully review all the information
S-17
<PAGE> 20
regarding the Debentures contained herein. See "Description of the Preferred
Securities -- Special Event Exchange or Redemption" and "Description of the
Debentures -- General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by the Issuer: (i) any accumulated
and unpaid Distributions required to be paid on the Preferred Securities, to the
extent that the Issuer has funds on hand available therefor at such time; (ii)
the redemption price with respect to any Preferred Securities called for
redemption, to the extent that the Issuer has funds on hand available therefor
at such time; and (iii) upon a voluntary or involuntary dissolution, winding-up
or liquidation of the Issuer (unless the Debentures are distributed to holders
of the Preferred Securities), the lesser of (a) the aggregate of the liquidation
preference and all accrued and unpaid Distributions to the date of payment to
the extent that the Issuer has funds on hand available therefor at such time and
(b) the amount of assets of the Issuer remaining available for distribution to
holders of the Preferred Securities in liquidation of the Issuer.
As part of the Guarantee, CMS Energy will agree that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for CMS Energy Common Stock or Debentures.
The holders of not less than a majority in aggregate liquidation amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of Preferred
Securities may institute a proceeding directly against CMS Energy to enforce its
rights under the Guarantee without first instituting a proceeding against the
Issuer, the Guarantee Trustee or any other person or entity. If CMS Energy were
to default on its obligation to pay amounts payable under the Debentures, the
Issuer would lack funds for the payment of Distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and, in such event, holders
of the Preferred Securities would not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing, a holder of Preferred Securities would be
required to rely on its enforcement by the Property Trustee of its rights as
registered holder of the Debenture against CMS Energy pursuant to the terms of
the Debenture. If, however, such event is attributable to the failure of CMS
Energy to pay interest on or principal of the Debentures on the payment date on
which such payment is due and payable, then a holder of Preferred Securities may
directly institute a proceeding against CMS Energy for enforcement of payment to
such holder of the interest on or principal of such Debentures having a
principal amount equal to the aggregate liquidation preference of the Preferred
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, CMS Energy will be subrogated to the rights of such holder of Preferred
Securities under the Trust Agreement to the extent of any payment made by CMS
Energy to such holder of Preferred Securities in such Direct Action. Except as
set forth herein, holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of Debentures or assert
directly any other rights in respect of the Debentures. See "Description of the
Preferred Securities -- Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Guarantee" and "Description of the Debentures
- -- Debenture Events of Default." The Trust Agreement provides that each holder
of Preferred Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Trust Agreement Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the holder of the
Debentures against CMS Energy. In addition, the holders of a majority in
aggregate liquidation amount of the Preferred Securities will have the right to
direct the time, method
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<PAGE> 21
and place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the Trust Agreement, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Debentures. If the Property Trustee fails to enforce its rights as holder of the
Debentures after a request therefor by a holder of Preferred Securities, such
holder may proceed to enforce such rights directly against CMS Energy.
Notwithstanding the foregoing, if a Trust Agreement Event of Default occurs that
results from the failure of CMS Energy to pay principal of or interest on the
Debentures when due (or in the case of a redemption, on the redemption date),
during the continuance of such an event of default a holder of Preferred
Securities may institute a legal proceeding directly against CMS Energy to
obtain payment to such holder of such principal or interest on Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities owned of record by such holder. See "Description of the Preferred
Securities -- Trust Agreement Events of Default; Notice" and "-- Voting Rights;
Amendment of the Trust Agreement."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will generally have limited voting rights
primarily in connection with directing the activities of the Property Trustee as
the holder of the Debentures. Holders of Preferred Securities will not be
entitled to vote to appoint, remove or replace the CMS Trustees (as defined),
which voting rights are vested exclusively in the holder of the Common
Securities. The CMS Trustees and CMS Energy may amend the Trust Agreement
without the consent of holders of Preferred Securities to ensure that the Issuer
will be classified for United States federal income tax purposes as a grantor
trust even it such action adversely affects the interests of such holders. See
"Description of the Preferred Securities -- Voting Rights; Amendment of the
Trust Agreement."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton Administration proposed certain changes to federal income tax law
which would, among other things, generally treat as equity, for federal income
tax purposes, certain debt obligations, such as the Debentures, that are "issued
on or after the date of first Congressional Committee action" (the "Clinton
Proposal"). On June 9, 1997, House Ways and Means Committee Chairman Bill Archer
released the Chairman's Mark Relating to Revenue Reconciliation Provisions which
are proposed to be included in 1997 tax legislation (the "Chairman's Mark"). The
Chairman's Mark constitutes "first Congressional Committee action" with respect
to the provisions contained therein. The Chairman's Mark does not include the
Clinton Proposal that would require the Debentures to be treated as equity for
federal income tax purposes.
In light of the Chairman's Mark, it appears that "first Congressional
Committee action" has not yet occurred with respect to the Clinton Proposal.
Furthermore, in light of the effective date transitional rules relating to
certain capital markets provisions included in the Chairman's Mark (as well as
transitional rules provided for in 1996 proposed legislation similar to the
Clinton Proposal) which provide, among other things, that instruments issued
pursuant to a prospectus supplement filed with the Securities and Exchange
Commission (the "Commission") on or before the effective date of the legislation
are not subject to the legislation, it is anticipated that, should the Clinton
Proposal be acted upon by Congress at some future date, such future date would
be the relevant effective date and similar transitional rules would apply.
Accordingly, because the Debentures will be issued pursuant to a prospectus
supplement filed with the Commission before the date of first Congressional
Committee action, it is not anticipated that the Clinton Proposal, even if acted
upon by Congress in the future, would apply to the Debentures.
There can be no assurance, however, that the Clinton Proposal or similar
legislation will not ultimately be enacted into law, that the effective date and
transitional rules relating thereto would be enacted as anticipated, or that
other developments will not occur after the date hereof that would
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<PAGE> 22
adversely affect the tax treatment of the Debentures and could result in the
exchange of the Debentures for Preferred Securities or, in certain limited
circumstances, the redemption of the Debentures by CMS Energy and the
distribution of the resulting cash in redemption of the Preferred Securities.
See "Description of the Preferred Securities -- Special Event Exchange or
Redemption."
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<PAGE> 23
PRICE RANGE OF CMS ENERGY COMMON STOCK AND DIVIDENDS
CMS Energy has paid dividends on its outstanding CMS Energy Common Stock
each year since its inception except 1987 and 1988. At June 10, 1997 there were
approximately 89,292 CMS Energy Common Stock shareholders of record. Future
dividends will depend upon CMS Energy's earnings, financial condition and other
factors. In addition to the discussion under "-- Restrictions on Dividends"
below, reference is made to "Description of Securities -- Common Stock --
Dividend Rights and Policy; Restrictions on Dividends" and "-- Primary Source of
Funds of CMS Energy; Restrictions on Sources of Dividends" in the accompanying
Prospectus regarding limitations upon payment of dividends on the capital stock
of CMS Energy.
CMS Energy Common Stock began trading on the NYSE on May 27, 1987. The high
and low sales prices of CMS Energy Common Stock, as reported on the Wall Street
Journal "New York Stock Exchange Composite Transactions", and the dividends
declared on CMS Energy Common Stock during the fiscal years ended December 31,
1992 through 1996, and for the first quarter and second quarter of fiscal 1997
through June 10, 1997, are set out below:
CMS ENERGY COMMON STOCK
<TABLE>
<CAPTION>
PRICE RANGE
---------------------
YEAR HIGH LOW DIVIDEND
- ---- ---- --- --------
<S> <C> <C> <C> <C> <C>
1992:
First Quarter................................................ $22 3/4 $17 7/8 $.12
Second Quarter............................................... 21 7/8 14 7/8 .12
Third Quarter................................................ 17 1/2 15 1/4 .12
Fourth Quarter............................................... 18 3/8 16 3/4 .12
1993:
First Quarter................................................ 20 7/8 17 7/8 .12
Second Quarter............................................... 25 1/2 19 1/2 .12
Third Quarter................................................ 27 1/2 24 7/8 .18
Fourth Quarter............................................... 27 1/8 23 .18
1994:
First Quarter................................................ 25 21 1/8 .18
Second Quarter............................................... 22 7/8 19 5/8 .18
Third Quarter................................................ 23 3/8 20 5/8 .21
Fourth Quarter............................................... 23 1/4 20 7/8 .21
1995:
First Quarter................................................ 24 3/4 22 5/8 .21
Second Quarter............................................... 25 3/8 22 1/2 .21
Third Quarter................................................ 26 3/8 23 3/8 .24
Fourth Quarter............................................... 30 26 .24
1996:
First Quarter................................................ 31 7/8 27 13/16 .24
Second Quarter............................................... 31 1/4 28 .24
Third Quarter................................................ 31 5/8 29 .27
Fourth Quarter............................................... 33 3/4 30 1/8 .27
1997:
First Quarter................................................ 34 1/2 31 1/2 .27
Second Quarter (through June 10, 1997)....................... 34 1/4 31 1/8 .27
</TABLE>
On May 27, 1997, the CMS Energy Board of Directors approved an increase in
the dividend to an annualized rate of $1.20 per share ($.30 per quarter). The
increase will be effective with the next scheduled quarterly dividend payment in
August 1997. For a recent closing sales price for the CMS
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<PAGE> 24
Energy Common Stock, as reported on the NYSE, see the cover page of this
Prospectus Supplement.
CMS Energy sponsors a dividend reinvestment and stock purchase plan under
which holders of record of CMS Energy Common Stock may purchase a limited amount
of CMS Energy Common Stock without paying brokerage fees and other expenses.
Under this plan, CMS Energy Common Stock may be purchased in the open market at
prevailing prices or purchased from CMS Energy at the average of the closing
sales prices on the NYSE for the five trading days of the month immediately
preceding the regular investment dates (typically the first trading date of the
month).
RESTRICTIONS ON DIVIDENDS
In addition to the restrictions on payment of dividends described under
"Description of Securities -- Common Stock -- Dividend Rights Policy;
Restrictions on Dividends" and -- Primary Source of Funds of CMS Energy;
Restrictions on Sources of Dividends" in the accompanying Prospectus, the
following are additional restrictions.
On November 21, 1995, CMS Energy entered into a $450 million Credit
Agreement (the "Credit Agreement") among CMS Energy, Citibank N.A. and Union
Bank as co-agents and certain banks named therein and a $125 million Term Loan
Agreement ("Term Loan") among CMS Energy, Citibank N.A. and Union Bank as
co-agents, and certain banks named therein. The Credit Agreement and Term Loan
each provide that CMS Energy will not, and will not permit certain of its
subsidiaries, directly or indirectly, to (i) declare or pay any cash dividend or
distribution on the capital stock of CMS Energy or such subsidiaries, or (ii)
purchase, redeem, retire or otherwise acquire for value any such capital stock
(a "Restricted Payment"), unless: (1) no event of default under the Credit
Agreement or the Term Loan, as the case may be, or event that with the lapse of
time or giving of notice would constitute such an event of default, has occurred
and is continuing, and (2) after giving effect to any such Restricted Payment,
the aggregate amount of all such Restricted Payments since September 30, 1993
shall not have exceeded the sum of: (a) $120,000,000, (b) 100% of CMS Energy's
consolidated net income (as defined in the Indenture dated as of September 15,
1992 as amended and supplemented (the "Senior Debt Indenture") since September
30, 1993 to the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment (or, in case such sum shall be a
deficit, minus 100% of the deficit), and (c) any net proceeds (as defined in the
Senior Debt Indenture) received by CMS Energy for the issuance or sale of its
capital stock subsequent to September 30, 1993. At March 31, 1997, CMS Energy
could pay cash dividends of $1,051 million pursuant to this restriction.
Under the terms of the Senior Debt Indenture, pursuant to which the Series
A Senior Deferred Coupon Notes due October 1, 1997, the Series B Senior Deferred
Coupon Notes due October 1, 1999, and 8.125 percent Unsecured Notes Due 2002
were issued, so long as any of the Notes are Outstanding and until the Notes are
rated BBB- or above (or an equivalent rating) by Standard & Poor's and one Other
Rating Agency (as defined therein), 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 (as defined therein) (except dividends or
distributions payable solely in its Non-Convertible Capital Stock (as defined
therein) 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
(as defined therein) (any such dividend, distribution, purchase, redemption,
repurchase, defeasing, other acquisition or retirement being hereinafter
referred to as a "Senior Debt Indenture Restricted Payment") if at the time the
Company or such Subsidiary makes such Senior Debt Indenture Restricted Payment:
(1) an Event of Default (as defined therein), or an
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<PAGE> 25
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 Senior Debt Indenture
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
(as defined therein) from the date of the Supplemental Indenture (as defined
therein) to the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Senior Debt Indenture 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. Under this
restriction, at March 31, 1997, CMS Energy would have been able to pay cash
dividends of $100 million.
The GTN Indenture provides that, so long as any of the General Term Notes,
Series A, Series B and Series C ("GTNs") issued thereunder are outstanding and
are rated below BBB- by Standard & Poor's or by Duff & Phelps, CMS Energy will
not, and will not permit certain of its subsidiaries, directly or indirectly,
to, make any Restricted Payments, if at any time CMS Energy or such subsidiary
makes such Restricted Payment: (1) an Event of Default (as defined in the GTN
Indenture, or an event that with the lapse of time or the giving of notice or
both would constitute such an Event of Default, has occurred and is continuing
(or would result therefrom), or (2) the aggregate amount of such Restricted
Payment and all other Restricted Payments made since September 30, 1993, would
exceed the sum of: (a) $120,000,000 plus 100% of consolidated net income from
September 30, 1993 the end of the most recent fiscal quarter ending at least 45
days prior to the date of such Restricted Payment (or, in case such sum shall be
a deficit, minus 100% of the deficit) and (b) the aggregate net proceeds
received by CMS Energy from the issue or sale of or contribution with respect to
its capital stock after September 30, 1993. At March 31, 1997, CMS Energy could
pay cash dividends of $1,057 million pursuant to this restriction.
The foregoing provisions do not prohibit: (i) dividends or other
distributions paid by CMS Energy in respect of the capital stock issued in
connection with the acquisition of any business or assets by CMS Energy where
such payments are payable solely from the net earnings of such business or
assets; (ii) any purchase or redemption or capital stock made by exchange for,
or out of the proceeds of the substantially concurrent sale of, capital stock;
(iii) dividends paid within 60 days after the date of declaration thereof if at
such date of declaration such dividends would have complied with the
aforementioned limitations; or (iv) payments pursuant to the tax sharing
agreement among CMS Energy and its subsidiaries.
In addition, Michigan law prohibits payment of a dividend if, after giving
it effect, CMS Energy would not be able to pay its debts as they become due in
the usual course of business, or its total assets would be less than the sum of
its total liabilities plus, unless the articles permit otherwise, the amount
that would be needed, if CMS Energy were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. CMS Energy's net assets available for payment of dividends under
the Michigan Business Corporation Act at March 31, 1997 were $1,772 million.
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<PAGE> 26
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The ratios of earnings to fixed charges and the ratios of earnings to fixed
charges and preferred stock dividends for the three months ended March 31, 1997
and for each of the years ended December 31, 1992 through 1996 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------
MARCH 31, 1997 1996 1995 1994 1993 1992(1)
-------------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......... 2.59 2.01 1.94 2.07 1.88 --
Ratio of earnings to fixed charges and
preferred stock dividends................. 2.28 1.79 1.77 1.87 1.81 --
</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's reduction in its investment in The
Oxford Energy Company. The ratio of earnings to fixed charges and the ratio
of earnings to fixed charges and preferred stock dividends would have been
1.33 and 1.29, respectively, excluding these amounts.
For the purpose of computing such ratios, earnings represent net income
before income taxes, net interest charges and the estimated interest portion of
lease rentals.
USE OF PROCEEDS
The net proceeds from the sale of the Preferred Securities and the Common
Securities will be invested by the Issuer in Debentures of CMS Energy and
ultimately will be used by CMS Energy for general corporate purposes, including
capital expenditures, investment in subsidiaries, working capital and repayment
of debt.
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<PAGE> 27
CAPITALIZATION
The following table sets forth the unaudited summary capitalization at
March 31, 1997 of the Company and its consolidated subsidiaries on a historical
basis and on a pro forma basis after giving effect to the sale by the Company of
the Preferred Securities offered hereby and the application of the net proceeds
therefrom (assuming no exercise of the Underwriters' overallotment option). See
"Use of Proceeds." The table should be read in conjunction with CMS Energy's
consolidated financial statements and notes thereto and other financial data
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-Term Debt (includes notes payable and current portion of long-
term debt and capital leases)...................................... $ 756 $ 756
====== ============
Long-Term Debt (including capital leases)(2)......................... $2,728 $2,728
Preferred Stock of Subsidiary........................................ 356 356
Company-obligated mandatorily redeemable preferred securities of
subsidiaries holding solely subordinated debentures of
Company(3)......................................................... 100 250
Common Stockholders' Equity.......................................... 1,775 1,775
------ ------------
Total Capitalization................................................. $4,959 $5,109
====== ============
</TABLE>
- ---------------
(1) Adjusted for the sale of Preferred Securities, the application of the
estimated net proceeds to the purchase of Debentures of CMS Energy and the
application by CMS Energy of the estimated net proceeds of Debentures for
the purposes set out under "Use of Proceeds."
(2) In May 1997, CMS Energy issued $350 million of senior unsecured notes due
2002 at an interest rate of 8.125 percent. Proceeds were used in part to pay
down debt, with the remainder, together with drawings under the Credit
Agreement, to fund CMS Energy's equity contribution in connection with the
acquisition of a 50 percent interest in the 2,000 MW Loy Yang A electric
generating plant and associated mine facilities in the State of Victoria,
Australia. See "Recent Developments."
(3) The sole assets of the subsidiaries are as follows: CMS Energy Trust I --
% subordinated debentures of CMS Energy due 2027 with a principal amount
of approximately $155 million (assuming no exercise of the Underwriters'
overallotment option); and Consumer Power Company Financing I -- 8.36%
subordinated notes of Consumers due 2015 with a principal amount of $103
million. Upon redemption of such debt, the preferred securities of such
subsidiaries will be mandatorily redeemable.
ACCOUNTING TREATMENT
The financial statements of the Issuer will be reflected in CMS Energy's
consolidated financial statements with the $150 million (assuming no exercise of
the Underwriters' overallotment option) of Preferred Securities shown as CMS
Energy-obligated mandatorily redeemable preferred securities of subsidiaries
holding solely subordinated debentures of CMS Energy. The financial statement
footnotes of CMS Energy will reflect that the sole asset of the Issuer will be
approximately $155 million (assuming no exercise of the Underwriters'
overallotment option) principal amount of % Debentures due , 2027 of
CMS Energy. See "Capitalization."
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<PAGE> 28
DESCRIPTION OF THE PREFERRED SECURITIES
The following description of certain terms of the Preferred Securities
offered hereby supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Preferred Securities
offered hereby set forth in the accompanying Prospectus, to which reference is
hereby made. The summaries of certain provisions of documents described below do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of such documents (including the
definitions therein of certain terms), forms of which are on file with the
Commission. Wherever particular Sections of, or terms defined in, such documents
are referred to herein, such Sections or defined terms are incorporated by
reference herein. Capitalized terms not defined herein have the meanings
assigned to such terms in the accompanying Prospectus.
GENERAL
Pursuant to the terms of the Trust Agreement, the CMS Trustees, on behalf
of the Issuer, will issue the Preferred Securities and the Common Securities.
The Preferred Securities will represent preferred undivided beneficial interests
in the assets of the Issuer and the Common Securities will represent common
undivided beneficial interests in the assets of the Issuer. All of the Common
Securities will be owned by CMS Energy. The Preferred Securities will rank pari
passu, and payments will be made thereon pro rata, with the Common Securities
except as described under "-- Subordination of Common Securities." Legal title
to the Debentures will be held by the Property Trustee in trust for the benefit
of the holders of the Preferred Securities and Common Securities. The Trust
Agreement does not permit the issuance by the Issuer of any securities other
than the Preferred Securities and the Common Securities or the incurrence of any
indebtedness by the Issuer. The payment of Distributions out of money held by
the Issuer, and payments upon redemption of the Preferred Securities or
liquidation of the Issuer, are guaranteed by CMS Energy to the extent described
under "Description of the Guarantee." The Guarantee is held by the Guarantee
Trustee for the benefit of the holders of the Preferred Securities. The
Guarantee does not cover payment of Distributions when the Issuer does not have
sufficient available funds to pay such Distributions. The remedy of a holder of
Preferred Securities in such an event is as described herein in "-- Enforcement
of Certain Rights by Holders of Preferred Securities" and in "-- Voting Rights;
Amendment of the Trust Agreement."
DISTRIBUTIONS
Distributions on each Preferred Security will be payable at the annual rate
of % of the liquidation preference of $50 per Preferred Security.
Distributions will accumulate from the date of original issuance and will be
payable quarterly in arrears on , , and of
each year on the applicable record date, commencing , 1997 when, as and
if available for payment by the Property Trustee, except as otherwise described
below. The amount of Distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), then payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day and without any
additional Distributions or other payment in respect of any such delay (each
date on which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a Saturday
or a Sunday, or a day on which banking institutions in the City of New York are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Debenture
Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing,
CMS Energy has the right under the Indenture to defer the payment of interest on
the Debentures at any time or from time to time for a period not exceeding 20
consecutive quarters with respect to each deferral period (each an "Extension
Period"), provided that no Extension Period may extend beyond the stated
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<PAGE> 29
maturity of the Debentures. As a consequence of any such election, quarterly
Distributions on the Preferred Securities will be deferred by the Issuer during
any such Extension Period. Distributions to which holders of the Preferred
Securities are entitled will accumulate additional Distributions thereon at the
rate per annum set forth herein, compounded quarterly from the relevant payment
date for such Distributions. The term "Distributions" as used herein shall
include any such additional Distributions. During any such Extension Period, CMS
Energy may not, and may not cause any of its subsidiaries to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of CMS Energy's capital stock, or (ii)
make any payment of principal, interest or premium, if any, on, or repay,
repurchase or redeem any debt securities (including guarantees of indebtedness
for money borrowed) of CMS Energy that rank pari passu with or junior to the
Debentures (other than (a) any dividend, redemption, liquidation, interest,
principal or guarantee payment by CMS Energy where the payment is made by way of
securities (including capital stock) that rank pari passu with or junior to the
securities on which such dividend, redemption, interest, principal or guarantee
payment is being made, (b) payments under the Guarantee, (c) purchases of CMS
Energy Common Stock related to the issuance of CMS Energy Common Stock under any
of CMS Energy's benefit plans for its directors, officers or employees, (d) as a
result of a reclassification of CMS Energy's capital stock or the exchange or
conversion of one series or class of CMS Energy's capital stock for another
series or class of CMS Energy's capital stock, and (e) the purchase of
fractional interests in shares of CMS Energy's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
CMS Energy may further extend the interest payment period, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the stated
maturity of the Debentures. Upon the termination of any such Extension Period
and the payment of all amounts then due on any Interest Payment Date, CMS Energy
may elect to begin a new Extension Period. See "Description of the
Debentures -- Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
CMS Energy has no current intention to exercise its right to defer payments
of interest by extending the interest payment period on the Debentures.
Distributions with respect to the Preferred Securities must be paid on the
dates payable to the extent that the Issuer has funds available for the payment
of such Distributions in the Property Account. The funds of the Issuer available
for distribution to holders of the Preferred Securities will be limited to
payments under the Debentures in which the Issuer will invest the proceeds from
the issuance and sale of the Preferred Securities and the Common Securities. See
"Description of the Debentures." If CMS Energy does not make interest payments
on such Debentures, the Property Trustee will not have funds available to pay
Distributions on the Preferred Securities. The payment of Distributions (if and
to the extent the Issuer has funds on hand available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by CMS
Energy on a limited basis as set forth herein under "Description of the
Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the Issuer on the relevant record
dates, which shall be the fifteenth day (whether or not a Business Day) next
preceding the relevant distribution date. As long as the Preferred Securities
remain in book-entry form, subject to any applicable laws and regulations and
the provisions of the Trust Agreement, each such payment will be made as
described under "-- Form, Transfer, Exchange and Book-Entry Procedures."
CONVERSION RIGHTS
GENERAL
The Preferred Securities will be convertible at any time prior to the
Conversion Expiration Date (as defined herein), at the option of the holder
thereof and in the manner described below, into
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<PAGE> 30
shares of CMS Energy Common Stock at an initial conversion rate of shares
of CMS Energy Common Stock for each Preferred Security (equivalent to a purchase
price of $ per share of CMS Energy Common Stock), subject to adjustment as
described under "-- Conversion Price Adjustments" below.
A holder of Preferred Securities wishing to exercise its conversion right
shall surrender such Preferred Securities together with an irrevocable
conversion notice to the Property Trustee, as conversion agent or to such other
agent appointed for such purpose (the "Conversion Agent"), which shall, on
behalf of such holder, exchange the Preferred Securities for a portion of the
Debentures and immediately convert such Debentures into CMS Energy Common Stock.
So long as a book-entry system for the Preferred Securities is in effect,
however, the procedures for converting the Preferred Stock that are in the form
of Global Certificates into shares of CMS Energy Common Stock will be as
described under "-- Form, Transfer, Exchange and Book-Entry Procedures." CMS
Energy's delivery upon conversion of the fixed number of shares of CMS Energy
Common Stock into which the Debentures are convertible (together with the cash
payment, if any, in lieu of any fractional share) shall be deemed to satisfy CMS
Energy's obligation to pay the principal amount at maturity of the portion of
the Debentures so converted and any unpaid interest accrued on such Debentures
at the time of such conversion. For a discussion of the taxation of such an
exchange to holders, see "Certain Federal Income Tax Consequences -- Conversion
of Preferred Securities into CMS Energy Common Stock." Holders may obtain copies
of the required form of the conversion notice from the Conversion Agent.
Accrued Distributions will not be paid on Preferred Securities that are
converted, provided however, that holders of Preferred Securities at the close
of business on a Distribution payment record date will be entitled to receive
the Distribution payable on such Preferred Securities on the corresponding
Distribution payment date notwithstanding the conversion of such Preferred
Securities on or subsequent to such Distribution record date but prior to such
Distribution payment date. Except as provided in the immediately preceding
sentence, the Issuer will make no payment or allowance for accumulated and
unpaid Distributions, whether or not in arrears, on converted Preferred
Securities. CMS Energy will make no payment or allowance for dividends on the
shares of CMS Energy Common Stock issued upon such conversion. Each conversion
will be deemed to have been effected immediately prior to the close of business
on the day on which proper notice was received by the Conversion Agent.
Shares of CMS Energy Common Stock issued upon conversion of Preferred
Securities will be validly issued, fully paid and non-assessable. No fractional
shares of CMS Energy Common Stock will be issued as a result of conversion, but
in lieu thereof such fractional interest will be paid in cash.
EXPIRATION OF CONVERSION RIGHTS
On and after , 2001, CMS Energy may, at its option, cause
the conversion rights of holders of the Preferred Securities to expire. CMS
Energy may exercise this option only if for 20 trading days within any period of
30 consecutive trading days, including the last trading day of such period, the
Current Market Price of CMS Energy Common Stock exceeds 115% of the conversion
price of the Preferred Securities, subject to adjustment in certain
circumstances. In order to exercise its option to terminate the conversion
rights of the Preferred Securities, CMS Energy must issue a press release for
publication on the Dow Jones News Service announcing the Conversion Expiration
Date prior to the opening of business on the second trading day after any period
in which the condition in the preceding sentence has been met, but in no event
prior to , 2001. The press release shall announce the Conversion
Expiration Date and provide the current conversion price and Current Market
Price of CMS Energy Common Stock, in each case as of the close of business on
the trading day next preceding the date of the press release. Conversion rights
will terminate at the close of business on the Conversion Expiration Date.
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Notice of the expiration of conversion rights will be given by CMS Energy
by first-class mail to the holders of the Preferred Securities not more than
four Business Days after CMS Energy issues the press release. The Conversion
Expiration Date will be a date selected by CMS Energy not less than 30 nor more
than 60 days after the date on which CMS Energy issues the press release
announcing its intention to terminate the conversion rights of the Preferred
Securities. In the event that CMS Energy does not exercise its option to
terminate the conversion rights of the Preferred Securities, the Conversion
Expiration Date with respect to the Preferred Securities will be two Business
Days preceding the date set for redemption of the Preferred Securities.
The term "Current Market Price" of CMS Energy Common Stock for any day
means the last reported sale price, regular way, on such day, or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the NYSE
Composite Transactions Tape, or, if the CMS Energy Common Stock is not listed or
admitted to trading on the NYSE on such day, on the principal national
securities exchange on which the CMS Energy Common Stock is listed or admitted
to trading, if the CMS Energy Common Stock is listed on a national securities
exchange, or the Nasdaq National Market, or, if the CMS Energy Common Stock is
not quoted or admitted to trading on such quotation system, on the principal
quotation system on which the CMS Energy Common Stock may be listed or admitted
to trading or quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of the CMS Energy Common Stock in the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or, if not so
available in such manner, as furnished by any NYSE member firm selected from
time to time by the Board of Directors of CMS Energy for that purpose or, if not
so available in such manner, as otherwise determined in good faith by the Board
of Directors of CMS Energy.
CONVERSION PRICE ADJUSTMENTS
General. The conversion price will be subject to adjustment in certain
events including, without duplication: (i) the payment of dividends (and other
distributions) payable exclusively in CMS Energy Common Stock on CMS Energy
Common Stock; (ii) the issuance to all holders of CMS Energy Common Stock of
rights or warrants entitling holders of such rights or warrants (for a period
not exceeding 45 days) to subscribe for or purchase CMS Energy Common Stock at
less than the then Current Market Price; (iii) subdivisions and combinations of
CMS Energy Common Stock; (iv) the payment of dividends (and other distributions)
to all holders of CMS Energy Common Stock consisting of evidences of
indebtedness of CMS Energy, securities or capital stock, cash, or assets
(including securities, but excluding those rights or warrants referred to above
in clause (ii) and dividends and distributions paid exclusively in cash); (v)
the payment of dividends (and other distributions) on CMS Energy Common Stock
paid exclusively in cash, excluding (A) cash dividends that do not exceed the
per share amount of the immediately preceding regular cash dividend (as adjusted
to reflect any of the events referred to in clauses (i) through (vi) of this
sentence), and (B) cash dividends if the annualized per share amount thereof
does not exceed 12.5% of the last sale price of CMS Energy Common Stock, as
reported on the NYSE Consolidated Transactions Tape, on the trading day
immediately preceding the date of trust agreement of such dividend (such
adjustment being limited to the amount in excess of 12.5% of such Current Market
Price); and (vi) payment in respect of a tender or exchange offer (other than an
odd-lot offer) by CMS Energy or any subsidiary of CMS Energy for CMS Energy
Common Stock in excess of 110% of the Current Market Price of CMS Energy Common
Stock on the trading day next succeeding the last date tenders or exchanges may
be made pursuant to such tender or exchange offer.
CMS Energy from time to time may reduce the conversion price of the
Debentures (and thus the conversion price of the Preferred Securities) by any
amount selected by CMS Energy for any period of at least 30 days, in which case
CMS Energy shall give at least 15 days' notice of such reduction. CMS Energy
may, at its option, make such reductions in the conversion price, in addition
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<PAGE> 32
to those set forth above, as the Board of Directors of CMS Energy deems
advisable to avoid or diminish any income tax to holders of CMS Energy Common
Stock resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. See "Certain
Federal Income Tax Consequences -- Adjustment of Conversion Price."
No adjustment of the conversion price will be made upon the issuance of any
shares of CMS Energy Common Stock pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on securities of
CMS Energy and the investment of additional optional amounts in shares of CMS
Energy Common Stock under any such plan, or the issuance of any shares of CMS
Energy Common Stock or options or rights to purchase such shares pursuant to any
present or future employee benefit plan or program of CMS Energy or pursuant to
any option, warrant, right, or exercisable, exchangeable or convertible security
which does not constitute an issuance to all holders of CMS Energy Common Stock
of rights or warrants entitling holders of such rights or warrants to subscribe
for or purchase CMS Energy Common Stock at less than the Current Market Price.
There shall also be no adjustment of the conversion price in case of the
issuance of any CMS Energy Common Stock (or securities convertible into or
exchangeable for CMS Energy Common Stock), except as specifically described
above. If any action would require adjustment of the conversion price pursuant
to more than one of the anti-dilution provisions, only one adjustment shall be
made and such adjustment shall be the amount of adjustment that has the highest
absolute value to holders of the Preferred Securities. No adjustment in the
conversion price will be required unless such adjustment would require an
increase or decrease of at least 1% of the conversion price, but any adjustment
that would otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment.
Merger, Consolidation or Sale of Assets of CMS Energy. In the event that
CMS Energy is a party to any transaction (including, without limitation, a
merger other than a merger that does not result in a reclassification,
conversion, exchange or cancellation of CMS Energy Common Stock), consolidation,
sale of all or substantially all of the assets of CMS Energy, recapitalization
or reclassification of CMS Energy Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value or
as a result of a subdivision or combination of CMS Energy Common Stock) or any
compulsory share exchange (each of the foregoing being referred to as a
"Transaction"), in each case, as a result of which shares of CMS Energy Common
Stock shall be converted into the right to receive, or shall be exchanged for,
(i) in the case of any Transaction other than a Transaction involving a Common
Stock Fundamental Change (as defined below) (and subject to funds being legally
available for such purpose under applicable law at the time of such conversion),
securities, cash or other property, each Preferred Security shall thereafter be
convertible into the kind and, in the case of a Transaction which does not
involve a Fundamental Change (as defined below), amount of securities, cash and
other property receivable upon the consummation of such Transaction by a holder
of that number of shares of CMS Energy Common Stock into which a Preferred
Security was convertible immediately prior to such Transaction, or (ii) in the
case of a Transaction involving a Common Stock Fundamental Change, common stock,
each Preferred Security shall thereafter be convertible (in the manner described
herein) into common stock of the kind received by holders of CMS Energy Common
Stock (but in each case after giving effect to any adjustment discussed below
relating to a Fundamental Change if such Transaction constitutes a Fundamental
Change). The holders of Preferred Securities will have no voting rights with
respect to any Transaction described in this section.
If any Fundamental Change occurs, then the conversion price in effect will
be adjusted immediately after such Fundamental Change as described below. In
addition, in the event of a Common Stock Fundamental Change, each Preferred
Security shall be convertible solely into common stock of the kind received by
holders of CMS Energy Common Stock as a result of such Common Stock Fundamental
Change.
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<PAGE> 33
The conversion price in the case of any Transaction involving a Fundamental
Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined below),
the conversion price of the Preferred Securities will thereupon become the
lower of (A) the conversion price in effect immediately prior to such
Non-Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to the preceding paragraphs, and (B) the
result obtained by multiplying the greater of the Applicable Price (as
defined below) or the then applicable Reference Market Price (as defined
below) by a fraction, the numerator of which is $50 and the denominator of
which is (x) the amount of the redemption price for Preferred Security if
the redemption date were the date of such Non-Stock Fundamental Change (or,
for the period commencing on the first date of original issuance of the
Preferred Securities and through , 1998, and the twelve-month
periods commencing , 1998, , 1999, , 2000, and
2001, the product of , , and , respectively,
multiplied by $50) plus (y) any then-accrued and unpaid distributions on
one Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the Preferred Securities in effect immediately prior to such
Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to the preceding paragraphs, will thereupon
be adjusted by multiplying such conversion price by a fraction of which the
numerator will be the Purchaser Stock Price (as defined below) and the
denominator will be the Applicable Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (A) 100% of the value
of the consideration received by a holder of CMS Energy Common Stock is
common stock of the successor, acquiror, or other third party (and cash, if
any, is paid only with respect to any fractional interests in such common
stock resulting from such Common Stock Fundamental Change) and (B) all CMS
Energy Common Stock will have been exchanged for, converted into, or
acquired for common stock (and cash with respect to fractional interests)
of the successor, acquiror, or other third party, the conversion price of
the Preferred Securities in effect immediately prior to such Common Stock
Fundamental Change will thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator will be one and the
denominator will be the number of shares of common stock of the successor,
acquiror, or other third party received by a holder of one share of CMS
Energy Common Stock as a result of such Common Stock Fundamental Change.
In the absence of the Fundamental Change provisions, in the case of a
Transaction each Preferred Security would become convertible into the
securities, cash, or property receivable by a holder of the number of shares of
CMS Energy Common Stock into which such Preferred Security was convertible
immediately prior to such Transaction. A failure to apply the Fundamental Change
conversion price adjustments described above could substantially lessen or
eliminate the value of the conversion privilege associated with the Preferred
Securities. For example, if CMS Energy were acquired in a cash merger, each
Preferred Security would become convertible solely into cash and would no longer
be convertible into securities whose value would vary depending on the future
prospects of CMS Energy and other factors.
The foregoing conversion price adjustments are designed, in certain
circumstances, to reduce the conversion price that would be applicable in
"Fundamental Change" Transactions where all or substantially all the CMS Energy
Common Stock is converted into securities, cash, or property and not more than
50% of the value received by the holders of CMS Energy Common Stock consists of
stock listed or admitted for listing subject to notice of issuance on the NYSE
or a national securities exchange or quoted on the Nasdaq National Market (a
Non-Stock Fundamental Change, as defined below). Such reduction would result in
an increase in the amount of the securities, cash, or property into which each
Preferred Security is convertible over that which would have been obtained in
the absence of such conversion price adjustments.
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<PAGE> 34
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of CMS Energy Common Stock (measured as described in the
definition of Applicable Price below) is lower than the then applicable
conversion price of a Preferred Security but greater than or equal to the
"Reference Market Price", the conversion price will be adjusted as described
above with the effect that each Preferred Security will be convertible into
securities, cash or property of the same type received by the holders of CMS
Energy Common Stock in the Transaction but in an amount per Preferred Security
that would at the time of the Transaction have had a value equal to the then
applicable redemption price per Preferred Security set forth below under
"-- Optional Redemption" (or, for periods prior to the date on and after which
CMS Energy may cause the conversion rights of holders of Preferred Securities to
expire, the applicable amount per Preferred Security set forth in clause (i)
above with respect to the conversion prices for Non-Stock Fundamental Changes).
In a Non-Stock Fundamental Change Transaction where the initial value
received per share of CMS Energy Common Stock (measured as described in the
definition of Applicable Price) is lower than both the conversion price of a
Preferred Security in effect prior to any adjustment described above and the
Reference Market Price, the conversion price will be adjusted as described above
but calculated as though such initial value had been the Reference Market Price.
In a Fundamental Change Transaction where all or substantially all the CMS
Energy Common Stock is converted into securities, cash, or property and more
than 50% of the value received by the holders of CMS Energy Common Stock
consists of listed or Nasdaq National Market traded common stock (a Common Stock
Fundamental Change, as defined below), the foregoing adjustments are designed to
provide in effect that (a) where CMS Energy Common Stock is converted partly
into such common stock and partly into other securities, cash, or property, each
Preferred Security will be convertible solely into a number of shares of such
common stock determined so that the initial value of such shares (measured as
described in the definition of "Purchaser Stock Price" below) equals the value
of the shares of CMS Energy Common Stock into which such Preferred Security was
convertible immediately before the Transaction (measured as aforesaid) and (b)
where CMS Energy Common Stock is converted solely into such common stock, each
Preferred Security will be convertible into the same number of shares of such
common stock receivable by a holder of the number of shares of CMS Energy Common
Stock into which such Preferred Security was convertible immediately before such
Transaction.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of the CMS Energy Common Stock receive
only cash, the amount of cash received by the holder of one share of CMS Energy
Common Stock and (ii) in the event of any other Non-Stock Fundamental Change or
any Common Stock Fundamental Change, the average of the Closing Prices (as
defined below) for the CMS Energy Common Stock during the ten trading days prior
to the record date for the determination of the holders of CMS Energy Common
Stock entitled to receive such securities, cash, or other property in connection
with such Non-Stock Fundamental Change or Common Stock Fundamental Change or, if
there is no such record date, the date upon which the holders of the CMS Energy
Common Stock shall have the right to receive such securities, cash, or other
property (such record date or distribution date being hereinafter referred to as
the "Entitlement Date"), in each case as adjusted in good faith by CMS Energy to
appropriately reflect any of the events referred to in clauses (i) through (vi)
of the first paragraph under "-- Conversion Price Adjustments -- General."
The term "Closing Price" means on any day the reported last sale price on
such day or in case no sale takes place on such day, the average of the reported
closing bid and asked prices in each case on the NYSE Consolidated Transactions
Tape or, if the stock is not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such stock is listed or admitted
to trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by any
NYSE member firm, selected by the Debenture Trustee for that purpose.
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<PAGE> 35
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of CMS Energy) of the consideration received by holders of CMS Energy
Common Stock consists of common stock that for each of the ten consecutive
trading days prior to the Entitlement Date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market; provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless either
(i) CMS Energy continues to exist after the occurrence of such Fundamental
Change and the outstanding Preferred Securities continue to exist as outstanding
Preferred Securities or (ii) not later than the occurrence of such Fundamental
Change, the outstanding Preferred Securities are converted into or exchanged for
shares of convertible preferred stock of an entity succeeding to the business of
CMS Energy or a subsidiary thereof, which convertible preferred stock has
powers, preferences, and relative, participating, optional, or other rights, and
qualifications, limitations, and restrictions, substantially similar to those of
the Preferred Securities.
The term "Fundamental Change" means the occurrence of any Transaction or
event in connection with a plan pursuant to which all or substantially all of
the CMS Energy Common Stock shall be exchanged for, converted into, acquired
for, or constitute solely the right to receive securities, cash, or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the CMS Energy Common Stock shall be exchanged for, converted into, or acquired
for or constitute solely the right to receive securities, cash, or other
property, but the adjustment shall be based upon the consideration that a holder
of CMS Energy Common Stock received in such Transaction or event as a result of
which more than 50% of the CMS Energy Common Stock shall have been exchanged
for, converted into, or acquired for or constitute solely the right to receive
securities, cash, or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
CMS Energy to appropriately reflect any of the events referred to in clauses (i)
through (vi) of the first paragraph under "-- Conversion Price Adjustments --
General."
The term "Reference Market Price" shall initially mean $ (which is an
amount equal to 66 2/3% of the reported last sales price for CMS Energy Common
Stock on the NYSE Corporate Tape on June , 1997) and in the event of any
adjustment of the conversion price other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial conversion price of the Preferred
Securities.
SPECIAL EVENT EXCHANGE OR REDEMPTION
At any time following the occurrence and the continuation of a Tax Event or
an Investment Company Event, the CMS Trustees shall direct the Conversion Agent
to exchange all outstanding Preferred Securities for Debentures, provided, that
in the case of a Tax Event, CMS Energy shall have the right to (a) direct that
less than all, or none, of the Preferred Securities be so exchanged if and for
so long as CMS Energy shall have elected to pay any Additional Sums such that
the net amounts received by the holders of Preferred Securities not so exchanged
in respect of
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<PAGE> 36
Distributions and other distributions are not reduced as a result of such Tax
Event, and shall not have revoked any such election or failed to make such
payments or (b) redeem the Preferred Securities in the manner set forth below.
If a Tax Event shall occur or be continuing, CMS Energy shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Debentures, in whole or in part, for cash upon the later of (i) 90 days
following the occurrence of such Tax Event or (ii) , 2001.
Promptly following such redemption, Preferred Securities and Common Securities
with an aggregate liquidation amount equal to the aggregate principal amount of
the Debentures so redeemed will be redeemed by the Issuer at the liquidation
amount thereof plus accrued and unpaid Distributions thereon to the redemption
date on a pro rata basis. The Common Securities will be redeemed on a pro rata
basis with the Preferred Securities, except that if a Trust Agreement Event of
Default has occurred and is continuing, the Preferred Securities will have a
priority over the Common Securities with respect to the Redemption Price.
Holders of Preferred Securities, by purchasing such Preferred Securities,
will be deemed to have agreed to be bound by these exchange provisions in regard
to the exchange of such Preferred Securities for Debentures on the terms
described above.
DISTRIBUTION OF DEBENTURES
At any time, CMS Energy will have the right to terminate the Issuer and,
after satisfaction of the liabilities of creditors of the Issuer as provided by
applicable law, cause the Debentures to be distributed to the holders of the
Preferred Securities in liquidation of the Issuer. Under current United States
federal income tax law and interpretations and assuming, as expected, the Issuer
is treated as a grantor trust, a distribution of the Debentures should not be a
taxable event to the Issuer and holders of the Preferred Securities. Should
there be a change in law, a change in legal interpretation, a Special Event or
other circumstances, however, the distribution could be a taxable event to
holders of the Preferred Securities. See "Certain Federal Income Tax
Consequences -- Redemption of Preferred Securities for Debentures or Cash."
After the liquidation date fixed for any distribution of Debentures for
Preferred Securities (i) such Preferred Securities will no longer be deemed to
be outstanding, (ii) DTC or its nominee, as the record holder of such Preferred
Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and (iii) any
certificates representing such Preferred Securities not held by DTC or its
nominee will be deemed to represent the Debentures having a principal amount
equal to the liquidation amount of such Preferred Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Preferred Securities until such certificates are presented
to the Property Trustee for transfer or reissuance.
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OPTIONAL REDEMPTION
Except as provided under "-- Mandatory Redemption" below, the Preferred
Securities may not be redeemed by the Issuer prior to , 2001.
On and after such date, upon any permitted redemption by CMS Energy of
Debentures, the Preferred Securities are subject to redemption, in whole or in
part, at the following percentages of the liquidation preference thereof plus
accrued and unpaid Distributions, if any, to the date fixed for redemption if
redeemed during the twelve-month period commencing in each of the
following years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................ %
2002............................
2003............................
2004............................
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2005............................ %
2006............................
2007 and thereafter.............
</TABLE>
The aggregate liquidation preference of the Preferred Securities and Common
Securities so redeemed will equal the aggregate principal amount of Debentures
redeemed by CMS Energy which may not exceed the amount of the proceeds derived,
directly or indirectly, by CMS Energy or its subsidiaries from the issuance and
sale of common stock within three years preceding the date fixed for redemption.
The Issuer may not redeem the Preferred Securities in part unless all accrued
and unpaid Distributions have been paid in full on all outstanding Preferred
Securities. If fewer than all the outstanding Preferred Securities are to be
redeemed, the Preferred Securities to be so redeemed will be selected as
described under "-- Form, Transfer, Exchange and Book-Entry Procedures."
In the event CMS Energy redeems the Debentures in certain circumstances
upon the occurrence of a Tax Event as described under "-- Special Event Exchange
or Redemption," the appropriate amount of the Preferred Securities will be
redeemed at 100% of the principal amount thereof together with accrued and
unpaid Distributions to the redemption date.
If at any time following the Conversion Expiration Date, less than 5% of
the Preferred Securities offered hereby remain outstanding, such Preferred
Securities shall be redeemable at the option of the Issuer, in whole but not in
part, at a redemption price of $50 per Preferred Security, and all accrued and
unpaid Distributions.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of the acceleration of the
Debentures upon the occurrence of a "Debenture Event of Default" described under
"Description of the Debentures -- Debenture Events of Default," the Debentures
shall be subject to mandatory redemption, in whole but not in part, by CMS
Energy, and the proceeds from such repayment will be applied to redeem Preferred
Securities and Common Securities having an aggregate liquidation amount equal to
the aggregate principal amount of Debentures so repaid or redeemed at a
redemption price equal to the respective liquidation amount of the Preferred
Securities and Common Securities or, in the case of a redemption of the
Debentures, at the redemption price paid with respect to the Debentures, as
described below, together with accrued and unpaid distributions on the Preferred
Securities and Common Securities to the date of redemption. In the case of
acceleration of the Debentures, the Preferred Securities will be redeemed only
when repayment of the Debentures has actually been received by the Issuer. In
addition, as described above under "-- Special Event Exchange or Redemption,"
upon the occurrence of a Special Event, Preferred Securities shall be exchanged
for Debentures unless, in the case of a Tax Event, CMS Energy shall have elected
to (a) pay any Additional Sums such that the net amounts of Distributions
received by the holders of any Preferred Securities not so exchanged are not
reduced as a result of such Tax Event and shall not have
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<PAGE> 38
revoked any such election or failed to make such payments or (b) redeem the
Preferred Securities as further set forth in "-- Special Event Exchange or
Redemption."
REDEMPTION PROCEDURES
Preferred Securities redeemed on the date fixed for redemption shall be
redeemed at the redemption price with the applicable proceeds from the
contemporaneous redemption of the Debentures. Redemptions of the Preferred
Securities shall be made and the redemption price shall be payable on the
redemption date only to the extent that the Issuer has funds on hand available
for the payment of such redemption price. See also "-- Subordination of Common
Securities."
Notice of any redemption (optional or mandatory) of Preferred Securities
(which notice will be irrevocable) will be given by the Property Trustee to each
record holder of Preferred Securities that are being redeemed not fewer than 30
nor more than 60 days prior to the redemption date. If the Property Trustee
gives a notice of redemption in respect of the Preferred Securities, then, by
12:00 noon, New York City time, on the redemption date, to the extent funds are
available, the Property Trustee will deposit irrevocably with DTC or the
Conversion Agent, as the case may be, funds sufficient to pay the applicable
redemption price and will give DTC or the Conversion Agent, as the case may be,
irrevocable instructions and authority to pay the redemption price to the
holders of such Preferred Securities. See "-- Form, Transfer, Exchange and
Book-Entry Procedures." If such Preferred Securities are no longer in book-entry
form, the Property Trustee, to the extent funds are available, will irrevocably
deposit with the Paying Agent funds sufficient to pay the applicable redemption
price and will give the Paying Agent irrevocable instructions and authority to
pay the redemption price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the redemption date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities as of the relevant record dates for the related
distribution dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease, except
the right of the holders of such Preferred Securities to receive the redemption
price, but without interest on such redemption price, and such Preferred
Securities will cease to be outstanding. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
redemption price on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the redemption price in respect of Preferred Securities called
for redemption is improperly withheld or refused and not paid either by the
Issuer or by CMS Energy pursuant to the Guarantee as described under
"Description of the Guarantee," Distributions on such Preferred Securities will
continue to accrue at the then applicable rate, from the redemption date
originally established by the Issuer to the date such redemption price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the redemption price.
Subject to applicable law (including, without limitation, United States
Federal securities law), CMS Energy or its subsidiaries may at any time and from
time to time purchase outstanding Preferred Securities by tender, in the open
market or by private agreement.
Payment of the redemption price on the Preferred Securities and any
distribution or exchange of Debentures to holders of Preferred Securities shall
be made to the applicable record holders thereof as they appear on the register
for such Preferred Securities on the relevant record date, which shall be the
fifteenth day (whether or not a Business Day) prior to the redemption date or
liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities listed
by the Issuer are to be redeemed on a redemption date, then the aggregate
liquidation amount of such Preferred Securities
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<PAGE> 39
and Common Securities to be redeemed shall be allocated pro rata among the
Preferred Securities and the Common Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 60 days prior to the
redemption date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by lot or by such method as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $50 or an integral multiple of
$50 in excess thereof) of the liquidation amount of the Preferred Securities.
The Property Trustee shall promptly notify the Conversion Agent in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the liquidation amount
thereof to be redeemed; it being understood that, in the case of Preferred
Securities held by DTC (or any successor) or its nominee, the distribution of
the proceeds of such redemption will be made in accordance with the procedures
of DTC or its nominee. For all purposes of the Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the aggregate
liquidation amount of Preferred Securities which has been or is to be redeemed.
Notice of any redemption of Debentures will be mailed at least 30 days but
not more than 60 days before the redemption date to each holder of Debentures to
be redeemed at its registered address. Unless CMS Energy defaults in payment of
the redemption price, on and after the redemption date interest ceases to accrue
on such Debentures or portions thereof called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the redemption price of, the Preferred
Securities and Common Securities, as applicable, shall be made pro rata based on
the liquidation amount of such Preferred Securities and Common Securities;
provided, however, that if on any distribution date or redemption date a Trust
Agreement Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or redemption price of, any of the Common Securities, and
no other payment on account of the redemption, liquidation or other acquisition
of such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the redemption price the full amount of such redemption
price on all of the outstanding Preferred Securities then called for redemption,
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or redemption price of, the Preferred Securities then due and
payable.
In the case of any Trust Agreement Event of Default, CMS Energy as holder
of the Common Securities will be deemed to have waived any right to act with
respect to any such Trust Agreement Event of Default until all such Trust
Agreement Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until any such Trust Agreement Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Preferred Securities and not on behalf of CMS Energy as holder of
the Common Securities, and only the holders of the Preferred Securities will
have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
In the event of any voluntary or involuntary liquidation, termination,
dissolution or winding up of the Issuer (each, a "Liquidation"), the holders of
the Preferred Securities at that time will be entitled to receive out of the
assets of the Issuer, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $50 per Preferred Security plus accrued and unpaid Distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation. Debentures in an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of,
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and accrued and unpaid interest equal to accrued and unpaid Distributions on,
the Preferred Securities, have been distributed on a pro rata basis to the
holders of Preferred Securities in exchange for such Preferred Securities. See
"-- Distribution of Debentures."
If such Liquidation Distribution can be paid only in part because the
Issuer has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Issuer on the
Preferred Securities shall be paid on a pro rata basis. The holder(s) of the
Common Securities will be entitled to receive Liquidation Distributions upon any
such liquidation pro rata with the holders of the Preferred Securities, except
that if a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a priority over the Common Securities.
Pursuant to the Trust Agreement, the Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of CMS Energy; (ii) the
distribution of Debentures to the holders of the Preferred Securities and Common
Securities, if CMS Energy, as Depositor, has given written direction to the
Property Trustee to terminate the Issuer (which direction is optional and wholly
within the discretion of CMS Energy, as Depositor); (iii) the redemption,
conversion, or exchange of all of the Preferred Securities and Common
Securities; (iv) the entry by a court of competent jurisdiction of an order for
the dissolution of the Issuer; and (v) the occurrence of a Special Event except
in the case of a Tax Event following which CMS Energy has elected to pay any
Additional Sums such that the net amount received by holders of Preferred
Securities in respect of Distributions is not reduced as a result of such Tax
Event and CMS Energy has not revoked any such election or failed to make such
payment.
TRUST AGREEMENT EVENTS OF DEFAULT; NOTICE
An event of default under the Indenture (a "Debenture Event of Default")
constitutes an event of default under the Trust Agreement with respect to the
Preferred Securities and the Common Securities (a "Trust Agreement Event of
Default"), whatever the reason for such Debenture Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
Within ten days after the occurrence of any Trust Agreement Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Trust Agreement Event of Default to the holders of the
Preferred Securities, the Administrative Trustees and CMS Energy, as Depositor,
unless such Trust Agreement Event of Default shall have been cured or waived.
CMS Energy, as Depositor, and the Administrative Trustees, on behalf of the
Issuer, are required to file annually with the Property Trustee a certificate as
to whether or not they are in compliance with all the conditions and covenants
applicable to them under the Trust Agreement.
If a Trust Agreement Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of the Issuer as described above. See "-- Liquidation Distribution
Upon Termination." The existence of a Trust Agreement Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity thereof.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Trust Agreement Event of Default has occurred and is continuing, then
the holders of Preferred Securities would rely on the enforcement by the
Property Trustee of its rights as a holder of the Debentures against CMS Energy.
In addition, the holders of a majority in aggregate liquidation amount of the
Preferred Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the
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Debentures. If the Property Trustee fails to enforce its rights as holder of the
Debentures after a request therefor by a holder of Preferred Securities, such
holder may proceed to enforce such rights directly against CMS Energy.
Notwithstanding the foregoing, if a Trust Agreement Event of Default has
occurred and is continuing and such event is attributable to the failure of CMS
Energy to pay interest or principal on the Debentures on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may directly institute a
Direct Action against CMS Energy for enforcement of payment to such holder of
the principal of or interest on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such holder
on or after the respective due date specified in the Debentures. In connection
with such Direct Action, CMS Energy will be subrogated to the rights of such
holder of Preferred Securities under the Trust Agreement to the extent of any
payment made by CMS Energy to such holder of Preferred Securities in such Direct
Action. The holders of Preferred Securities will not be able to exercise
directly against CMS Energy any other remedy available to the Property Trustee
unless the Property Trustee first fails to do so.
MERGER OR CONSOLIDATION OF CMS TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such CMS Trustee shall be
a party, or any corporation succeeding to all or substantially all the corporate
trust business of such CMS Trustee, shall be the successor of such CMS Trustee
under the Trust Agreement, provided such corporation shall be otherwise
qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. The Issuer may, at the request of CMS Energy, with the consent
of the Administrative Trustees and without the consent of the Property Trustee,
the Delaware Trustee or the holders of the Preferred Securities, merge with or
into, consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided that (i) such successor entity either (a)
expressly assumes all of the obligations of the Issuer with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to Distributions and payments
upon liquidation, redemption and otherwise, (ii) CMS Energy expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Debentures, (iii) the Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which the
Preferred Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose identical to that of the
Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, CMS Energy has received an opinion from
independent counsel to the Issuer experienced in such matters to the effect that
(a) such merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders
interest in the new entity) and (b) following such merger, consolidation,
amalgamation, replacement,
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conveyance, transfer or lease, neither the Issuer nor such successor entity will
be required to register as an investment company under the Investment Company
Act, and (viii) CMS Energy or any permitted successor or assignee owns all of
the Common Securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Issuer shall not,
except with the consent of holders of 100% in aggregate liquidation amount of
the Preferred Securities, consolidate, amalgamate, merge with or into, be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Issuer or the successor entity to be classified as other than a grantor trust
for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee --
Amendments and Assignment" and as otherwise required by law and the Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by CMS Energy and the
CMS Trustees, without the consent of the holders of the Preferred Securities (i)
to cure any ambiguity, correct or supplement any provisions in the Trust
Agreement that may be inconsistent with any other provision, or to make any
other provisions with respect to matters or questions arising under the Trust
Agreement that shall not be inconsistent with the other provisions of the Trust
Agreement, (ii) to modify, eliminate or add to any provision of the Trust
Agreement to such extent as shall be necessary to ensure that the Issuer will be
classified for United States federal income tax purposes as a grantor trust at
all times that any Preferred Securities and Common Securities are outstanding or
to ensure that the Issuer will not be required to register as an "investment
company" under the Investment Company Act or be classified as other than a
grantor trust for United States federal income tax purposes or (iii) to maintain
the qualification of the Trust Agreement under the Trust Indenture Act;
provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of
Preferred Securities or Common Securities, and any amendments of the Trust
Agreement shall become effective when notice thereof is given to the holders of
Preferred Securities and Common Securities. The Trust Agreement may be amended
by the CMS Trustees and CMS Energy with (i) the consent of holders representing
not less than a majority (based upon liquidation amounts) of the outstanding
Preferred Securities and Common Securities, acting as a single class, and (ii)
receipt by the CMS Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the CMS Trustees in accordance
with such amendment will not affect the Issuer's status as a grantor trust for
United States federal income tax purposes or the Issuer's exemption from the
status of an "investment company" under the Investment Company Act; provided
further that (a) without the consent of each holder of Preferred Securities and
Common Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Preferred Securities and Common
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Preferred Securities and Common Securities as of a
specified date or (ii) restrict the right of a holder of Preferred Securities
and Common Securities to institute suit for the enforcement of any such payment
on or after such date.
If any proposed amendment of the Trust Agreement provides for, or the CMS
Trustees otherwise propose to effect, the dissolution, winding-up or termination
of the Issuer, other than pursuant to the terms of the Trust Agreement, then the
holders of the then outstanding Preferred Securities, as a class, will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of the holders of the majority
in aggregate liquidation amount of the Preferred Securities.
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The holders of a majority in aggregate liquidation amount of Preferred
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the Property Trustee
under the Trust Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Debentures. So long as
any Debentures are held by the Property Trustee, the CMS Trustees shall not (i)
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee or executing any trust or power conferred on
the Debenture Trustee with respect to such Debentures, (ii) waive any past
default that is waivable under Section 5.10 of the Indenture, (iii) exercise any
right to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent shall be
required, without in each case, obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of all outstanding Preferred Securities
(except in the case of clause (iv), which consent, in the event that no Trust
Agreement Event of Default shall occur and be continuing, shall be of the
holders of Preferred Securities and Common Securities, voting together as a
single class); provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each holder of the Preferred Securities. The CMS Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders of the Preferred
Securities. The Property Trustee shall notify each holder of record of the
Preferred Securities of any notice of default with respect to the Debentures.
A waiver of a Debenture Event of Default will constitute a waiver of the
corresponding Trust Agreement Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of the Preferred Securities and
the Common Securities or pursuant to written consent. The Property Trustee will
cause a notice of any meeting at which holders of Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be given to each holder of record of Preferred
Securities in the manner set forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for the Issuer to redeem and cancel the Preferred Securities in accordance with
the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by CMS Energy, the CMS Trustees or any
affiliate of any CMS Trustee shall, for purposes of such vote or consent, be
treated as if such Preferred Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Form, Transfer, Exchange and
Book-Entry Procedures."
Holders of the Preferred Securities will have no rights to appoint or
remove the CMS Trustees, who may be appointed, removed or replaced solely by CMS
Energy, as the direct or indirect holder of all the Common Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable distribution dates
or, if the Preferred Securities are not held by DTC, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the Securities Register. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property
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Trustee and acceptable to the Administrative Trustees and CMS Energy. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Property Trustee and CMS Energy. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and CMS Energy) to act as Paying Agent.
FORM, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Preferred Securities initially will be represented by the Global
Certificate. The Global Certificate will be deposited upon issuance with the
Property Trustee as custodian for DTC, in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Certificate may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Certificate may not be
exchanged for Preferred Securities in certificated form except in the limited
circumstances described below under "-- Exchanges of Book-Entry Certificates for
Certificated Preferred Securities."
EXCHANGES OF BOOK-ENTRY CERTIFICATES FOR CERTIFICATED PREFERRED SECURITIES
A beneficial interest in a Global Certificate may not be exchanged for a
certificated Preferred Security unless (i) DTC (x) notifies the Issuer and the
Company that it is unwilling or unable to continue as Depositary for the Global
Certificate or (y) has ceased to be a clearing agency registered under the
Exchange Act and in either case the Issuer and the Company thereupon fails to
appoint a successor Depositary, (ii) the Issuer and the Company, at their
option, notifies the Property Trustee in writing that they elect to cause the
issuance of the Preferred Securities in certificated form or (iii) there shall
have occurred and be continuing a Trust Agreement Event of Default or any event
which after notice or lapse of time or both would be a Trust Agreement Event of
Default. In all cases, certificated Preferred Securities delivered in exchange
for any Global Certificate or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of the Depositary (in accordance with its customary procedures).
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL CERTIFICATES
DTC has advised the Issuer and the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the 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 ("participants") and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities 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").
DTC has advised the Issuer and the Company that its current practice, upon
the issuance of the Global Certificate, is to credit, on its internal system,
the respective principal amount of the individual beneficial interests
represented by such Global Certificates to the accounts with DTC of the
participants through which such interests are to be held. Ownership of
beneficial interests in the Global Certificate will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
DTC or its nominees (with respect to interests of participants) and the
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records of participants and indirect participants (with respect to interests of
persons other than participants).
As long as DTC, or its nominee, is the registered holder of a Global
Certificate, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the Preferred Securities represented by such Global
Certificate for all purposes under the Trust Agreement and the Preferred
Securities.
Except in the limited circumstances described above owners of beneficial
interests in a Global Certificate will not be entitled to have any portions of
such Global Certificate registered in their names, will not receive or be
entitled to receive physical delivery of Preferred Securities in definitive form
and will not be considered the owners or holders of the Global Certificate (or
any Preferred Securities represented thereby) under the Trust Agreement or the
Preferred Securities.
Investors may hold their interests in the Global Certificate directly
through DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system. All interests in a Global
Certificate will be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of its participants,
which in turn act on behalf of indirect participants and certain banks, the
ability of a person having beneficial interests in a Global Certificate to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of Distributions on Global Certificates will be made to DTC or its
nominee as the registered owner thereof. Neither the Issuer, the Company, the
Property Trustee nor any of their respective agents will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Certificate or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Issuer and the Company expect that DTC or its nominee, upon receipt of
any payment of Distributions in respect of a Global Certificate representing any
Preferred Securities held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Certificate for such Preferred Securities as shown on the records of DTC or its
nominee. The Issuer and 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 "street name." Such payments will be the responsibility of such participants.
Interests in the Global Certificates will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds.
DTC has advised the Issuer and the Company that it will take any action
permitted to be taken by a holder of Certificates (including the presentation of
Preferred Securities for exchange as described below and the conversion of
Preferred Securities) only at the direction of one or more participants to whose
account with DTC interests in the Global Certificates are credited and only in
respect of such portion of the aggregate liquidation amount of the Preferred
Securities as to which such participant or participants has or have given such
direction. However, if there is a Trust Agreement Event of Default, DTC reserves
the right to exchange the Global Certificates for
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legended Preferred Securities in certificated form, and to distribute such
Preferred Securities to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the 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. None of
the Issuer, the Company, the Property Trustee nor any of their respective agents
will have any responsibility for the performance by DTC, its participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations, including maintaining, supervising or
reviewing the records relating to, or payments made on account of, beneficial
ownership interests in Global Certificates.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Preferred Securities are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts such Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners of the Preferred Securities and the voting
rights of participants, indirect participants and beneficial owners of Preferred
Securities will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Property Trustee and CMS Energy. In the event that a successor securities
depositary is not obtained, definitive Preferred Securities certificates
representing such Preferred Securities are required to be printed and delivered.
CMS Energy, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation amount of Preferred
Securities may determine to discontinue the system of book-entry transfers
through DTC. In any such event, definitive certificates for the Preferred
Securities will be printed and delivered.
TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The Property Trustee will act as transfer agent, registrar and paying,
conversion and exchange agent for the Preferred Securities.
Registration of transfers or exchanges of Preferred Securities will be
effected without charge by or on behalf of the Issuer, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Issuer will not be required to register or cause to be
registered the transfer of the Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
CMS Energy and certain of its subsidiaries may maintain deposit accounts
and conduct other banking and corporate securities transactions and
relationships with the Property Trustee in the ordinary course of their
businesses. The Property Trustee, other than during the occurrence and
continuance of a Trust Agreement Event of Default, undertakes to perform only
such duties as are
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specifically set forth in the Trust Agreement and, after such Trust Agreement
Event of Default, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the Property Trustee is under no obligation to exercise any
of the powers vested in it by the Trust Agreement at the request of any holder
of Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Trust
Agreement Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in the Trust Agreement or is unsure of the application of
any provision of the Trust Agreement, and the matter is not one on which holders
of Preferred Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by CMS Energy and, if not
so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Preferred Securities and the Common Securities
and will have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuer in such a way that the Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Debentures will be
treated as indebtedness of CMS Energy for United States federal income tax
purposes. In this connection, CMS Energy and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Issuer or the Trust Agreement, that CMS Energy and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Issuer may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF THE GUARANTEE
The Guarantee will be executed and delivered by CMS Energy concurrently
with the issuance by the Issuer of the Preferred Securities for the benefit of
the holders from time to time of such Preferred Securities. The Bank of New York
will act as trustee ("Guarantee Trustee") under the Guarantee. The following
description of certain terms of the Guarantee supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Guarantee set forth in the accompanying Prospectus, to which
reference is hereby made. This summary of certain provisions of the Guarantee
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Guarantee (a copy of which is
available at the corporate trust offices of the Guarantee Trustee in New York,
New York). Capitalized terms not defined herein have the meanings assigned to
such terms in the accompanying Prospectus. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Preferred Securities.
GENERAL
CMS Energy will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert other than
the defense of payment. The following payments with respect to the Preferred
Securities, to the extent not paid by or on behalf of the Issuer (the "Guarantee
Payments"), will be subject to the Guarantee: (i) any accumulated and unpaid
Distributions required to be paid on the Preferred Securities, to the extent
that the Issuer has funds on hand available therefor at such time,
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(ii) the redemption price with respect to any Preferred Securities called for
redemption to the extent that the Issuer has funds on hand available therefor at
such time, or (iii) upon a voluntary or involuntary dissolution, winding up or
liquidation of the Issuer (unless the Debentures are distributed to holders of
the Preferred Securities), the lesser of (a) the Liquidation Distribution, to
the extent that the Issuer has funds on hand available therefor at such time,
and (b) the amount of assets of the Issuer remaining available for distribution
to holders of Preferred Securities. CMS Energy's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by CMS Energy
to the holders of the Preferred Securities or by causing the Issuer to pay such
amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Issuer's obligations under the Preferred Securities, but will apply only to
the extent that the Issuer has funds sufficient to make such payments, and is
not a guarantee of collection. If CMS Energy does not make interest payments on
the Debentures held by the Issuer, the Issuer will not be able to pay
Distributions on the Preferred Securities and will not have funds legally
available therefor.
CMS Energy has, through the Guarantee, the Trust Agreement, the Debentures
and the Indenture, taken together, fully, irrevocably and unconditionally
guaranteed all of the Issuers obligations under the Preferred Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantee."
CMS Energy has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Issuer with respect to the Common Securities to
the same extent as the Guarantee, except that upon the occurrence and during the
continuation of a Trust Agreement Event of Default, holders of Preferred
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of CMS Energy and
will rank subordinate and junior in right of payment to all other liabilities of
CMS Energy and will rank pari passu with any guarantee now or hereafter entered
into by CMS Energy in respect of any preferred or preference stock of any
affiliate of CMS Energy.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution of the Debentures to the holders of the Preferred Securities. The
Guarantee does not place a limitation on the amount of additional indebtedness
that may be incurred by CMS Energy or any of its subsidiaries.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in aggregate liquidation amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities -- Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of CMS Energy and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
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CERTAIN COVENANTS OF CMS ENERGY
CMS Energy will covenant in the Guarantee that if and so long as (i) the
Issuer is the holder of all the Debentures, (ii) a Tax Event in respect of the
Issuer has occurred and is continuing and (iii) CMS Energy has elected, and has
not revoked such election, to pay Additional Sums in respect of the Preferred
Securities and Common Securities, CMS Energy will pay to the Issuer such
Additional Sums. CMS Energy will also covenant that it will not, and it will not
cause any of its subsidiaries to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of CMS Energy's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities (including guarantees of indebtedness for money borrowed) of CMS
Energy that rank pari passu with or junior to the Debentures (other than (a) any
dividend, redemption, liquidation, interest, principal or guarantee payment by
CMS Energy where the payment is made by way of securities (including capital
stock) that rank pari passu with or junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being made,
(b) payments under the Guarantee, (c) purchases of CMS Energy Common Stock
related to the issuance of CMS Energy Common Stock under any of CMS Energy's
benefit plans for its directors, officers or employees, (d) as a result of a
reclassification of CMS Energy's capital stock or the exchange or conversion of
one series or class of CMS Energy's capital stock for another series or class of
CMS Energy's capital stock and (e) the purchase of fractional interests in
shares of CMS Energy's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged)
if at such time (i) there shall have occurred any event of which CMS Energy has
actual knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute a Debenture Event of Default and (b) in respect of which
CMS Energy shall not have taken reasonable steps to cure, (ii) CMS Energy shall
be in default with respect to its payment of any obligations under the Guarantee
or (iii) CMS Energy shall have given notice of its selection of an Extension
Period as provided in the Indenture with respect to the Debentures and shall not
have rescinded such notice, or such Extension Period, or any extension thereof,
shall be continuing. CMS Energy will also covenant (i) for so long as Preferred
Securities are outstanding, not to convert Debentures except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of Preferred
Securities, (ii) to maintain directly or indirectly 100% ownership of the Common
Securities, provided that certain successors which are permitted pursuant to the
Indenture may succeed to CMS Energy's ownership of the Common Securities, (iii)
not to voluntarily terminate, wind-up or liquidate the Issuer, except (a) in
connection with a distribution of the Debentures to the holders of the Preferred
Securities in liquidation of the Issuer or (b) in connection with certain
mergers, consolidations or amalgamations permitted by the Trust Agreement, (iv)
to maintain the reservation for issuance of the number of shares of CMS Energy
Common Stock that would be required from time to time upon the conversion of all
the Debentures then outstanding, (v) to use its reasonable efforts, consistent
with the terms and provisions of the Trust Agreement, to cause the Issuer to
remain classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes and (vi) to deliver
shares of CMS Energy Common Stock upon an election by the holders of the
Preferred Securities to convert such Preferred Securities into CMS Energy Common
Stock.
As part of the Guarantee, CMS Energy will agree that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for CMS Energy Common Stock or Debentures.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of CMS
Energy to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to
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direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Securities may institute a legal proceeding directly against CMS
Energy to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other person
or entity. In addition, any record holder of Preferred Securities shall have the
right, which is absolute and unconditional, to proceed directly against CMS
Energy to obtain Guarantee Payments, without first waiting to determine if the
Guarantee Trustee has enforced the Guarantee or instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other person or entity. CMS
Energy has waived any right or remedy to require that any action be brought just
against the Issuer, or any other person or entity before proceeding directly
against CMS Energy.
CMS Energy, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not CMS Energy is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by CMS Energy in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the Preferred Securities, upon full
payment of the amounts payable upon liquidation of the Issuer, upon the
distribution, if any, of CMS Energy Common Stock to the holders of Preferred
Securities in respect of the conversion of all such holders' Preferred
Securities into CMS Energy Common Stock or upon distribution of Debentures to
the holders of the Preferred Securities in exchange for all of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of Preferred Securities must
restore payment of any sums paid under such Preferred Securities or the
Guarantee.
DESCRIPTION OF THE DEBENTURES
The Debentures are to be issued under a Subordinated Debt Indenture, to be
dated as of June , 1997 (the "Base Indenture") between CMS Energy and The Bank
of New York as trustee (the "Debenture Trustee"), as supplemented by a First
Supplemental Indenture, to be dated as of June , 1997 (the Base Indenture, so
supplemented, is hereinafter referred to as the "Indenture"), copies of which
will be available for inspection at the corporate trust office of the Debenture
Trustee in New York, New York. This summary supplements, and to the extent
inconsistent replaces, the summary of the general terms and provisions of the
Debentures set forth in the accompanying Prospectus, to which reference is
hereby made. This summary of certain terms and provisions of the Debentures and
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Indenture. Whenever particular
defined terms of the Indenture are referred to herein, such defined terms are
incorporated herein or therein by reference.
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GENERAL
The Debentures will be unsecured and will rank junior and be subordinate in
right of payment to all Senior Indebtedness of CMS Energy. The Debentures will
be limited in aggregate principal amount to approximately $155 million
(approximately $177 million if the Underwriters' over-allotment option is
exercised in full), such amount being the sum of the aggregate stated
liquidation amount of the Preferred Securities and capital contributed by CMS
Energy in exchange for the Common Securities. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of CMS Energy, whether
under the Indenture or any existing or other indenture that CMS Energy may enter
into in the future or otherwise. See "-- Subordination."
Concurrently with the issuance of the Preferred Securities, the Issuer will
invest the proceeds thereof and the consideration paid by CMS Energy for the
Common Securities in the Debentures. The Debentures will be in the principal
amount equal to the aggregate stated liquidation amount of the Preferred
Securities plus CMS Energy's concurrent investment in the Common Securities.
The Debentures are not subject to any sinking fund provision. The entire
principal amount of the Debentures will mature, and become due and payable,
together with any accrued and unpaid interest thereon, on
, 2027.
INTEREST
The Debentures will bear interest at the annual rate of % per annum,
payable quarterly in arrears on , ,
and of each year, commencing on ,
1997 (each, an "Interest Payment Date"), to the person in whose name each
Debenture is registered at the close of business on the Business Day next
preceding such Interest Payment Date, subject to certain exceptions. It is
anticipated that, until the liquidation, if any, of the Issuer, each Debenture
will be held in the name of the Property Trustee in trust for the benefit of the
holders of the Preferred Securities and the Common Securities. The amount of
interest payable for any period will be computed on the basis of a 360-day year
of twelve 30-day months. In the event that any date on which interest is payable
on the Debentures is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay). Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
the stated rate per annum, compounded quarterly. The term "interest" as used
herein shall include quarterly interest payments, interest on quarterly interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined below), as applicable.
GLOBAL SECURITIES
If distributed to holders of the Preferred Securities in connection with
the involuntary or voluntary dissolution, winding-up or liquidation of the
Issuer as a result of the occurrence of a Special Event, the Debentures will be
issued in the same form as the Preferred Securities which such Debentures
replace. Any Global Certificate will be replaced by one or more global
certificates (each a "Global Security") registered in the name of the depository
or its nominee. Except under the limited circumstances described below, the
Debentures represented by the Global Security will not be exchangeable for, and
will not otherwise be issuable as, Debentures in definitive form. The Global
Securities described above may not be transferred except by the depository to a
nominee of the depository or by a nominee of the depository to the depository or
another nominee of the depository or to a successor depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
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Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Debentures shall be
exchangeable, except for another Global Security of like denomination and tenor
to be registered in the name of the depository or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner of Preferred
Securities must rely on the procedures of DTC or if such person is not a
participant, on the procedures of the participant through which such person owns
its interest to exercise any rights of a holder under the Indenture.
If Debentures are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Issuer and a Global Security is
issued, DTC will act as securities depository for the Debentures represented by
such Global Security. For a description of DTC and the specific terms of the
depository arrangements, see "Description of the Preferred Securities -- Form,
Transfer, Exchange and Book-Entry Procedures." As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. CMS Energy
may appoint a successor to DTC or any successor depository in the event DTC or
such depository is unable or unwilling to continue as a depository for the
Global Securities.
None of CMS Energy, the Debenture Trustee, any Paying Agent or the
Securities Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Security representing such Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
A Global Security shall be exchangeable for Debentures registered in the
names of persons other than DTC or its nominee only if (i) DTC notifies CMS
Energy that it is unwilling or unable to continue as a depository for such
Global Debenture and no successor depositary shall have been appointed by CMS
Energy within 90 days, or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depository, (ii) CMS Energy in its sole discretion
determines that such Global Security shall be so exchangeable, or (iii) there
shall have occurred and be continuing an Event of Default with respect to such
Global Security. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive certificates registered
in such names as DTC shall direct. It is expected that such instructions will be
based upon directions received by DTC from its Participants with respect to
ownership of beneficial interests in such Global Security. In the event that
Debentures are issued in definitive form, such Debentures will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described in "-- Payment and Paying Agents" below.
PAYMENT AND PAYING AGENTS
Payments on Debentures represented by a Global Security will be made to
DTC, as the depositary for the Debentures. In the event Debentures are issued in
definitive form, principal of and premium, if any, and any interest on
Debentures will be payable, the transfer of the Debentures will be registrable,
and the Debentures will be exchangeable for Debentures of other denominations of
a like aggregate principal amount at the corporate office of the Debenture
Trustee in the City of New York or at the office of such Paying Agent or Paying
Agents as CMS Energy may designate, except that at the option of CMS Energy
payment of any interest may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Securities Register
or (ii) by wire transfer to an account maintained by the Person entitled thereto
as specified in the Securities Register, provided that proper transfer
instructions have been received by the Regular Record Date. Payment of any
interest on Debentures will be made to the Person in whose name such Debentures
are registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Regular Record Date for
the interest payable
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on any Interest Payment Date shall be the fifteenth day (whether or not a
Business Day) next preceding such Interest Payment Date. CMS Energy may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent.
Any monies deposited with the Debenture Trustee or any Paying Agent, or
then held by CMS Energy in trust, for the payment of the principal of and
premium, if any, or interest on any Debentures and remaining unclaimed for two
years after such principal and premium, if any, or interest has become due and
payable shall, at the request of CMS Energy, be repaid to CMS Energy and the
holder of such Debentures shall thereafter look, as a general unsecured
creditor, only to CMS Energy for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Indenture has occurred and is
continuing, CMS Energy has the right under the Indenture to defer the payment of
interest (including any Liquidated Damages) on the Debentures at any time or
from time to time for a period not exceeding 20 consecutive quarters with
respect to each Extension Period, provided that no Extension Period may extend
beyond the stated maturity of the Debentures. At the end of such Extension
Period, CMS Energy must pay all interest then accrued and unpaid (together with
interest thereon at the stated annual rate, compounded quarterly, to the extent
permitted by applicable law). During an Extension Period, interest will continue
to accrue and holders of Debentures (or holders of Preferred Securities while
the Preferred Securities are outstanding) will be required to accrue interest
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount."
During any such Extension Period, CMS Energy may not, and may not cause any
subsidiary to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of CMS
Energy's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of CMS Energy that
rank pari passu with or junior to the Debentures (other than (a) any dividend,
redemption, liquidation, interest, principal or guarantee payment by CMS Energy
where the payment is made by way of securities (including capital stock) that
rank pari passu with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made, (b) payments
under the Guarantee, (c) purchases of CMS Energy Common Stock related to the
issuance of CMS Energy Common Stock under any of CMS Energy's benefit plans for
its directors, officers or employees, (d) as a result of a reclassification of
CMS Energy's capital stock or the exchange or conversion of one series or class
of CMS Energy's capital stock for another series or class of CMS Energy's
capital stock, and (e) the purchase of fractional interests in shares of CMS
Energy's capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged). Prior to the
termination of any such Extension Period, CMS Energy may further extend the
interest payment period, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the stated maturity of the Debentures.
Upon the termination of any such Extension Period and the payment of all amounts
then due on any Interest Payment Date, CMS Energy may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due and
payable during an Extension Period, except at the end thereof. CMS Energy shall
give the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election to begin any Extension Period at least one Business Day
prior to the earlier of (i) the record date for the date Distributions on the
Preferred Securities (or, if no Preferred Securities are outstanding, for the
date interest on the Debentures) would have been payable except for the election
to begin such Extension Period and (ii) the date the Property Trustee is (or, if
no Preferred Securities are outstanding, the Debenture Trustee is) required to
give notice to the NYSE or other applicable self-regulatory organization or to
holders of such Preferred Securities (or, if no Preferred Securities are
outstanding, to the holders of such Debentures) of such record date.
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The Debenture Trustee and the Property Trustee shall give notice of CMS Energy's
election to begin an Extension Period to the holders of the Debentures and the
Preferred Securities, respectively.
MANDATORY REDEMPTION
Upon repayment at maturity or as a result of acceleration upon the
occurrence of a Debenture Event of Default, CMS Energy will redeem the
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, together with any accrued and unpaid interest thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York City time, on the date of such repayment or acceleration or at such other
time on such earlier date as the parties thereto shall agree. The Debentures are
not entitled to the benefit of any sinking fund or, except as set forth above or
as a result of acceleration, any other provision for mandatory prepayment.
OPTIONAL REDEMPTION
On and after , 2001, CMS Energy will have the right, at any
time and from time to time, to redeem the Debentures, in whole or in part, upon
notice given as provided below, during the twelve month periods beginning on
in each of the following years and at the indicated
redemption prices (expressed as a percentage of the principal amount of the
Debentures being redeemed), together with any accrued but unpaid interest on the
portion being redeemed.
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
- -------------------------------- ---------- -------------------------------- ----------
<S> <C> <C> <C>
2001............................ % 2005............................ %
2002............................ 2006............................
2003............................ 2007 and thereafter.............
2004............................
</TABLE>
The principal amount of Debentures so redeemed may not, however, exceed the
amount of the proceeds derived, directly or indirectly, by CMS Energy or its
Subsidiaries from the issuance and sale of common stock within three years
preceding the date fixed for redemption. For so long as the Issuer is the holder
of all the outstanding Debentures, the proceeds of any such redemption will be
used by the Issuer to redeem Preferred Securities and Common Securities in
accordance with their terms. CMS Energy may not redeem the Debentures in part
unless all accrued and unpaid interest has been paid in full on all outstanding
Debentures. See "Description of the Preferred Securities -- Optional
Redemption."
CMS Energy also shall have the right to redeem the Debentures at any time
after , 2001 upon the occurrence of a Tax Event as described in
"Description of the Preferred Securities -- Special Event Exchange or
Redemption."
If at any time following the Conversion Expiration Date, less than 5% of
the original aggregate principal amount of the Debentures remains outstanding,
such Debentures shall be redeemable at the option of CMS Energy, in whole but
not in part, at a redemption price equal to the principal amount thereof, plus
any accrued and unpaid interest.
REDEMPTION PROCEDURES
Notices of any redemption of the Debentures and the procedures for such
redemption shall be as provided with respect to the Preferred Securities under
"Description of the Preferred Securities -- Redemption Procedures." Notice of
any redemption will be mailed at least 30 days but not more than 60 days before
the redemption date to each holder of Debentures to be redeemed at its
registered address. Unless CMS Energy defaults in payment of the redemption
price, on and after the redemption date interest ceases to accrue on such
Debentures or portions thereof called for redemption.
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DISTRIBUTION OF DEBENTURES
At any time, CMS Energy will have the right to terminate the Issuer and
cause the Debentures to be distributed to the holders of the Preferred
Securities in liquidation of the Issuer after satisfaction of liabilities to
creditors of the Issuer as provided by applicable law. If distributed to holders
of Preferred Securities in liquidation, the Debentures will initially be issued
in the form of one or more global securities and DTC, or any successor
depositary for the Preferred Securities, will act as depositary for the
Debentures. It is anticipated that the depositary arrangements for the
Debentures would be substantially identical to those in effect for the Preferred
Securities. There can be no assurance as to the market price of any Debentures
that may be distributed to the holders of Preferred Securities. For a
description of DTC and the terms of the depositary matters, see "Description of
the Preferred Securities -- Form, Transfer, Exchange and Book-Entry Procedures."
CONVERSION OF THE DEBENTURES
The Debentures will be convertible at the option of the holders of the
Debentures into CMS Energy Common Stock, at any time prior to redemption,
maturity or the Conversion Expiration Date, initially at the rate of shares
of CMS Energy Common Stock for each $50 in principal amount of the Debentures
(equivalent to a conversion price of $ per share of CMS Energy Common
Stock), subject to the conversion price adjustments described under "Description
of the Preferred Securities -- Conversion Rights." The Issuer will covenant for
so long as the Preferred Securities are outstanding not to convert the
Debentures except pursuant to a notice of conversion delivered to the Conversion
Agent by a holder of Preferred Securities. Upon surrender of such Preferred
Securities to the Conversion Agent for conversion, the Issuer will distribute
the commensurate principal amount of the Debentures to the Conversion Agent on
behalf of the holder of every Preferred Security so converted, whereupon the
Conversion Agent will convert such Debentures into CMS Energy Common Stock on
behalf of such holder. CMS Energy's delivery to the holders of the Debentures
(through the Conversion Agent) of the fixed number of shares of CMS Energy
Common Stock into which the Debentures are convertible (together with the cash
payment, if any, in lieu of fractional shares) will be deemed to satisfy CMS
Energy's obligation to pay the principal amount of the Debentures, and the
accrued and unpaid interest attributable to the period from the last date to
which interest has been paid or duly provided for.
EXPIRATION OF CONVERSION RIGHTS
The conversion rights of any Debentures held by the Issuer shall expire
upon the expiration of the conversion rights of the Preferred Securities on the
terms described above under "Description of the Preferred Securities --
Expiration of Conversion Rights." In the case of any Debentures that have been
exchanged for Preferred Securities under the conditions described under
"Description of the Preferred Securities -- Special Event Exchange or
Redemption," on and after , 2001, CMS Energy may, at
its option, cause the conversion rights of holders of such Debentures to expire.
CMS Energy may exercise this option only if for 20 trading days within any
period of 30 consecutive trading days, including the last trading day of such
period, the Current Market Price of CMS Energy Common Stock exceeds 115% of the
conversion price of the Debentures, subject to adjustment in certain
circumstances. In order to exercise its conversion expiration option, CMS Energy
must issue a press release for publication on the Dow Jones News Service
announcing the Conversion Expiration Date prior to the opening of business on
the second trading day after any period in which the condition in the preceding
sentence has been met, but in no event prior to , 2001. The press
release shall announce the Conversion Expiration Date and provide the current
conversion price and Current Market Price of CMS Energy Common Stock, in each
case as of the close of business on the trading day next preceding the date of
the press release.
Notice of the expiration of conversion rights will be given by first-class
mail to the holders of the Debentures not more than four Business Days after CMS
Energy issues the press release. The
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Conversion Expiration Date will be a date selected by CMS Energy not less than
30 nor more than 60 days after the date on which CMS Energy issues the press
release announcing its intention to terminate the conversion rights of the
Debenture holders. In the event that CMS Energy does not exercise its conversion
expiration option, the Conversion Expiration Date with respect to the Debentures
will be two Business Days preceding the date set for mandatory redemption of the
Debentures.
MODIFICATION OF INDENTURE
The Indenture permits CMS Energy and the Debenture Trustee to enter into
supplemental indentures thereto without the consent of the holders of the
Debentures to: (i) secure the Debentures, (ii) evidence the assumption by a
successor corporation of the obligations of CMS Energy under the Indenture and
the Debentures then outstanding, (iii) add covenants for the protection of the
holders of the Debentures, (iv) cure any ambiguity or correct any defect or
inconsistency in the Indenture or to make such other provisions as CMS Energy
deems necessary or desirable with respect to matters or questions arising under
the Indenture, provided that no such action adversely affects the interests of
any holders of the Debentures, (v) establish the form and terms of any series of
securities under the Indenture and (vi) evidence the acceptance of appointment
by a successor Debenture Trustee.
The Indenture also permits CMS Energy and the Debenture Trustee, with the
consent of the holders of not less than a majority in aggregate principal amount
of the Debentures 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 Indenture or modify in any manner the
rights of the holders of the Debentures, provided, however, that CMS Energy and
the Debenture Trustee may not, without the consent of the holder of each of the
Debentures then outstanding and affected thereby, enter into a supplemental
indenture to: (i) change the stated maturity of the Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon (other than deferrals of the payments of interest as described
under "-- Option to Extend Interest Payment Period") or impair any right to
institute suit for the enforcement of any such payment, or adversely affect the
subordination provisions of the Indenture or any right to convert any Debentures
or (ii) reduce the percentage of principal amount of the Debentures, the holders
of which are required to consent to any such modification of the Indenture,
provided that, so long as any of the Preferred Securities remain outstanding, no
such modification may be made that adversely affects the holders of such
Preferred Securities in any material respect, and no termination of the
Indenture may occur, and no waiver of any Debenture Event of Default or
compliance with any covenant under the Indenture may be effective, without the
prior consent of the holders of at least a majority in aggregate liquidation
amount of the Preferred Securities then outstanding unless and until the
principal of the Debentures and all accrued and unpaid interest thereon has been
paid in full.
Prior to the acceleration of the maturity of any Debentures, the holders of
a majority in aggregate principal amount of the Debentures at the time
outstanding with respect to which a default or an Event of Default shall have
occurred and be continuing (voting as one class) may on behalf of the holders of
all such affected Debentures waive any past default or Event of Default and its
consequences, except a default or an Event of Default in respect of a covenant
or provision of the Indenture or of any Debentures which cannot be modified or
amended without the consent of the holder of each of the Debentures affected.
DEBENTURE EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the
Debentures will constitute an "Event of Default" with respect to such
Debentures: (i) failure for 30 days to pay any interest on the Debentures, when
due (subject to the deferral of any due date in the case of an Extension
Period); (ii) failure to pay any principal or premium, if any, on the Debentures
when due whether at maturity,
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upon redemption by declaration or otherwise; (iii) failure by CMS Energy to
deliver shares of CMS Energy Common Stock upon an appropriate election by
holders of the Debentures to convert such Debentures; (iv) default for 60 days
by CMS Energy in the observance or performance of any other covenant or
agreement contained in the Indenture relating to the Debentures after written
notice thereof as provided in the Indenture; (v) certain events of bankruptcy,
insolvency or reorganization relating to CMS Energy; (vi) entry of final
judgments against CMS Energy or Consumers aggregating in excess of $25,000,000
which remain undischarged or unbonded for 60 days; or (vii) a default resulting
in the acceleration of indebtedness of CMS Energy 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 Indenture.
If an Event of Default on the Debentures shall have occurred and be
continuing, either the Debenture Trustee or the holders of not less than 25% in
aggregate principal amount of the Debentures then outstanding may declare the
principal of all Debentures and the interest, if any, accrued thereon to be due
and payable immediately and, should the Debenture Trustee or the holders of the
Debentures fail to make such declaration, the holders of at least 25% in
aggregate liquidation amount of the Preferred Securities then outstanding shall
have such right.
Upon certain conditions, any such declarations may be rescinded and
annulled if all Events of Default, other than the nonpayment of accelerated
principal, with respect to the Debentures then outstanding shall have been cured
or waived as provided in the Indenture by the holders of a majority in aggregate
principal amount of the Debentures then outstanding and, should the holders of
the Debentures fail to waive such default, the holders of a majority in
aggregate liquidation amount of the Preferred Securities shall have such right.
The Indenture provides that the Debenture Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of the holders of the Debentures, unless such
holders shall have offered to the Debenture Trustee reasonable indemnity.
Subject to such provisions for indemnity and certain other limitations contained
in the Indenture, the holders of a majority in aggregate principal amount of the
Debentures 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 Debenture Trustee, or exercising any trust or power conferred on the
Debenture Trustee, with respect to the Debentures.
The Indenture provides that no holder of the Debentures may institute any
action against CMS Energy under the Indenture (except actions for payment of
overdue principal, premium or interest) unless such holder previously shall have
given to the Debenture Trustee written notice of default and continuance thereof
and unless the holders of not less than 25% in aggregate principal amount of the
Debentures then outstanding (voting as one class) shall have requested the
Debenture Trustee to institute such action and shall have offered the Debenture
Trustee reasonable indemnity, the Debenture Trustee shall not have instituted
such action within 60 days of such request and the Debenture Trustee shall not
have received direction inconsistent with such request by the holders of a
majority in aggregate principal amount of the Debentures then outstanding
(voting as one class).
The Indenture requires CMS Energy to furnish to the Debenture Trustee
annually a statement as to CMS Energy's compliance with all conditions and
covenants under the Indenture. The Indenture provides that the Debenture Trustee
may withhold notice to the holders of the Debentures of any default (except
defaults as to payment of principal, premium or interest on the Debentures) if
it considers such withholding to be in the interest of the holders of the
Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of CMS Energy to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable, a
holder of Preferred Securities may institute a Direct Action for payment after
the respective due date specified in the Debentures. CMS Energy may not amend
the
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Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities.
Notwithstanding any payment made to such holder of Preferred Securities by CMS
Energy in connection with a Direct Action, CMS Energy shall remain obligated to
pay the principal of or interest on the Debentures held by the Issuer or the
Property Trustee and CMS Energy shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by CMS Energy to such holder in
any Direct Action.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that CMS Energy shall not consolidate with or merge
into any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate with
or merge into CMS Energy or convey, transfer or lease its properties and assets
substantially or as an entirety to CMS Energy, unless (i) in case CMS Energy
consolidates with or merges into another Person or conveys, transfers or leases
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any state
or the District of Columbia, and such successor Person expressly assumes CMS
Energy's obligations on the Debentures; (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, shall have
happened and be continuing; (iii) in the case of the Debentures, such
transaction is permitted under the Trust Agreement and Guarantee and does not
give rise to any breach or violation of the Trust Agreement or Guarantee; and
(iv) certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Debentures protection in the event of a highly leveraged or other transaction
involving CMS Energy that may adversely affect holders of the Debentures.
EXPENSES OF ISSUER
Pursuant to the Indenture, CMS Energy will pay all of the costs, expenses
or liabilities of the Issuer, other than obligations of the Issuer to pay to the
holders of any Preferred Securities or Common Securities the amounts due such
holders pursuant to the terms of the Preferred Securities or Common Securities.
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The Indenture provides that, at the option of CMS Energy: (i) CMS Energy
will be discharged from any and all obligations in respect of the Debentures
then outstanding (except for certain obligations to register the transfer of or
exchange the Debentures, to replace stolen, lost or mutilated Debentures, to
maintain paying agencies and to maintain the trust described below), or (ii) CMS
Energy need not comply with certain restrictive covenants of the Indenture
(including those described under "Consolidation, Merger, Sale of Assets and
Other Transactions"), in each case if CMS Energy irrevocably deposits in trust
with the Debenture 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 the interest thereon in accordance with their terms, will provide money in
an amount sufficient to pay all the principal of and premium, if any, and
interest on the Debentures on the stated maturity of such Debentures (which may
include one or more redemption dates designated by CMS Energy) in accordance
with the terms thereof. To exercise such option, CMS Energy is required, among
other things, to deliver to the Debenture Trustee an opinion of independent
counsel to the effect that the exercise of such option would not cause the
holders of the Debentures to recognize income, gain or loss for United States
Federal income tax purposes as a result of such defeasance, and such holders
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 (i) of
the
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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
Indenture there has been a change in the applicable Federal income tax law.
In the event CMS Energy exercises its option to effect a covenant
defeasance with respect to the Debentures as described in the preceding
paragraph and the Debentures 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 Debenture Trustee would be insufficient to
pay amounts due on the Debentures at the time of the acceleration resulting from
such Event of Default, CMS Energy would remain liable for such amounts.
CMS Energy may also obtain a discharge of the Indenture with respect to all
Debentures then outstanding (except for certain obligations to register the
transfer of or exchange such Debentures to replace stolen, lost or mutilated
Debentures, to maintain paying agencies and to maintain the trust described
below) by irrevocably depositing in trust with the Debenture 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 the interest thereon in
accordance with their terms, will provide money in an amount sufficient to pay
all the principal of and premium, if any, and interest on the Debentures on the
stated maturities thereof (including one or more redemption dates), provided
that such Debentures are by their terms due and payable, or are to be called for
redemption, within one year.
For United States Federal income tax purposes any deposit contemplated in
the preceding paragraph would be treated as an exchange of the Debentures
outstanding for other property. Accordingly, holders of the Debentures
outstanding may be required to recognize a gain or loss for United States
Federal income tax purposes upon such exchange. In addition, such holders
thereafter may be required to recognize income from such property which could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors as to
the specific consequences to them of such deposit.
SUBORDINATION
The Indenture provides (and each holder of the Debentures by acceptance
thereof agrees) that the Debentures will be subordinated in right of payment to
the prior payment in full of all Senior Indebtedness (as defined herein) of CMS
Energy. No payment on account of principal of, premium, if any, or interest on
the Debentures and no acquisition of, or payment on account of any sinking fund
for, the Debentures may be made unless full payment of amounts then due for
principal, premium, if any, and interest then due on all Senior Indebtedness by
reason of the maturity thereof (by lapse of time, acceleration or otherwise) has
been made or duly provided for in cash or in a manner satisfactory to the
holders of such Senior Indebtedness. In addition, the Indenture provides that
upon the happening and during the continuation of any default in payment of the
principal of, premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable or in the event any judicial proceeding shall be
pending with respect to any such default, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no payment shall
be made by CMS Energy with respect to the principal of, premium, if any, or
interest on the Debentures or to acquire any Debentures or on account of any
sinking fund provisions applicable to the Debentures. CMS Energy shall give
prompt written notice to the Debenture Trustee of any default in payment of
principal of or interest on any Senior Indebtedness. The Indenture provisions
described in this paragraph, however, do not prevent CMS Energy from making
sinking fund payments in the Debentures acquired prior to the maturity of Senior
Indebtedness or, in the case of default, prior to such default and notice
thereof. Upon any distribution of its assets in connection with any dissolution,
winding up, liquidation or reorganization of CMS Energy, whether voluntary or
involuntary, in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the
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benefit of creditors or otherwise: (i) all Senior Indebtedness must be paid in
full before the holders of the Debentures are entitled to any payments
whatsoever; and (ii) any payment or distribution of CMS Energy's assets of any
kind or character, whether in cash, securities or other property, which would
otherwise (but for the subordination provisions) be payable or deliverable in
respect of the Debentures shall be paid or delivered directly to the holders of
such Senior Indebtedness (or their representative or trustee) in accordance with
the priorities then existing among such holders until all Senior Indebtedness
shall have been paid in full before any payment or distribution is made to the
holders of the Debentures. In the event that notwithstanding such subordination
provisions, any payment or distribution of assets of any kind or character is
made on the Debentures before all Senior Indebtedness is paid in full, the
Debenture Trustee or the holders of the Debentures receiving such payment will
be required to pay over such payment or distribution to the holders of such
Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness,
the rights of the holders of the Debentures will be subrogated to the rights of
the holders of Senior Indebtedness to receive payments or distributions
applicable to Senior Indebtedness until all amounts owing on the Debentures are
paid in full. As a result of the subordination provisions, in the event of CMS
Energy's insolvency, the holders of the Debentures may recover ratably less than
senior creditors of CMS Energy.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including interest accruing on or after the filing of any petition in
bankruptcy relating to CMS Energy whether or not such claim for post-petition
interest is allowed in such proceeding) on the following, whether outstanding on
the date of execution of the Indenture or thereafter incurred, created or
assumed: (i) indebtedness of CMS Energy for money borrowed by CMS Energy
(including purchase money obligations, except indebtedness to trade creditors or
assumed by CMS Energy in the ordinary course of business in connection with the
obtaining of goods, materials or services) or evidenced by debentures (other
than the Debentures), notes, bankers' acceptances or other corporate debentures
or similar instruments issued by CMS Energy; (ii) all capital lease obligations
of CMS Energy; (iii) obligations with respect to letters of credit; (iv) all
indebtedness of others of the type referred to in the preceding clauses (i)
through (iii) assumed by or guaranteed in any manner by CMS Energy or in effect
guaranteed by CMS Energy; or (v) renewals, extensions or refundings of any of
the indebtedness referred to in the preceding clauses (i), (ii), (iii) and (iv)
unless, in the case of any particular indebtedness, renewal, extension or
refunding, under the express provisions of the instrument creating or evidencing
the same or the assumption or guarantee of the same, or pursuant to which the
same is outstanding, such indebtedness or such renewal, extension or refunding
thereof is not superior in right of payment to the Debentures.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued. As of May 31, 1997, Senior Indebtedness of CMS Energy
aggregated approximately $1,612 million.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of the Debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES
AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are irrevocably guaranteed by CMS Energy as and to the extent set
forth under "Description of the Guarantee." Taken together, CMS Energy's
obligations under the Debentures, the Indenture, the Trust Agreement and the
Guarantee provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under the
Preferred Securities. If and to the extent that CMS Energy does not make
payments on the Debentures, the Issuer will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover payment of
Distributions when the Issuer does not have sufficient funds to pay such
Distributions. In such event, a holder of Preferred Securities may institute a
Direct Action directly against CMS Energy to enforce payment of such
Distributions to such holder after the respective due dates. The obligations of
CMS Energy under the Guarantee are subordinate and junior in right of payment to
all other liabilities of CMS Energy; and pari passu with any guarantee now or
hereafter entered into by CMS Energy in respect of any preferred or preference
stock of any affiliate of CMS Energy.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Debentures, such payments will be sufficient to cover Distributions and other
payments due on the Preferred Securities, primarily because (i) the aggregate
principal amount of the Debentures will be equal to the sum of the aggregate
stated liquidation amount of the Preferred Securities and Common Securities;
(ii) the interest rate and interest and other payment dates on the Debentures
will match the Distribution rate and Distribution and other payment dates for
the Preferred Securities; (iii) CMS Energy shall pay for all and any costs,
expenses and liabilities of the Issuer except the Issuer's obligations to
holders of the Preferred Securities under such Preferred Securities; and (iv)
the Trust Agreement further provides that the Issuer will not engage in any
activity that is not consistent with the limited purposes of the Issuer.
Notwithstanding anything to the contrary in the Indenture, CMS Energy has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent CMS Energy has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Securities may institute a legal proceeding
directly against CMS Energy to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other person or entity.
A default or event of default under any Senior Indebtedness of CMS Energy
will not constitute a default under the Indenture or a Debenture Event of
Default. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness of CMS Energy, the subordination provisions of the Indenture
provide that no payments may be made in respect of the Debentures until such
Senior Indebtedness has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Debentures would
constitute a Debenture Event of Default.
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LIMITED PURPOSE OF ISSUER
The Preferred Securities evidence a beneficial interest in the Issuer, and
the Issuer exists for the sole purpose of issuing the Preferred Securities and
Common Securities and investing the proceeds thereof in the Debentures. A
principal difference between the rights of a holder of Preferred Securities and
a holder of Debentures is that a holder of Debentures is entitled to receive
from CMS Energy the principal amount of and interest accrued on Debentures held,
while a holder of Preferred Securities is entitled to receive Distributions from
the Issuer (or from CMS Energy under the applicable Guarantee) if and to the
extent the Issuer has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Issuer involving the liquidation of the Debentures, the holders of the
Preferred Securities will be entitled to receive, out of assets held by the
Issuer, the Liquidation Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of CMS Energy, the Property Trustee, as
holder of the Debentures, would be a subordinated creditor of CMS Energy,
subordinated in right of payment to all Senior Indebtedness, but entitled to
receive payment in full of principal and interest before any stockholders of CMS
Energy receive payments or distributions. Since CMS Energy is the guarantor
under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of the Issuer (other than the Issuer's obligations to the holders of
the Preferred Securities), the positions of a holder of such Preferred
Securities and a holder of such Debentures relative to other creditors and to
stockholders of CMS Energy in the event of liquidation or bankruptcy of CMS
Energy would be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special United
States tax counsel to the Issuer and CMS Energy ("Special Tax Counsel"), the
following is a summary of certain of the material United States federal income
tax consequences of the purchase, ownership, disposition and conversion of the
Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by U.S. Holders who purchase the
Preferred Securities upon original issuance. As used herein, a "U.S. Holder"
means a person who is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust defined
in section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the
"Code"). This summary does not deal with special classes of holders such as
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. Dollar. Further, it
does not include any description of any alternative minimum tax consequences or
the tax laws of any state or local government or of any foreign government that
may be applicable to the Preferred Securities. This summary is based on the
Code, Treasury regulations thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF
ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
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CLASSIFICATION OF THE DEBENTURES
CMS Energy has taken the position that the Debentures will be classified
for United States federal income tax purposes as indebtedness of CMS Energy
under current law and, by acceptance of Preferred Securities, each holder
covenants to treat the Debentures as indebtedness and the Preferred Securities
as evidence of an indirect beneficial ownership interest in the Debentures. No
assurance can be given, however, that such position of CMS Energy will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. The remainder of this discussion assumes that
the Debentures will be classified as indebtedness of CMS Energy for United
States federal income tax purposes.
CLASSIFICATION OF THE ISSUER
The Issuer will be classified for United States federal income tax purposes
as a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Debentures, and each holder will be required to include in its
gross income any interest with respect to its allocable share of those
Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations, a debt instrument will be deemed to
be issued with OID if there is more than a remote contingency that periodic
stated interest payments due on the instrument will not be timely paid. Because
the exercise by CMS Energy of its option to defer the payment of stated interest
on the Debentures would, among other things, prevent CMS Energy from declaring
dividends on its capital stock, CMS Energy believes that the likelihood of its
exercising the option is remote within the meaning of such regulations. As a
result, CMS Energy intends to take the position, based upon the advice of
Special Tax Counsel, that the Debentures will not be issued with OID.
Accordingly, based upon this position and except as set forth below, stated
interest on the Debentures generally will be taxable to a holder of Preferred
Securities as ordinary income at the time it is paid or accrued in accordance
with such holder's regular method of tax accounting.
If CMS Energy exercises its right to defer payments of interest on the
Debentures, the Debentures will become OID instruments at that time and,
consequently, a holder of the Preferred Securities will be required to include
such holder's pro rata share of such OID in income on an economic accrual basis
before the receipt of cash attributable to the interest, regardless of such
holder's regular method of tax accounting, and actual distributions of stated
interest will not be separately reported as taxable income. Thereafter, the
Debentures will be taxed as OID instruments for as long as they remain
outstanding. The amount of OID that will accrue in any month will approximately
equal the amount of the interest that accrues on the Debentures in that month at
the stated interest rate. Any amount of OID included in a holder's gross income
(whether or not during an Extension Period) with respect to a Preferred Security
will increase such holder's tax basis in such Preferred Security, and the amount
of actual distributions received by a holder in respect of such accrued OID will
reduce the tax basis of such Preferred Security.
The Treasury regulations described above have not yet been addressed in any
rulings or other interpretations by the Internal Revenue Service (the "IRS"),
and it is possible that the IRS could take a contrary position. If the IRS were
to assert successfully that the stated interest on the Debentures was OID
regardless of whether CMS Energy exercised its option to defer payments of
interest on such debt instruments, a holder of Preferred Securities would be
required to include such OID in income on a daily economic accrual basis as
described above.
Because income on the Debentures will constitute interest, corporate
holders will not be entitled to a dividends-received deduction with respect to
any income recognized with respect to the Debentures.
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REDEMPTION OF PREFERRED SECURITIES FOR DEBENTURES OR CASH UPON LIQUIDATION OF
THE ISSUER
Under certain circumstances, the Debentures may be distributed to holders
in exchange for the Preferred Securities. Under current law, such a distribution
to holders, for United States federal income tax purposes, would be treated as a
nontaxable event to each holder, and each holder would receive an aggregate tax
basis in the Debentures distributed equal to such holder's aggregate tax basis
in its Preferred Securities exchanged therefor. A holder's holding period in the
Debentures so received would include the period during which the Preferred
Securities were held by such holder. If, however, the exchange is caused by a
Tax Event which results in the Issuer being treated as an association taxable as
a corporation, the distribution would likely constitute a taxable event to the
Issuer and holders of the Preferred Securities.
Under certain circumstances described herein (see "Description of the
Preferred Securities -- Special Event Exchange or Redemption"), the Debentures
may be redeemed for cash and the proceeds of such redemption distributed to
holders in redemption of their Preferred Securities. Under current law, such a
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Preferred Securities, and a holder would
recognize gain or loss in the same manner as if it sold such redeemed Preferred
Securities for cash. See "-- Sales of Preferred Securities".
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities.
Assuming that CMS Energy does not defer interest on the Debentures, a holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price. In general, such gain or loss will be a capital gain or loss and
will be a long-term capital gain or loss if the Preferred Securities have been
held for more than one year at the time of sale. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
CONVERSION OF PREFERRED SECURITIES INTO CMS ENERGY COMMON STOCK
A holder of Preferred Securities generally will not recognize income, gain
or loss upon the conversion of the Preferred Securities into CMS Energy Common
Stock through the Conversion Agent. A holder of Preferred Securities will,
however, recognize gain upon the receipt of cash in lieu of a fractional share
of CMS Energy Common Stock equal to the amount of cash received less such
holder's tax basis in such fractional share. Such a holder's tax basis in the
CMS Energy Common Stock received upon conversion should generally be equal to
such holder's tax basis in the Preferred Securities delivered to the Conversion
Agent for exchange less the basis allocated to any fractional share for which
cash is received, and such holder's holding period in the CMS Energy Common
Stock received upon conversion should generally begin on the date such holder
acquired the Preferred Securities delivered to the Conversion Agent for
exchange.
Holders of Preferred Securities should not recognize gain or loss upon
expiration of the conversion rights. Such expiration should not effect a
significant modification of the underlying Debentures within the meaning of
applicable Treasury Regulations, and thus will not be considered a sale or
exchange for purposes of federal income taxation.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from CMS Energy in the event the conversion ratio of the Debentures were
adjusted if (i) as a result of such adjustment, the proportionate interest
(measured by the quantum of CMS Energy Common Stock into or for which the
Debentures are convertible or exchangeable) of the holders of the Preferred
Securities in the
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<PAGE> 65
assets or earnings and profits of CMS Energy were increased and (ii) the
adjustment was not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in the conversion ratio would not be considered made
pursuant to such a formula if the adjustment was made to compensate for certain
taxable distributions with respect to the CMS Energy Common Stock. Thus, under
certain circumstances, a reduction in the conversion price for the holders may
result in deemed dividend income to holders to the extent of the current or
accumulated earnings and profits of CMS Energy. Holders of the Preferred
Securities would be required to include their allocable share of such deemed
dividend income in gross income but would not receive any cash related thereto.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to holders
on Forms 1099, which forms will be mailed to holders of record prior to January
31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will generally be
allowed as a credit against the holder's federal income tax, provided the
required information is timely filed with the IRS.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton administration proposed certain changes to federal income tax law
which would, among other things, generally treat as equity, for federal income
tax purposes, certain debt obligations, such as the Debentures, that are "issued
on or after the date of first Congressional Committee action" (the "Clinton
Proposal"). On June 9, 1997, House Ways and Means Committee Chairman Bill Archer
released the Chairman's Mark Relating to Revenue Reconciliation Provisions which
are proposed to be included in 1997 tax legislation (the "Chairman's Mark"). The
Chairman's Mark constitutes "first Congressional Committee action" with respect
to the provisions contained therein. The Chairman's Mark does not include the
Clinton Proposal that would require the Debentures to be treated as equity for
federal income tax purposes.
In light of the Chairman's Mark, it appears that "first Congressional
Committee action" has not yet occurred with respect to the Clinton Proposal.
Furthermore, in light of the effective date transitional rules relating to
certain capital markets provisions included in the Chairman's Mark (as well as
transitional rules provided for in 1996 proposed legislation similar to the
Clinton Proposal) which provide, among other things, that instruments issued
pursuant to a prospectus supplement filed with the Commission on or before the
effective date of the legislation are not subject to the legislation, it is
anticipated that, should the Clinton Proposal be acted upon by Congress at some
future date, such future date would be the relevant effective date and similar
transitional rules would apply. Accordingly, because the Debentures will be
issued pursuant to a prospectus supplement filed with the Commission before the
date of first Congressional Committee action, it is not anticipated that the
Clinton Proposal, even if acted upon by Congress in the future, would apply to
the Debentures.
There can be no assurance, however, that the Clinton Proposal or similar
legislation will not ultimately be enacted into law, that the effective date and
transitional rules relating thereto would be enacted as anticipated, or that
other developments will not occur after the date hereof that would adversely
affect the tax treatment of the Debentures and could result in the exchange of
the Debentures for Preferred Securities or, in certain limited circumstances,
the redemption of the Debentures by CMS Energy and the distribution of the
resulting cash in redemption of the Preferred Securities. See "Description of
the Preferred Securities -- Special Event Exchange or Redemption."
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, CMS
Energy and the Issuer have agreed that the Issuer will sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated are acting as representatives, has severally agreed to purchase
from the Issuer, the respective number of Preferred Securities set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
------------------------------------------------------------------------ ---------
<S> <C>
Goldman, Sachs & Co.....................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
Morgan Stanley & Co. Incorporated.......................................
---------
Total.............................................................. 3,000,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Preferred Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Debentures issued by CMS Energy, the
Underwriting Agreement provides that CMS Energy will pay as Underwriters'
Compensation for the Underwriters arranging the investment therein of such
proceeds an amount of $ per Preferred Security for the accounts of the
several Underwriters.
Prior to this offering, there has been no public market for the Preferred
Securities. Application will be made to list the Preferred Securities on the New
York Stock Exchange, subject to official notice of issuance, under the symbol
"CMS PrZ". In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell Preferred Securities to a minimum of 100 beneficial owners. The
representatives have advised CMS Energy that they intend to make a market in the
Preferred Securities, but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Preferred Securities.
In connection with the offering, the Underwriters may purchase and sell the
Preferred Securities and CMS Energy Common Stock in the open market. These
transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the
Preferred Securities and CMS Energy Common Stock; and syndicate short positions
involve the sale by the Underwriters of a greater number of Preferred Securities
than they are required to purchase from the Issuer in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate
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<PAGE> 67
members or other broker-dealers in respect of the securities sold in the
offering for their account may be reclaimed by the syndicate if such Preferred
Securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Preferred Securities and CMS Energy Common Stock, which may
be higher than the price that might otherwise prevail in the open market; and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
CMS Energy and the Issuer have agreed that, during the period beginning
from the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date on which the distribution of the Preferred Securities
ceases, as determined by the representatives, and (ii) 90 days after the
issuance of the Preferred Securities, they will not offer, sell, contract to
sell or otherwise dispose of (a) any Preferred Securities or any preferred stock
or any other securities of CMS Energy which are substantially similar to the
Preferred Securities, including any guarantee of such securities, or any
securities convertible into or exchangeable for or representing the right to
receive any of the foregoing securities, or (b) any shares of any class of
Common Stock of the Company, other than shares of Common Stock issuable upon
conversion of the Preferred Securities or pursuant to the Stock Purchase Plan,
the Performance Incentive Stock Plan, the Employee Stock Ownership Plan and the
Employee Savings and Incentive Plan.
CMS Energy and the Issuer have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act,
without the prior written consent of the representatives.
LEGAL MATTERS
The validity of the Common Stock issuable upon conversion of the Preferred
Securities or the Debentures, the Indenture, the Guarantee, the Debentures and
certain matters relating thereto will be passed upon for the Issuer and CMS
Energy by Michael D. Van Hemert, Esq., Assistant General Counsel of CMS Energy.
Certain matters will be passed upon for the Underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York, which has also acted as Special
Tax Counsel to the Issuer and CMS Energy. Certain matters of Delaware law
relating to the validity of the Preferred Securities will be passed upon on
behalf of the Issuer by Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington,
Delaware, special Delaware counsel to the Issuer. Skadden, Arps, Slate, Meagher
& Flom LLP from time to time renders legal services to CMS Energy.
S-65
<PAGE> 68
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 JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED JUNE 12, 1997
CMS ENERGY CORPORATION
COMMON STOCK
SUBORDINATED DEBENTURES
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
AND
CMS ENERGY TRUST I
CMS ENERGY TRUST II
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY CMS ENERGY CORPORATION
------------------------
CMS Energy Corporation, a Michigan corporation ("CMS Energy"), may offer,
from time to time, (i) shares of Common Stock, par value $.01 per share ("CMS
Energy Common Stock"), (ii) unsecured subordinated debt securities (the
"Subordinated Debentures") consisting of debentures, convertible debentures,
notes and other unsecured evidence of indebtedness, (iii) Stock Purchase
Contracts ("Stock Purchase Contracts") to purchase CMS Energy Common Stock, and
(iv) Stock Purchase Units ("Stock Purchase Units"), each representing ownership
of a Stock Purchase Contract and Subordinated Debentures or Preferred Securities
or debt obligations of third parties, including U.S. Treasury Securities,
securing the holder's obligation to purchase the CMS Energy Common Stock under
the Stock Purchase Contract, or any combination of the foregoing, in each case
in amounts, at prices and on terms to be determined at or prior to the time of
sale. See "Description of Securities."
CMS Energy Trust I and CMS Energy Trust II (each, a "Trust" and
collectively, the "Trusts"), statutory business trusts formed under the laws of
the State of Delaware, may also offer, from time to time, preferred securities
("Preferred Securities") representing preferred undivided beneficial interests
in the assets of the Trust in amounts, at prices and on terms to be determined
at or prior to the time of sale. The undivided common beneficial interests in
the Trust will be owned by CMS Energy. The proceeds from the offering of the
Preferred Securities and the sale of the common securities may be contributed by
the Trust to purchase from CMS Energy Subordinated Debentures in an aggregate
principal amount equal to the aggregate liquidation preference of the Preferred
Securities, bearing interest at an annual rate equal to the annual distribution
rate of such Preferred Securities and having certain redemption terms which
correspond to the redemption terms for the Preferred Securities. The
Subordinated Debentures will rank subordinate in right of payment to all of CMS
Energy's Senior Indebtedness (as defined herein). Distributions on the Preferred
Securities may not be made unless the Trust receives corresponding interest
payments on the Subordinated Debentures from CMS Energy. CMS Energy will
irrevocably guarantee, on a subordinated basis and to the extent set forth
therein, with respect to each of the Trust securities, if any, the payment of
distributions, the redemption price, including all accrued or deferred and
unpaid distributions, and payment on liquidation, but only to the extent of
funds on hand. Each of the guarantees will be unsecured and each will be
subordinate to all Senior Indebtedness of CMS Energy. Upon the occurrence of
certain events (subject to the conditions to be described in an accompanying
Prospectus Supplement) the Trust may be liquidated and the holders of the
Preferred Securities could receive Subordinated Debentures in lieu of any
liquidating cash distribution.
Specific terms of the CMS Energy Common Stock, Subordinated Debentures,
Stock Purchase Contracts, Stock Purchase Units, Preferred Securities, and Trust
guarantees, in respect of which this Prospectus is being delivered (the "Offered
Securities"), will be set forth in an accompanying Prospectus Supplement or
Supplements, together with the terms of the offering of the Offered Securities,
the initial price thereof and the net proceeds from the sale thereof. The
Prospectus Supplement will set forth with regard to the particular Offered
Securities, without limitation, the following: (i) in the case of Subordinated
Debentures, the designation, aggregate principal amount, denomination, maturity,
premium, if any, any exchange, conversion, redemption or sinking fund
provisions, interest rate (which may be fixed or variable), the time or method
of calculating interest payments, the right of CMS Energy, if any, to defer
payment or interest on the Subordinated Debentures and the maximum length of
such deferral, put options, if any, public offering price, ranking, any listing
on a securities exchange and other specific terms of the offering; (ii) in the
case of CMS Energy Common Stock, the designation, number of shares, public
offering price and other specific terms of the Offering, from the sale thereof;
(iii) in the case of Preferred Securities, the designation, number of shares,
liquidation preference per security, initial public offering price, any listing
on a securities exchange, dividend rate (or method of calculation thereof),
dates on which dividends shall be payable and dates from which dividends shall
accrue, any voting rights, any redemption, exchange, conversion or sinking fund
provisions and any other rights, preferences, privileges, limitations or
restrictions relating to a specific series or the Preferred Securities, as the
case may be; and (iv) in the case of Stock Purchase Units, the specific terms of
the Stock Purchase Contracts and any Subordinated Debentures, Preferred
Securities, or debt obligations of third parties securing the holders obligation
to purchase CMS Energy Common Stock under the Stock Purchase Contracts, and the
terms of the offering and sale thereof. The offering price to the public of the
Offered Securities will be limited to $300,000,000 in the aggregate.
The outstanding CMS Energy Common Stock is traded on the New York Stock
Exchange, Inc. ("NYSE"). See "Description of Securities -- Dividends and Price
Range of Common Stock." The CMS Energy Common Stock sold pursuant to a
Prospectus Supplement accompanying this Prospectus will also be listed for
trading on the NYSE, subject to official notice of issuance.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
CMS Energy intends to sell the Offered Securities through underwriters,
dealers, agents or directly to a limited number of purchasers. The names of, and
the Offered Securities to be purchased by or through, underwriters, dealers or
agents, if any, the compensation of such persons and other special terms in
connection with the offering and sale of such Offered Securities will be set
forth in the related Prospectus Supplement. See "Plan of Distribution" herein.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 69
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND ANY INFORMATION
OR REPRESENTATION NOT CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY CMS ENERGY OR ANY UNDERWRITER, DEALER OR AGENT.
THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH THEY RELATE OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED HEREIN OR THEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
CMS Energy is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Information, as of particular dates, concerning
CMS Energy's directors and officers, their remuneration, the principal holders
of CMS Energy's securities and any material interest of such persons in
transactions with CMS Energy is disclosed in proxy statements distributed to
shareholders of CMS Energy and filed with the Commission. Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at 500 West Madison Street, Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a Web site (http://www.sec.gov) that contains reports, proxy
statements and other information regarding CMS Energy. The outstanding shares of
CMS Energy Common Stock are listed on the NYSE and reports, proxy statements and
other information concerning CMS Energy may also be inspected and copied at the
offices of such exchange at 20 Broad Street, New York, New York 10005.
No separate financial statements of the Trusts have been included herein.
CMS Energy and the Trusts do not consider that such financial statements would
be material to holders of Preferred Securities because the Trust are newly
organized special purposes entities, have no operating history and no
independent operations and are not engaged in, and do not propose to engage in,
any activity other than as described under "CMS Energy Trust". Further, CMS
Energy believes that financial statements of the Trusts are not material to the
holders of the Preferred Securities since CMS Energy will guarantee the
Preferred Securities such that the holders of the Preferred Securities, with
respect to the payment of distributions and amounts upon liquidation,
dissolution and winding-up, are at least in the same position vis-a-vis the
assets of CMS Energy as a preferred stockholder of CMS Energy. CMS Energy
beneficially owns directly or indirectly all of the undivided beneficial
interests in the assets of the Trusts (other than the beneficial interests
represented by the Preferred Securities). See "CMS Energy Trusts," "Description
of Securities -- Preferred Securities" and "Description of Securities -- The
Guarantees." In future filings under the Exchange Act , an audited footnote to
CMS Energy's annual financial statements will state that the Trusts are
wholly-owned by CMS Energy, that the sole assets of the Trusts are the
Subordinated Debentures of CMS Energy having a specified aggregate principal
amount, and, considered together, the back-up undertakings, including the
Guarantees, constitute a full and unconditional guarantee by CMS Energy of the
Trusts' obligations under the Preferred Securities issued by the Trusts.
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<PAGE> 70
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by CMS Energy (File No. 1-9513) with the
Commission pursuant to the Exchange Act are hereby incorporated by reference in
this Prospectus and shall be deemed to be a part hereof: (i) CMS Energy's Annual
Report on Form 10-K for the year ended December 31, 1996; (ii) CMS Energy's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997; (iii) CMS
Energy's Current Reports on Form 8-K dated March 7, April 24, May 1, June 5 and
June 11, 1997; and (iv) CMS Energy's Registration Statement on Form 8-B/A dated
November 21, 1996.
All documents subsequently filed by CMS Energy pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the
offering made by this Prospectus (the "Offering") shall be deemed to be
incorporated by reference herein and shall be deemed to be a part hereof from
the date of filing of such documents (such documents, and the documents
enumerated above, being hereinafter referred to as "Incorporated Documents").
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
CMS Energy undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, upon
the written or oral request of any such person, a copy of any and all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed to CMS Energy at its principal
executive offices located at Fairlane Plaza South, Suite 1100, 330 Town Center
Drive, Dearborn, Michigan 48126, Attention: Office of the Secretary, telephone:
(313) 436-9200.
Certain information contained in this Prospectus summarizes, is based upon,
or refers to information and financial statements contained in one or more
Incorporated Documents; accordingly, such information contained herein is
qualified in its entirety by reference to such documents and should be read in
conjunction therewith.
CMS ENERGY CORPORATION
CMS Energy, incorporated 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 CMS Energy. Consumers' customer base includes a mix of
residential, commercial and diversified industrial customers, the largest of
which is the automotive industry. Enterprises is engaged in several 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 customers; (iv) transmission, storage and processing of
natural gas; and (v) international energy distribution.
CMS Energy 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
transmission, storage 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. CMS Energy and its subsidiaries
routinely evaluate, invest in, acquire and divest energy-related
3
<PAGE> 71
assets and/or companies both domestically and internationally. Consideration for
such transactions may involve the delivery of cash or securities.
CMS Energy'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 major share of CMS Energy's total assets, revenue and income. The
unconsolidated share of non-utility electric generation, gas transmission and
storage and international energy distribution revenue for 1996 was $557 million.
Consumers is a public utility serving gas or electricity to almost six
million of Michigan's nine and a half million residents in all of the 68
counties in Michigan's Lower Peninsula. Industries in Consumers' service area
include automotive, metal, chemical, food and wood products and a diversified
group of other industries. Consumers' 1996 consolidated operating revenue of
$3,770 million was derived approximately 65% ($2,446 million) from its electric
utility business and approximately 34% ($1,282 million) from its gas utility
business. Consumers' rates and certain other aspects of its business are subject
to the jurisdiction of the Michigan Public Service Commission (the "MPSC") and
the Federal Energy Regulatory Commission.
CMS ENERGY TRUSTS
Each of CMS Energy Trust I and CMS Energy Trust II is a statutory business
trust formed under the Delaware Business Trust Act (the "Trust Act") pursuant to
(i) a trust agreement executed by CMS Energy, as sponsor, and the trustees of
CMS Energy Trust I and CMS Energy Trust II (the "CMS Trustees") and (ii) the
filing of a certificate of trust with the Secretary of State of the State of
Delaware. Each trust agreement will be amended and restated in its entirety (as
so amended and restated, the "Trust Agreement") and will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). CMS Energy will directly or indirectly acquire common
securities of each Trust in an aggregate liquidation amount equal to
approximately 3% of the total capital of the Trust. Each Trust exists for the
exclusive purposes of (i) issuing the Preferred Securities and common securities
(the "Common Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. Each Trust has a term of approximately 30
years, but may terminate earlier as provided in the Trust Agreement.
Pursuant to the Trust Agreement, the number of CMS Trustees will initially
be three. Two of the CMS Trustees (the "Administrative Trustees") will be
persons who are employees or officers of or who are affiliated with CMS Energy.
The third trustee will be a financial institution that is unaffiliated with CMS
Energy, which trustee will serve as property trustee under the Trust Agreement
and as indenture trustee for the purposes of compliance with the provisions of
the Trust Indenture Act (the "Property Trustee"). Initially, The Bank of New
York, a New York banking corporation, will be the Property Trustee until removed
or replaced by the holder of the Common Securities. For the purpose of
compliance with the provisions of the Trust Indenture Act, The Bank of New York
will also act a trustee (the "Guarantee Trustee") under the Preferred Securities
Guarantee and The Bank of New York (Delaware) will act as the Delaware Trustee
for the purposes of the Trust Act (as defined herein), until removed or replaced
by the holder of the Common Securities. See "Description of Securities -- The
Guarantees."
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and the Property Trustee will
have the power to exercise all rights, powers
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<PAGE> 72
and privileges under the Subordinated Debt Indenture (as defined herein) as the
holder of the Subordinated Debentures. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the "Property Account") to hold all payments made in respect of the
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Property Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Preferred Securities Guarantee for the benefit of the holders of the Preferred
Securities. CMS Energy, as the direct or indirect holder of all the Common
Securities, will have the right to appoint, remove or replace any CMS Trustee
and to increase or decrease the number of CMS Trustees; provided, that the
number of CMS Trustees shall be at least three, a majority of which shall be
Administrative Trustees. CMS Energy will pay all fees and expenses related to
CMS Energy Trust and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Trust Act and the Trust Indenture Act.
The trustee in the State of Delaware is The Bank of New York (Delaware),
White Clay Center, Route 273, Newark, Delaware 19711. The principal place of
business of each Trust shall be c/o CMS Energy Corporation, Fairlane Plaza
South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126-2712.
USE OF PROCEEDS
The proceeds received by the Trust from the sale of its Preferred
Securities or the common securities will be invested in the Subordinated
Debentures. As will be more specifically set forth in the applicable Prospectus
Supplement, CMS Energy will use such borrowed amounts and the net proceeds from
the sale of the CMS Energy Common Stock and any Subordinated Debentures offered
hereby for its general corporate purposes, including capital expenditures,
investment in subsidiaries, working capital and repayment of debt.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratios of earnings to fixed charges and the ratios of earnings to fixed
charges and preferred stock dividends for each of the years ended December 31,
1992 through 1996, and for the three months ended March 31, 1997, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994 1993 1992(1)
THREE MONTHS ---- ---- ---- ---- -------
ENDED
MARCH 31, 1997
--------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......... 2.59 2.01 1.94 2.07 1.88 --
Ratio of earnings to fixed charges and
preferred stock dividends................. 2.28 1.79 1.77 1.87 1.81 --
</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's reduction in its investment in The
Oxford Energy Company. The ratio of earnings to fixed charges and the ratio
of earnings to fixed charges and preferred stock dividends would have been
1.33 and 1.29, respectively, excluding these amounts.
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For the purpose of computing such ratios, earnings represent net income
before income taxes, net interest charges and the estimated interest portion of
lease rentals.
DESCRIPTION OF SECURITIES
CAPITAL STOCK
The following summary of certain rights of the holders of CMS Energy
capital stock does not purport to be complete and is qualified in its entirety
by express reference to the Restated Articles of Incorporation of CMS Energy
(the "Articles of Incorporation") and the By-Laws of CMS Energy, copies of which
are filed as exhibits to the Registration Statement of which this Prospectus is
a part, and by express reference to the Registration Statement on Form 8-B/A,
which is incorporated into this Prospectus by reference. See "Incorporation of
Certain Documents by Reference" herein.
The authorized capital stock of CMS Energy consists of 250 million shares
of CMS Energy Common Stock, 60 million shares of Class G Common Stock, no par
value ("Class G Common Stock"), and 10 million shares of CMS Energy Preferred
Stock, $.01 par value ("Preferred Stock"). At June 10, 1997, there were
outstanding 95,502,754 shares of CMS Energy Common Stock and 8,000,435 shares of
Class G Common Stock; no shares of Preferred Stock are issued or outstanding.
The CMS Energy Common Stock and the Class G Common Stock are sometimes together
referred to herein as the "Common Stock."
COMMON STOCK
The Class G Common Stock is intended to reflect the separate performance of
the gas distribution, storage and transportation businesses conducted by
Consumers and Michigan Gas Storage, a subsidiary of Consumers (such businesses,
collectively, have been attributed to the "Consumers Gas Group"). The CMS Energy
Common Stock is intended to reflect the performance of all businesses of CMS
Energy and its subsidiaries, including the businesses of the Consumers Gas
Group, except for the interest in the Consumers Gas Group attributable to the
outstanding shares of Class G Common Stock.
DIVIDEND RIGHTS AND POLICY; RESTRICTIONS ON DIVIDENDS
Dividends on the CMS Energy Common Stock are paid at the discretion of the
Board of Directors based primarily upon the earnings and financial condition of
CMS Energy, including the Consumers Gas Group, except for the interest in the
Consumers Gas Group attributable to the outstanding shares of the Class G Common
Stock, and other factors. Dividends are payable out of the assets of CMS Energy
legally available therefore, including the Available Class G Dividend Amount (as
defined in the Articles of Incorporation).
Dividends on the Class G Common Stock are paid at the discretion of the
Board of Directors based primarily upon the earnings and financial condition of
the Consumers Gas Group, and, to a lesser extent, CMS Energy as a whole.
Dividends are payable out of the lesser of (i) the assets of CMS Energy legally
available therefore and (ii) the Available Class G Dividend Amount. Although the
Available Class G Dividend Amount is intended to reflect the amount available
for dividends to holders of outstanding Class G Common Stock, it is also legally
available for dividends to holders of CMS Energy Common Stock.
CMS Energy, in the sole discretion of its Board of Directors could pay
dividends exclusively to the holders of CMS Energy Common Stock, exclusively to
the holders of Class G Common Stock, or to the holders of both of such classes
in equal or unequal amounts.
CMS Energy is a holding company and its assets consist primarily of
investments in its subsidiaries. As a holding company with no significant
operations of its own, the principal sources of its funds are dependent
primarily upon the earnings of its subsidiaries (in particular, Consumers),
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<PAGE> 74
borrowings and sales of equity. CMS Energy's ability to pay dividends, including
dividends on CMS Energy Common Stock, is dependent primarily upon the earnings
of its subsidiaries and the distribution or other payment of such earnings to
CMS Energy in the form of dividends, loans or advances and repayment of loans
and advances from CMS Energy. The subsidiaries are separate and distinct legal
entities and, accordingly, the ability of CMS Energy to pay dividends on its
capital stock will depend on the earnings, financial requirements, contractual
restrictions of the subsidiaries of CMS Energy, in particular, Consumers, and
other factors.
Dividends on capital stock of CMS Energy are limited by Michigan law to
legally available assets of CMS Energy. Distributions on Common Stock may be
subject to the rights of the holders, if any, of the CMS Energy Preferred Stock.
There are restrictions on CMS Energy's ability to pay dividends contained
in certain revolving credit and term loan agreements, the Indenture dated as of
September 15, 1992, as amended and supplemented, between CMS Energy and NBD
Bank, as Trustee, and the Indenture dated as of January 15, 1994, as amended and
supplemented, between CMS Energy and The Chase Manhattan Bank, as Trustee. A
discussion of specific restrictions on CMS Energy's ability to pay dividends
will be set forth in an accompanying Prospectus Supplement pursuant to which
convertible Subordinated Debentures, convertible Preferred Securities or CMS
Energy Common Stock are offered.
VOTING RIGHTS
The holders of CMS Energy Common Stock vote with the holders of Class G
Common Stock as a single class, except on matters which would be required by law
or the Articles of Incorporation to be voted on by class. Each holder of Common
Stock is entitled to one vote for each share of Common Stock held by such holder
on each matter voted upon by the shareholders. Such right to vote is not
cumulative. A majority of the votes cast by the holders of shares entitled to
vote thereon is sufficient for the adoption of any question presented, except
that certain provisions of the Articles of Incorporation relating to special
shareholder meetings, the removal, indemnification and liability of the Board of
Directors and the requirements for amending these provisions may not be amended,
altered, changed or repealed unless such amendment, alteration, change or repeal
is approved by the affirmative vote of at least 75% of the outstanding shares
entitled to vote thereon.
Under Michigan law, the approval of the holders of a majority of the
outstanding shares of a class of Common Stock, voting as a separate class, would
be necessary for authorizing, effecting or validating the merger or
consolidation of CMS Energy into or with any other corporation if such merger or
consolidation would adversely affect the powers or special rights of such class
of stock, and to authorize any amendment to the Articles of Incorporation that
would increase or decrease the aggregate number of authorized shares of such
class (except pursuant to Section 303 of the Michigan Business Corporation Act)
or alter or change the powers, preferences or special rights of the shares of
such class so as to affect them adversely. The Articles of Incorporation also
provide that unless the vote or consent of a greater number of shares shall then
be required by law, the vote or consent of the holders of a majority of all the
shares of either class of Common Stock then outstanding, voting as a separate
class, will be necessary for authorizing, effecting or validating the merger or
consolidation of CMS Energy into or with any other entity if such merger or
consolidation would adversely affect the powers or special rights of such class
of Common Stock, either directly by amendment to the Articles of Incorporation
or indirectly by requiring the holders of such class to accept or retain, in
such merger or consolidation, anything other than (i) shares of such class or
(ii) shares of the surviving or resulting corporation, having, in either case,
powers and special rights identical to those of such class prior to such merger
or consolidation. The effect of these provisions may be to permit the holders of
a majority of the outstanding shares of either class of Common Stock to block
any such merger or amendment which would adversely affect the powers or special
rights of holders of such class of Common Stock.
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<PAGE> 75
PREEMPTIVE RIGHTS
The Articles of Incorporation provide that holders of Common Stock will
have no preemptive rights to subscribe for or purchase any additional shares of
the capital stock of CMS Energy of any class now or hereafter authorized, or
Preferred Stock, bonds, debentures, or other obligations or rights or options
convertible into or exchangeable for or entitling the holder or owner to
subscribe for or purchase any shares of capital stock, or any rights to exchange
shares issued for shares to be issued.
LIQUIDATION RIGHTS
In the event of the dissolution, liquidation or winding up of CMS Energy,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of CMS Energy and after there shall have been paid
or set apart for the holders of Preferred Stock the full preferential amounts
(including any accumulated and unpaid dividends) to which they are entitled, the
holders of CMS Energy Common Stock and Class G Common Stock shall be entitled to
receive, on a per share basis, the same portion of all of the assets of CMS
Energy remaining for distribution to the holders of Common Stock, regardless of
whether or not any of such assets were attributed to the Consumers Gas Group.
Neither the merger or consolidation of CMS Energy into or with any other
corporation, nor the merger or consolidation of any other corporation into or
with CMS Energy nor any sale, transfer or lease of all or any part of the assets
of CMS Energy, shall be deemed to be a dissolution, liquidation or winding up
for the purposes of this provision.
Because CMS Energy has subsidiaries which have debt obligations and other
liabilities of their own, CMS Energy's rights and the rights of its creditors
and its stockholders to participate in the distribution of assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject to
prior claims of the subsidiary's creditors, except to the extent that CMS Energy
may itself be a creditor with recognized claims against the subsidiary.
SUBDIVISION OR COMBINATION
If CMS Energy subdivides (by stock split, stock dividend or otherwise) or
combines (by reverse stock split or otherwise) the outstanding shares of either
Class G Common Stock or CMS Energy Common Stock, the voting and liquidation
rights of shares of CMS Energy Common Stock relative to Class G Common Stock
will be appropriately adjusted so as to avoid any dilution in aggregate voting
or liquidation rights of either class of Common Stock. For example, in case CMS
Energy were to effect a two-for-one split of Class G Common Stock, the per share
liquidation rights of CMS Energy Common Stock would be multiplied by two in
order to avoid dilution in the aggregate liquidation rights of holders of CMS
Energy Common Stock and each post-split share of Class G Common Stock would have
one-half of a vote.
EXCHANGES
The Articles of Incorporation do not provide for either the mandatory or
optional exchange or redemption of CMS Energy Common Stock but do provide that
Class G Common Stock may be exchanged for CMS Energy Common Stock as described
in the Registration Statement on Form 8-B/A incorporated by reference herein.
CMS Energy cannot predict the impact of the potential for such exchanges on the
market prices of the CMS Energy Common Stock.
CMS Energy may exchange the Class G Common Stock for a proportionate number
of shares of a subsidiary that holds all the assets and liabilities attributed
to the Consumers Gas Group, and no other assets and liabilities. If CMS Energy
transfers all or substantially all of the properties and assets attributed to
the Consumers Gas Group, CMS Energy is required, subject to certain exceptions
and conditions, to exchange each outstanding share of Class G Common Stock for a
number of shares of CMS Energy Common Stock having a Fair Market Value (defined
in the Articles of Incorporation) equal to 110% of the Fair Market Value of one
share of Class G Common Stock.
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CMS Energy may, in the sole discretion of the Board of Directors, at any
time, exchange each outstanding share of Class G Common Stock for a number of
shares of CMS Energy Common Stock having a Fair Market Value equal to 115% of
the Fair Market Value of one share of Class G Common Stock.
CMS Energy cannot predict the impact of the potential for such exchanges on
the market prices of the CMS Energy Common Stock.
TRANSFER AGENT AND REGISTRAR
CMS Energy Common Stock and Class G Common Stock are transferable at
Consumers Energy Company, 212 W. Michigan Avenue, Jackson, MI 49201. CMS Energy
is the registrar and transfer agent for CMS Energy Common Stock and Class G
Common Stock.
DIVIDENDS AND PRICE RANGE OF CMS ENERGY COMMON STOCK
CMS Energy has paid dividends on its outstanding CMS Energy Common Stock
each year since its inception except 1987 and 1988. At June 10, 1997, there were
approximately 89,292 CMS Energy Common Stock shareholders of record. Future
dividends will depend upon CMS Energy's earnings, financial condition and other
factors.
CMS Energy Common Stock began trading on the NYSE on May 27, 1987. The
following table indicates the high and low sales prices of the CMS Energy Common
Stock for the calendar quarters indicated as reported in The Wall Street Journal
under "New York Stock Exchange Composite Transactions," and the quarterly cash
dividends declared per share of CMS Energy Common Stock, for the calendar
quarters indicated.
CMS ENERGY COMMON STOCK
<TABLE>
<CAPTION>
PRICE RANGE
----------------------------------
YEAR DIVIDEND HIGH LOW DIVIDEND
---- -------------------------------------------------------- -------------- --------------- --------
<C> <S> <C> <C> <C> <C> <C>
1992: First Quarter........................................... $22 3/4 $17 7/8 $.12
Second Quarter.......................................... 21 7/8 14 7/8 .12
Third Quarter........................................... 17 1/2 15 1/4 .12
Fourth Quarter.......................................... 18 3/8 16 3/4 .12
1993: First Quarter........................................... 20 7/8 17 7/8 .12
Second Quarter.......................................... 25 1/2 19 1/2 .12
Third Quarter........................................... 27 1/2 24 7/8 .18
Fourth Quarter.......................................... 27 1/8 23 .18
1994: First Quarter........................................... 25 21 1/8 .18
Second Quarter.......................................... 22 7/8 19 5/8 .18
Third Quarter........................................... 23 3/8 20 5/8 .21
Fourth Quarter.......................................... 23 1/4 20 7/8 .21
1995: First Quarter........................................... 24 3/4 22 5/8 .21
Second Quarter.......................................... 25 3/8 22 1/2 .21
Third Quarter........................................... 26 3/8 23 3/8 .24
Fourth Quarter.......................................... 30 26 .24
1996: First Quarter........................................... 31 7/8 27 13/16 .24
Second Quarter.......................................... 31 1/4 28 .24
Third Quarter........................................... 31 5/8 29 .27
Fourth Quarter.......................................... 33 3/4 30 1/8 .27
1997: First Quarter........................................... 34 1/2 31 1/2 .27
Second Quarter (through June 10, 1997).................. 34 1/4 31 1/8 .27
</TABLE>
On May 27, 1997, the CMS Energy Board of Directors approved an increase in
the dividend to an annualized rate of $1.20 per share ($.30 per quarter). The
increase will be effective with the next scheduled quarterly dividend payment in
August 1997. The last reported sale prices of the CMS Energy Common Stock on
June 11, 1997 on the NYSE was $33.75.
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PREFERRED STOCK
The authorized Preferred Stock may be issued without the approval of the
holders of Common Stock in one or more series, from time to time, with each such
series to have such designation, powers, preferences and relative,
participating, optional or other special rights, voting rights, if any, and
qualifications, limitations or restrictions thereof, as shall be stated in a
resolution providing for the issue of any such series adopted by CMS Energy's
Board of Directors. The Articles of Incorporation provide that holders of
Preferred Stock will not have any preemptive rights to subscribe for or purchase
any additional shares of the capital stock of CMS Energy of any class now or
hereafter authorized, or any Preferred Stock, bonds, debentures or other
obligations or rights or options convertible into or exchangeable for or
entitling the holder or owner to subscribe for or purchase any shares of capital
stock. The future issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of CMS Energy.
PRIMARY SOURCE OF FUNDS OF CMS ENERGY; RESTRICTIONS ON SOURCES OF DIVIDENDS
The ability of CMS Energy to pay (i) dividends on its capital stock and
(ii) its indebtedness, including the Subordinated Debentures, depends and will
depend substantially upon timely receipt of sufficient dividends or other
distributions from its subsidiaries, in particular Consumers. Consumers' ability
to pay dividends on its common stock depends upon its revenues, earnings and
other factors. Consumers' revenues and earnings will depend substantially upon
rates authorized by the MPSC.
Consumers' ability to pay dividends is restricted by its First Mortgage
Bond Indenture (the "Mortgage Indenture") and its Articles of Incorporation
("Articles"). The Mortgage Indenture provides that Consumers can only pay
dividends on its common stock out of retained earnings accumulated subsequent to
September 30, 1945, provided that upon such payment, there shall remain of such
retained earnings an amount equivalent to any deficiency in maintenance and
replacement expenditures as compared with maintenance and replacement
requirements since December 31, 1945. Because of restrictions in its Articles
and Mortgage Indenture, Consumers was prohibited from paying dividends on its
common stock from June 1991 to December 31, 1992. However, as of December 31,
1992, Consumers effected a quasi-reorganization in which Consumers' accumulated
deficit of $574 million was eliminated against other paid-in capital. With the
accumulated deficit eliminated, Consumers satisfied the requirements under its
Mortgage Indenture and resumed paying dividends on its common stock in May 1993.
Consumers' Articles also provide two restrictions on its payment of
dividends on its common stock. First, prior to the payment of any common stock
dividend, Consumers must reserve retained earnings after giving effect to such
dividend payment of at least (i) $7.50 per share on all then outstanding shares
of its preferred stock, (ii) in respect to its Class A Preferred Stock, 7.5% of
the aggregate amount established by its Board of Directors to be payable on the
shares of each series thereof in the event of involuntary liquidation of
Consumers, and (iii) $7.50 per share on all then outstanding shares of all other
stock over which its preferred stock and Class A Preferred Stock do not have
preference as to the payment of dividends and as to assets. Second, dividend
payments during the 12 month period ending with the month the proposed payment
is to be paid are limited to: (i) 50% of net income available for the payment of
dividends during the base period (hereinafter defined) if the ratio of common
stock and surplus to total capitalization and surplus for 12 consecutive
calendar months within the 14 calendar months immediately preceding the proposed
dividend payment (the "base period"), adjusted to reflect the proposed dividend,
is less than 20%; and (ii) 75% of net income available for the payment of
dividends during the base period if the ratio of common stock and surplus to
total capitalization and surplus for the base period, adjusted to reflect the
proposed dividend, is at least 20% but less than 25%.
Consumers' Articles also prohibit the payment of cash dividends on its
common stock if Consumers is in arrears on preferred stock dividend payments.
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<PAGE> 78
In addition, Michigan law prohibits payment of a dividend if, after giving
it effect, Consumers would not be able to pay its debts as they become due in
the usual course of business, or its total assets would be less than the sum of
its total liabilities plus, unless the articles permit otherwise, the amount
that would be needed, if Consumers were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. Consumers' net assets available for payment of dividends under the
Michigan Business Corporation Act at March 31, 1997 were $1,748 million.
Currently, it is Consumers' policy to pay annual dividends equal to 80% of its
annual consolidated net income. Under the most restrictive of these conditions,
and Consumers current dividend policy, at March 31, 1997, $70 million of
Consumers' retained earnings were available to pay cash dividends on its common
stock. Consumers' Board of Directors reserves the right to change this policy at
any time.
In 1996, Consumers paid $200 million in common stock dividends to CMS
Energy. Consumers also paid dividends on its common stock of $70 million on May
22, 1997.
SUBORDINATED DEBENTURES
The Subordinated Debentures will be issued under an Indenture (the
"Subordinated Debt Indenture), between CMS Energy and The Bank of New York as
Trustee (the "Subordinated Debt Trustee"). The descriptions of the provisions of
the Subordinated Debentures and the Subordinated Debt Indenture contained herein
are brief summaries of such provisions and do not purport to be complete. The
form of the Subordinated Debt Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and reference is made
thereto for the respective definitive provisions of such Indenture. The
descriptions herein are qualified in their entirety by such reference. Certain
capitalized terms used herein shall have the meanings respectively set forth in
the Indenture. Section references below are references to sections of the
Subordinated Debt Indenture.
GENERAL
CMS Energy will offer under this Prospectus unsecured Subordinated
Debentures. The Subordinated Debt Indenture does not limit the aggregate
principal amount of Subordinated Debentures which may be issued thereunder.
Subordinated Debentures may be issued under the Subordinated Debt Indenture from
time to time in one or more series. The Subordinated Debentures shall mature on
a date not less than nine months nor more than 40 years after the date of
issuance. (Section 2.3) Capitalized terms used in this section "Subordinated
Debentures" and not otherwise specifically defined in this Prospectus shall have
the meanings respectively set forth in the Subordinated Debt Indenture. The
terms of any Subordinated Debentures may or may not restrict the issuance by CMS
Energy or its subsidiaries of additional indebtedness which is secured,
unsecured, senior, pari passu or subordinated to such Subordinated Debentures.
CMS Energy is a holding company and its assets consist primarily of
investments in its subsidiaries. The Subordinated Debentures will be obligations
exclusively of CMS Energy. CMS Energy's ability to service its indebtedness,
including the Subordinated Debentures, is dependent primarily upon the earnings
of its subsidiaries and the distribution or other payment of such earnings to
CMS Energy in the form of dividends, loans or advances, and repayment of loans
and advances from CMS Energy. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts due
pursuant to the Subordinated Debentures or to make any funds available therefor,
whether by dividends, loans or other payments.
A substantial portion of the consolidated liabilities of CMS Energy have
been incurred by its subsidiaries. Therefore, CMS Energy's rights and the rights
of its creditors, including holders of Subordinated Debentures, 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 CMS Energy may itself be a
creditor with recognized claims against the subsidiary (in which case the claims
of CMS Energy would still be
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<PAGE> 79
subject to the prior claims of any secured creditor of such subsidiary and of
any holder of indebtedness of such subsidiary that is senior to that held by CMS
Energy). As of May 31, 1997, CMS Energy's subsidiaries had total indebtedness
for borrowed money (including capital lease obligations and excluding
intercompany indebtedness) of approximately $2,616 million.
The applicable Prospectus Supplement will set forth the following terms
relating to the Subordinated Debentures: (1) the specific designation of the
Subordinated Debentures; (2) any limit on the aggregate principal amount of the
Subordinated Debentures; (3) the date or dates, if any (and whether fixed or
extendible), on which the Subordinated Debentures will mature; (4) the rate or
rates per annum (which may be fixed or variable) at which the Subordinated
Debentures will bear interest, if any, the date or dates on which any such
interest will be payable and the regular record dates for any interest payable
on the Subordinated Debentures; (5) the place or places where the principal of
and any interest on the Subordinated Debentures shall be payable and where such
Subordinated Debentures may be surrendered for registration of transfer or
exchange; (6) any provisions relating to the issuance of the Subordinated
Debentures at an original issue discount; (7) the option, if any, of CMS Energy
to redeem the Subordinated Debentures and the periods within which or the dates
on which, the prices at which and the terms and conditions upon which, such
Subordinated Debentures may be redeemed, in whole or in part, upon the exercise
of such option; (8) the obligation, if any, of CMS Energy to redeem such
Subordinated Debentures pursuant to any sinking fund or other mandatory
redemption provisions or at the option of the holder and the periods within
which or the dates on which, the prices at which and the terms and conditions
upon which such Subordinated Debentures will be redeemed, in whole or in part,
pursuant to such obligation; (9) the obligation, if any, of CMS Energy to permit
the conversion of the Subordinated Debentures into CMS Energy Common Stock, and
the terms and conditions upon which such conversion shall be effected; (10) the
denominations in which such Subordinated Debentures will be issued and whether
the Subordinated Debentures will be issuable in registered form or bearer form
or both, and, if issuable in bearer form, the restrictions as to the offer, sale
and delivery of the Subordinated Debentures in bearer form and as to exchanges
between registered and bearer form; (11) whether the Subordinated Debentures
will be issuable in the form of one or more temporary or permanent global
securities and, if so, the identity of the depository for such global
securities; (12) whether and under what circumstances CMS Energy will pay
additional amounts with respect to the Subordinated Debentures to a non-United
States Person (as defined in such Prospectus Supplement) on account of any tax,
assessment or governmental charge withheld or deducted and, if so, whether CMS
Energy will have the option to redeem such Subordinated Debentures rather than
pay such additional amounts; and (13) any other terms of the Subordinated
Debentures not inconsistent with the Subordinated Debt Indenture, including
covenants and events of default relating solely to the Subordinated Debentures.
Subordinated Debentures may be issued at a substantial discount from the stated
principal amount thereof ("Original Issue Discount Securities"). United States
federal income tax consequences and other special considerations applicable
thereto or to other Subordinated Debentures offered and sold at par which are
treated as having been issued at a discount for United States federal income tax
purposes will be described in the Prospectus Supplement relating thereto.
CONCERNING THE TRUSTEE
The Bank of New York, the Trustee under the Subordinated Debt Indenture, is
one of a number of banks with which CMS Energy and its subsidiaries maintain
ordinary banking relationships, including credit facilities.
EXCHANGE AND TRANSFER
Subordinated Debentures may be presented for exchange and registered
Subordinated Debentures may be presented for registration of transfer at the
offices and subject to the restrictions set forth therein and in the applicable
Prospectus Supplement without service charge, but upon
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payment of any taxes or other governmental charges due in connection therewith,
subject to any applicable limitations contained in the Subordinated Debt
Indenture. Subordinated Debentures in bearer form and the coupons appertaining
thereto, if any, will be transferable by delivery. (Section 2.8)
PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the principal of and the premium and interest, if any, on all Subordinated
Debentures in registered form will be made at the office or agency of the
Subordinated Debt Trustee in the City of New York, except that, at the option of
CMS Energy, payment of any interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Security Register. (Sections 3.1 and
3.2) Unless otherwise indicated in the applicable Prospectus Supplement, payment
of any interest due on Subordinated Debentures in registered form will be made
to the Persons in whose name such Subordinated Debentures are registered at the
close of business on the Record Date for such interest payments. (Section
2.3(f))
EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the
Subordinated Debentures of any series will constitute an "Event of Default" with
respect to the Subordinated Debentures of such series: (a) default for 30 days
in the payment of any interest on any of the Subordinated Debentures of such
series (whether or not payment is prohibited by the subordination provisions of
the Subordinated Debt Indenture); provided, however, that if CMS Energy is
permitted by the terms of the Subordinated Debentures of the applicable series
to defer the payment in question, the date on which such payment is due and
payable shall be the date on which CMS Energy is required to make payment
following such deferral, if such deferral has been elected pursuant to the terms
of the Subordinated Debentures; (b) default in the payment when due of any of
the principal of or the premium, if any, on any of the Subordinated Debentures
of such series, whether at maturity, upon redemption, acceleration or otherwise
(whether or not payment is prohibited by the subordination provisions of the
Subordinated Debt Indenture); provided, however, that if CMS Energy is permitted
by the terms of the Subordinated Debentures of the applicable series to defer
the payment in question, the date on which such payment is due and payable shall
be the date on which CMS Energy is required to make payment following such
deferral, if such deferral has been elected pursuant to the terms of the
Subordinated Debentures; (c) failure by CMS Energy to deliver shares of CMS
Energy Common Stock upon an appropriate election by holders of the Subordinated
Debentures to convert such Subordinated Debentures; (d) default in the deposit
or payment of any sinking fund or analogous payment in respect of any
Subordinated Debentures of such series (whether or not payment is prohibited by
the subordination provisions of the Subordinated Debt Indenture); (e) default
for 60 days by CMS Energy in the observance or performance of any other covenant
or agreement contained in the Subordinated Debt Indenture relating to the
Subordinated Debentures of such series after written notice thereof as provided
in the Subordinated Debt Indenture; (f) certain events of bankruptcy, insolvency
or reorganization relating to CMS Energy; (g) entry of final judgments against
CMS Energy or Consumers aggregating in excess of $25,000,000 which remain
undischarged or unbonded for 60 days; (h) a default resulting in the
acceleration of indebtedness of CMS Energy 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 Subordinated Debt Indenture; or (i)
the voluntary or involuntary dissolution, winding-up or termination of a Trust,
except in connection with the distribution of Subordinated Debentures to the
holders of Preferred Securities in liquidation of such Trust, the redemption of
all outstanding Trust Securities of the Trust and certain mergers,
consolidations or amalgamations permitted by the Trust Agreement of such Trust.
Additional Events of Default may be prescribed for the benefit of the
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Holders of a particular series of Subordinated Debentures and will be described
in the Prospectus Supplement relating to such Subordinated Debentures. (Section
5.1)
If an Event of Default on any series of Subordinated Debentures shall have
occurred and be continuing, either the Subordinated Debt Trustee or the Holders
of not less than 25% in aggregate principal amount of the Subordinated
Debentures of such series then Outstanding may declare the principal of all
Subordinated Debentures of such series and the interest, if any, accrued thereon
to be due and payable immediately and, should the Subordinated Debenture Trustee
or the holders of the Subordinated Debentures fail to make such declaration, the
holders of at least 25% in aggregate liquidation amount of the Preferred
Securities then outstanding shall have such right. (Section 5.1)
Upon certain conditions, any such declarations may be rescinded and
annulled if all Events of Default, other than the nonpayment of accelerated
principal, with respect to the Subordinated Debentures of all such affected
series then Outstanding shall have been cured or waived as provided in the
Subordinated Debt Indenture by the Holders of a majority in aggregate principal
amount of the Subordinated Debentures of the affected series then Outstanding
and, should the holders of the Subordinated Debentures fail to waive such
defaults, the holders of a majority in aggregate liquidation amount of the
Preferred Securities shall have such right. (Section 5.1)
Reference is made to the Prospectus Supplement relating to any series of
Original Issue Discount Securities for the particular provisions relating to the
acceleration of a portion of the principal amount thereof upon the occurrence
and continuance of an Event of Default with respect thereto.
The Subordinated Debt Indenture provides that the Subordinated Debt Trustee
will be under no obligation to exercise any of its rights or powers under the
Subordinated Debt Indenture at the request, order or direction of the Holders of
the Subordinated Debentures, unless such Holders shall have offered to the
Subordinated Debt Trustee reasonable indemnity. (Sections 6.1 and 6.2(d))
Subject to such provisions for indemnity and certain other limitations contained
in the Subordinated Debt Indenture, the Holders of a majority in aggregate
principal amount of the Subordinated Debentures 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
Subordinated Debt Trustee, or exercising any trust or power conferred on the
Subordinated Debt Trustee, with respect to the Subordinated Debentures of such
affected series. (Sections 5.9 and 6.2)
The Subordinated Debt Indenture provides that no Holder of Subordinated
Debentures may institute any action against CMS Energy under the Subordinated
Debt Indenture (except actions for payment of overdue principal, premium or
interest) unless such Holder previously shall have given to the Subordinated
Debt Trustee written notice of default and continuance thereof and unless the
Holders of not less than 25% in aggregate principal amount of the Subordinated
Debentures of the affected series then Outstanding (voting as one class) shall
have requested the Subordinated Debt Trustee to institute such action and shall
have offered the Subordinated Debt Trustee reasonable indemnity, the
Subordinated Debt Trustee shall not have instituted such action within 60 days
of such request and the Subordinated Debt Trustee shall not have received
direction inconsistent with such request by the Holders of a majority in
aggregate principal amount of the Subordinated Debentures of the affected series
then Outstanding (voting as one class). (Sections 5.6, 5.7 and 5.9)
The Subordinated Debt Indenture requires CMS Energy to furnish to the
Subordinated Debt Trustee annually a statement as to CMS Energy's compliance
with all conditions and covenants under the Subordinated Debt Indenture.
(Section 4.3(d)) The Subordinated Debt Indenture provides that the Subordinated
Debt Trustee may withhold notice to the Holders of the Subordinated Debentures
of any series of any default affecting such series (except defaults as to
payment of principal, premium or interest on the Subordinated Debentures of such
series) if it considers such
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withholding to be in the interests of the Holders of the Subordinated Debentures
of such series. (Section 5.11)
SUBORDINATION
The Subordinated Debt Indenture provides (and each Holder of Subordinated
Debentures by acceptance thereof agrees) that the Subordinated Debentures will
be subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined herein) of CMS Energy. (Section 12.1) No payment on
account of principal of, premium, if any, or interest on the Subordinated
Debentures and no acquisition of, or payment on account of any sinking fund for,
the Subordinated Debentures may be made unless full payment of amounts then due
for principal, premium, if any, and interest then due on all Senior Indebtedness
by reason of the maturity thereof (by lapse of time, acceleration or otherwise)
has been made or duly provided for in cash or in a manner satisfactory to the
Holders of such Senior Indebtedness. In addition, the Subordinated Debt
Indenture provides that upon the happening and during the continuation of any
default in payment of the principal of, premium, if any, or interest on any
Senior Indebtedness when the same becomes due and payable or in the event any
judicial proceeding shall be pending with respect to any such default, then,
unless and until such default shall have been cured or waived or shall have
ceased to exist, no payment shall be made by CMS Energy with respect to the
principal of, premium, if any, or interest on Subordinated Debentures or to
acquire any Subordinated Debentures or on account of any sinking fund provisions
applicable to Subordinated Debentures. CMS Energy shall give prompt written
notice to the Subordinated Debt Trustee of any default in payment of principal
of or interest on any Senior Indebtedness. (Section 12.2) The Subordinated Debt
Indenture provisions described in this paragraph, however, do not prevent CMS
Energy from making sinking fund payments in Subordinated Debentures acquired
prior to the maturity of Senior Indebtedness or, in the case of default, prior
to such default and notice thereof. Upon any distribution of its assets in
connection with any dissolution, winding up, liquidation or reorganization of
CMS Energy, whether voluntary or involuntary, in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise: (i) all Senior Indebtedness must be paid in full before the Holders
of the Subordinated Debentures are entitled to any payments whatsoever; and (ii)
any payment or distribution of CMS Energy's assets of any kind or character,
whether in cash, securities or other property, which would otherwise (but for
the subordination provisions) be payable or deliverable in respect of the
Subordinated Debentures shall be paid or delivered directly to the Holders of
such Senior Indebtedness (or their representative or trustee) in accordance with
the priorities then existing among such Holders until all Senior Indebtedness
shall have been paid in full before any payment or distribution is made to the
Holders of Subordinated Debentures. (Section 12.3) In the event that
notwithstanding such subordination provisions, any payment or distribution of
assets of any kind or character is made on the Subordinated Debentures before
all Senior Indebtedness is paid in full, the Subordinated Debt Trustee or the
Holders of Subordinated Debentures receiving such payment will be required to
pay over such payment or distribution to the Holders of such Senior
Indebtedness. (Sections 12.2 and 12.3) Subject to the payment in full of all
Senior Indebtedness, the rights of the Holders of the Subordinated Debentures
will be subrogated to the rights of the Holders of Senior Indebtedness to
receive payments or distributions applicable to Senior Indebtedness until all
amounts owing on the Subordinated Debentures are paid in full. As a result of
the subordination provisions, in the event of CMS Energy's insolvency, Holders
of the Subordinated Debentures may recover ratably less than senior creditors of
CMS Energy.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including interest accruing on or after the filing of any petition in
bankruptcy relating to CMS Energy whether or not such claim for post-petition
interest is allowed in such proceeding) on the following, whether outstanding on
the date of execution of the Subordinated Debt Indenture or thereafter incurred,
created or assumed: (i) indebtedness of CMS Energy for money borrowed by CMS
Energy (including purchase money obligations, except indebtedness to trade
creditors or assumed by CMS Energy in the ordinary course of business in
connection with the obtaining of goods, materials or
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services) or evidenced by debentures (other than the Subordinated Debentures),
notes, bankers' acceptances or other corporate Subordinated Debentures or
similar instruments issued by CMS Energy; (ii) all capital lease obligations of
CMS Energy; (iii) obligations with respect to letters of credit; (iv) all
indebtedness of others of the type referred to in the preceding clauses (i) and
(iii) assumed by or guaranteed in any manner by CMS Energy or in effect
guaranteed by CMS Energy; or (v) renewals, extensions or refundings of any of
the indebtedness referred to in the preceding clauses (i), (ii), (iii) and (iv)
unless, in the case of any particular indebtedness, renewal, extension or
refunding, under the express provisions of the instrument creating or evidencing
the same or the assumption or guarantee of the same, or pursuant to which the
same is outstanding, such indebtedness or such renewal, extension or refunding
thereof is not superior in right of payment to the Subordinated Debentures.
(Section 12.1)
The Subordinated Debt Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued. As of May 31, 1997, Senior Indebtedness
of CMS Energy aggregated approximately $1,612 million.
CERTAIN COVENANTS
If Subordinated Debentures are issued to a Trust or a trustee of such Trust
in connection with the issuance of Preferred Securities by such Trust, CMS
Energy will covenant that it will not, and it will not cause any of its
subsidiaries to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
CMS Energy's capital stock or (ii) make any payment of principal, interest or
premium, if any, on or repay or repurchase or redeem any debt securities
(including guarantees of indebtedness for money borrowed) of CMS Energy that
rank pari passu with or junior to the Subordinated Debentures (other than (a)
any dividend, redemption, liquidation, interest, principal or guarantee payment
by CMS Energy where the payment is made by way of securities (including capital
stock) that rank pari passu with or junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being made,
(b) payments under the Preferred Securities Guarantee, (c) purchases of CMS
Energy Common Stock related to the issuance of CMS Energy Common Stock under any
of CMS Energy's benefit plans for its directors, officers or employees, (d) as a
result of a reclassification of CMS Energy's capital stock or the exchange or
conversion of one series or class of CMS Energy's capital stock for another
series or class of CMS Energy's capital stock and (e) the purchase of fractional
interests in shares of CMS Energy's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged) if at such time (i) there shall have occurred any event of which CMS
Energy has actual knowledge that (a) with the giving of notice or the lapse of
time, or both, would constitute an Event of Default and (b) in respect of which
CMS Energy shall not have taken reasonable steps to cure, (ii) CMS Energy shall
be in default with respect to its payment of any obligations under the Preferred
Securities Guarantee or (iii) CMS Energy shall have given notice of its
selection of an Extension Period as provided in the Subordinated Debt Indenture
with respect to the Subordinated Debentures and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be continuing.
CMS Energy will also covenant (i) for so long as Preferred Securities are
outstanding, not to convert the Subordinated Debentures except pursuant to a
notice of conversion delivered to the Conversion Agent by a holder of Preferred
Securities, (ii) to maintain directly or indirectly 100% ownership of the Common
Securities, provided that certain successor which are permitted pursuant to the
Subordinated Debt Indenture may succeed to CMS Energy's ownership of the Common
Securities, (iii) not to voluntarily terminate, wind-up or liquidate such Trust,
except (a) in connection with a distribution of the Subordinated Debentures to
the holders of the Preferred Securities in liquidation of such Trust or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the Trust Agreement, (iv) to maintain the reservation for issuance of the number
of shares of CMS Energy Common Stock that would be required from time to time
upon the conversion of all the Subordinated Debentures then outstanding, (v) to
use its reasonable efforts, consistent with the terms and provisions of the
Trust Agreement, to cause such
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Trust to remain classified as a grantor trust and into as an association taxable
as a corporation for United States federal income tax purposes and (vi) to
deliver shares of CMS Energy Common Stock upon an election by the holders of the
Preferred Securities to convert such Preferred Securities into CMS Energy Common
Stock. (Section 3.5).
As part of the Preferred Securities Guarantee, CMS Energy will agree that
it will honor all obligations described therein relating to the conversion or
exchange of the Preferred Securities into or for CMS Energy Common Stock or
Subordinated Debentures.
CONSOLIDATION, MERGER OR SALE OF ASSETS
The Subordinated Debt Indenture provides that CMS Energy 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 CMS Energy under the Subordinated Debentures and the
Subordinated Debt Indenture and is organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia.
(Section 9.1).
CONVERSION RIGHTS
If the Prospectus Supplement provides, the Holders of Subordinated
Debentures may convert the Subordinated Debentures into CMS Energy Common Stock,
as defined herein (see "Description of Securities -- Common Stock"), at the
option of the Holders at the principal amount thereof, or of such portion
thereof, at any time during the period specified in the Prospectus Supplement,
at the conversion price or conversion rate specified in the Prospectus
Supplement; except that, with respect to any Subordinated Debentures (or portion
thereof) called for redemption, such conversion right shall terminate at the
close of business on the fifteenth day prior to the date fixed for redemption of
such Subordinated Debentures, unless CMS Energy shall default in payment of the
amount due upon redemption thereof (Section 13.2).
The conversion privilege and conversion price or conversion rate will be
adjusted in certain events, including if CMS Energy (i) pays a dividend or makes
a distribution in shares of CMS Energy Common Stock; (ii) subdivides its
outstanding shares of CMS Energy Common Stock into a greater number of shares;
(iii) combines its outstanding shares of CMS Energy Common Stock into a smaller
number of shares; (iv) pays a dividend or makes a distribution on its CMS Energy
Common Stock other than in shares of its CMS Energy Common Stock; (v) issues by
reclassification of its shares of CMS Energy Common Stock any shares of its
capital stock; (vi) issues any rights or warrants to all holders of shares of
its CMS Energy Common Stock entitling them (for a period expiring within 45
days, or such other period as may be specified in the Prospectus Supplement) to
purchase shares of CMS Energy Common Stock (or Convertible Securities) at a
price per share less than the Average Market Price per share for such CMS Energy
Common Stock; and (vii) distributes to all holders of shares of its CMS Energy
Common Stock any assets or Subordinated Debentures or any rights or warrants to
purchase securities, provided that no adjustment shall be made under (vi) or
(vii) above if the adjusted conversion price would be higher than, or the
adjusted conversion rate would be less than, the conversion price or conversion
rate, as the case may be, in effect prior to such adjustment (Sections 13.7,
13.8 and 13.9). CMS Energy may reduce the conversion price or increase the
conversion rate, temporarily or otherwise, by any amount but in no event shall
such adjusted conversion price or conversion rate result in shares of CMS Energy
Common Stock being issuable upon conversion of the Subordinated Debentures if
converted at the time of such adjustment at an effective conversion price per
share less than the par value of the CMS Energy Common Stock at the time such
adjustment is made. (Section 13.10) No adjustments in the conversion price or
conversion rate need be made unless the adjustment would require an increase or
decrease of at least one percent (1%) in the initial conversion price or
conversion rate. Any adjustment which is not made shall be carried forward and
taken into account in any subsequent adjustment (Section 13.13). The foregoing
conversion provisions may be modified to the extent set forth in the Prospectus
Supplement.
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MODIFICATION OF THE SUBORDINATED DEBT INDENTURE
The Subordinated Debt Indenture permits CMS Energy and the Subordinated
Debt Trustee to enter into supplemental indentures thereto without the consent
of the Holders of the Subordinated Debentures to: (a) secure the Subordinated
Debentures of one or more series, (b) evidence the assumption by a successor
corporation of the obligations of CMS Energy under the Subordinated Debt
Indenture and the Subordinated Debentures then Outstanding, (c) add covenants
for the protection of the Holders of the Subordinated Debentures, (d) cure any
ambiguity or correct any defect or inconsistency in the Subordinated Debt
Indenture or to make such other provisions as CMS Energy deems necessary or
desirable with respect to matters or questions arising under the Subordinated
Debt Indenture, provided that no such action adversely affects the interests of
any Holders of Subordinated Debentures, (e) establish the form and terms of any
series of securities under the Subordinated Debt Indenture and (f) evidence the
acceptance of appointment by a successor Subordinated Debt Trustee. (Section
8.1)
The Subordinated Debt Indenture also permits CMS Energy and the
Subordinated Debt Trustee, with the consent of the Holders of not less than a
majority in aggregate principal amount of the Subordinated Debentures 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 Subordinated Debt Indenture or modify in
any manner the rights of the Holders of the Subordinated Debentures of each such
affected series; provided, however, that CMS Energy and the Subordinated Debt
Trustee may not, without the consent of the Holder of each of the Subordinated
Debentures then outstanding and affected thereby, enter into a supplemental
indenture to: (a) change the time of payment of the principal (or any
installment of principal) of any of the Subordinated Debentures, or reduce the
principal amount thereof, or reduce the rate or change the time of payment of
interest thereon (other than any permitted deferrals of the payments of
interest), or reduce the amount payable on any Original Issue Discount
Securities upon acceleration or provable in bankruptcy, or impair the right to
institute suit for the enforcement of any payment on any of the Subordinated
Debentures when due, or materially adversely affects the subordination
provisions of the Subordinated Debt Indenture; or (b) reduce the percentage in
principal amount of the Subordinated Debentures of the affected series, the
consent of whose Holders is required for any such modification or for any waiver
provided for in the Subordinated Debt Indenture, provided that, so long as any
of the Preferred Securities remain outstanding, no such modification may be made
that adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Subordinated Debt Indenture may occur, and no
waiver of any Event of Default or compliance with any covenant under the
Subordinated Debt Indenture may be effective, without the prior consent of the
holders of at least a majority in aggregate liquidation amount of the Preferred
Securities then outstanding unless and until the principal of the Subordinated
Debentures and all accrued and unpaid interest thereon has been paid in full.
(Section 8.2)
Prior to the acceleration of the maturity of any Subordinated Debentures,
the Holders of a majority in aggregate principal amount of the Subordinated
Debentures of all series at the time Outstanding with respect to which a default
or an Event of Default shall have occurred and be continuing (voting as one
class) may on behalf of the Holders of all such affected Subordinated Debentures
waive any past default or Event of Default and its consequences, except a
default or an Event of Default in respect of a covenant or provision of the
Subordinated Debt Indenture or of any Subordinated Debentures which cannot be
modified or amended without the consent of the Holder of each of the
Subordinated Debentures affected. (Section 5.10)
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The Subordinated Debt Indenture provides that, at the option of CMS Energy:
(a) CMS Energy will be discharged from any and all obligations in respect of the
Subordinated Debentures of a particular series then Outstanding (except for
certain obligations to register the transfer of or exchange the Subordinated
Debentures of such series, to replace stolen, lost or mutilated
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Subordinated Debentures of such series, to maintain paying agencies and to
maintain the trust described below), or (b) CMS Energy need not comply with
certain restrictive covenants of the Subordinated Debt Indenture (including
those described under "Consolidation, Merger or Sale of Assets") if CMS Energy
irrevocably deposits in trust with the Subordinated Debt 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 the interest thereon in
accordance with their terms, will provide money in an amount sufficient to pay
all the principal of and premium, if any, and interest on the Subordinated
Debentures of such series on the stated maturity of such Subordinated Debentures
(which may include one or more redemption dates designated by CMS Energy) in
accordance with the terms thereof. To exercise such option, CMS Energy is
required, among other things, to deliver to the Subordinated Debt Trustee an
opinion of independent counsel to the effect that the exercise of such option
would not cause the Holders of the Subordinated Debentures of such series to
recognize income, gain or loss for United States Federal income tax purposes as
a result of such defeasance, and such Holders 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 Subordinated Debt
Indenture there has been a change in the applicable Federal income tax law.
(Section 10.1)
In the event CMS Energy exercises its option to effect a covenant
defeasance with respect to the Subordinated Debentures of any series as
described in the preceding paragraph and the Subordinated Debentures of such
series 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 Subordinated Debt Trustee would be insufficient to pay amounts
due on the Subordinated Debentures of such series at the time of the
acceleration resulting from such Event of Default, CMS Energy would remain
liable for such amounts.
CMS Energy may also obtain a discharge of the Subordinated Debt Indenture
with respect to all Subordinated Debentures then Outstanding (except for certain
obligations to register the transfer of or exchange such Subordinated Debentures
to replace stolen, lost or mutilated Subordinated Debentures, to maintain paying
agencies and to maintain the trust described below) by irrevocably depositing in
trust with the Subordinated Debt 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 the interest thereon in accordance with their terms, will
provide money in an amount sufficient to pay all the principal of and premium,
if any and interest on the Subordinated Debentures on the stated maturities
thereof (including one or more redemption dates), provided that such
Subordinated Debentures are by their terms due and payable, or are to be called
for redemption, within one year. (Section 10.1)
For United States Federal income tax purposes any deposit contemplated in
the preceding paragraph would be treated as an exchange of the Subordinated
Debentures outstanding for other property. Accordingly, holders of Subordinated
Debentures outstanding may be required to recognize a gain or loss for United
States Federal income tax purposes upon such exchange. In addition, such Holders
thereafter may be required to recognize income from such property which could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors as to
the specific consequences to them of such deposit.
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PREFERRED SECURITIES
GENERAL
Each CMS Energy Trust may issue, from time to time, Preferred Securities
having terms described in the Prospectus Supplement relating thereto. The Trust
Agreement of each Trust will authorize the establishment of no more than one
series of Preferred Securities, having such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such rights or restrictions as shall be set forth
therein or otherwise established by the Trust Trustees pursuant thereto.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities for specific terms, including (i) the distinctive designation and the
number of Preferred Securities to be offered which will represent undivided
beneficial interests in the assets of the Trust; (ii) the annual distribution
rate and the dates or date upon which such distributions will be paid, provided,
however distributions on the Preferred Securities will be paid quarterly in
arrears to holders of Preferred Securities as of a record date on which the
Preferred Securities are outstanding; (iii) whether holders' can convert the
Preferred Securities into shares of CMS Energy Common Stock; (iv) whether
distributions on Preferred Securities would be deferred during any deferral of
interest payments on the Subordinated Debentures, provided, however that no such
deferral, including extensions, if any, may exceed 20 consecutive quarters nor
extend beyond the stated maturity date of the Subordinated Debentures, and at
the end of any such deferrals, CMS Energy shall make all interest payments then
accrued or deferred and unpaid (including any compounded interest); (v) the
amount of any liquidation preference; (vi) the obligation, if any, of the Trust
to redeem Preferred Securities through the exercise of CMS Energy of an option
on the corresponding Subordinated Debenture and the price or prices at which,
the period or periods within which and the terms and conditions upon which
Preferred Securities shall be purchased or redeemed, in whole or in part,
pursuant to such obligation; (vii) the period or periods within which and the
terms and conditions, if any, including the price or prices or the rate or rates
of conversion or exchange and the terms and conditions of any adjustments
thereof, upon which the Preferred Securities shall be convertible or
exchangeable at the option of the holder of the Preferred Securities or other
property or cash; (viii) the voting rights, if any, of the Preferred Securities
in addition to those required by law and in the Trust Agreement, or set forth
under the Guarantees (as defined below); (ix) the additional payments, if any,
which the Trust will pay as a distribution as necessary so that the net amounts
reserved by the Trust and distributable to the holders of the Preferred
Securities, after all taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) have been paid will not be less
than the amount that would have been reserved and distributed by the Trust, and
the amount the holders of the Preferred Securities would have reserved, had no
such taxes, duties, assessments or governmental charges been imposed; (x) the
terms and conditions, if any, upon which the Subordinated Debentures may be
distributed to holders of Preferred Securities; and (xi) any other relative
rights, powers, preferences, privileges, limitations or restrictions of the
Preferred Securities not inconsistent with the Trust Agreement or applicable
law. All Preferred Securities offered hereby will be irrevocably guaranteed by
CMS Energy, on a subordinated basis and to the extent set forth below under
"Description of the Guarantees." Any applicable federal income tax
considerations applicable to any offering of the Preferred Securities will be
described in the Prospectus Supplement relating thereto. The aggregate number of
Preferred Securities which the Trust shall have authority to issue will be
pursuant to the terms of the Trust Agreement.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Trust Agreement, the sole purpose of the Trust is to
issue the Trust securities evidencing undivided beneficial interests in the
assets of each of the Trust, and to invest the proceeds from such issuance and
sale to acquire directly the Subordinated Debentures from CMS Energy.
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<PAGE> 88
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover distributions
and payments due on the Trust securities because of the following factors: (i)
the aggregate principal amount of Subordinated Debentures will be equal to the
sums of the aggregate stated liquidation amount of the Trust securities; (ii)
the interest rate and the interest and other payment dates on the Subordinated
Debentures will match the distribution rate and distribution and other payment
dates for the Preferred Securities; (iii) CMS Energy shall pay all, and the
Trust shall not be obligated to pay, directly or indirectly, all costs,
expenses, debt and obligations of the Trust (other than with respect to the
Trust securities); and (iv) the Trust Agreement further provides that CMS Energy
Trustees shall not take or cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefore are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by CMS Energy as and to the extent set forth under
"The Guarantees" below. If CMS Energy does not make interest payments on the
Subordinated Debenture purchased by the Trust, it is expected that the Trust
will not have sufficient funds to pay distributions on the Preferred Securities.
The Guarantee does not apply to any payment of distributions unless and until
the Trust has sufficient funds for the payment of distributions and other
payments on the Preferred Securities only if and to the extent that CMS Energy
has made a payment of interest or principal on the Subordinated Debenture held
by the Trust as its sole asset. The Guarantee, when taken together with CMS
Energy's obligations under the Subordinated Debenture and the Indenture and its
obligations under the Trust Agreement, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust securities), provide a full and unconditional guarantee of amounts on the
Preferred Securities.
If CMS Energy fails to make interest or other payments on the Subordinated
Debentures when due (taking account of any extension period), the Trust
Agreement provides a mechanism whereby the holders of the Preferred Securities
may direct the institutional Trustee to enforce its rights under the
Subordinated Debenture. If the institutional Trustee fails to enforce its rights
under the Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding against CMS Energy to enforce the institutional
Trustee's rights under the Subordinated Debentures without first instituting any
legal proceeding against the institutional Trustee or any other person or
entity. Notwithstanding the foregoing, if an event of default has occurred and
is continuing under the Trust Agreement, and such event is attributable to the
failure of CMS Energy to pay interest or principal on the Subordinated
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption on the redemption date), then a holder of Preferred
Securities may institute legal proceedings directly against CMS Energy to obtain
payment. If CMS Energy fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee trustee to enforce its rights thereunder. Any holder of Preferred
Securities may institute a legal proceeding directly against CMS Energy to
enforce the Guarantee trustee's rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee, or any other person or entity.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton Administration proposed certain changes to federal income tax law
which would, among other things, generally treat as equity, for federal income
tax purposes, certain debt obligations, such as the Debentures, that are "issued
on or after the date of first Congressional Committee action" (the "Clinton
Proposal"). On June 9, 1997, House Ways and Means Committee Chairman Bill Archer
released the Chairman's Mark Relating to Revenue Reconciliation Provisions which
are proposed to be included in 1997 tax legislation (the "Chairman's Mark"). The
Chairman's Mark constitutes "first Congressional Committee action" with respect
to the provisions contained therein. The Chairman's Mark
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<PAGE> 89
does not include the Clinton Proposal that would require the Debentures to be
treated as equity for federal income tax purposes.
In light of the Chairman's Mark, it appears that "first Congressional
Committee action" has not yet occurred with respect to the Clinton Proposal.
Furthermore, in light of the effective date transitional rules relating to
certain capital markets provisions included in the Chairman's Mark (as well as
transitional rules provided for in 1996 proposed legislation similar to the
Clinton Proposal) which provide, among other things, that instruments issued
pursuant to a prospectus supplement filed with the Commission on or before the
effective date of the legislation are not subject to the legislation, it is
anticipated that, should the Clinton Proposal be acted upon by Congress at some
future date, such future date would be the relevant effective date and similar
transitional rules would apply. Accordingly, because the Debentures will be
issued pursuant to a prospectus supplement filed with the Commission before the
date of first Congressional Committee action, it is not anticipated that the
Clinton Proposal, even if acted upon by Congress in the future, would apply to
the Debentures.
There can be no assurance, however, that the Clinton Proposal or similar
legislation will not ultimately be enacted into law, that the effective date and
transitional rules relating thereto would be enacted as anticipated, or that
other developments will not occur after the date hereof that would adversely
affect the tax treatment of the Debentures and could result in the exchange of
the Debentures for Preferred Securities or, in certain limited circumstances,
the redemption of the Debentures by CMS Energy and the distribution of the
resulting cash in redemption of the Preferred Securities.
THE GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantee (each, the "Guarantee") which will be executed and
delivered by CMS Energy for the benefit of the holders, from time to time, of
the Preferred Securities. The Preferred Securities Guarantee will be qualified
as an indenture under the Trust Indenture Act of 1939. The Bank of New York, an
independent trustee, will act as indenture trustee under the Preferred
Securities Guarantee for purpose of compliance with the provisions of the Trust
Indenture Act of 1939. The summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Guarantee, which are filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
CMS Energy will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Preferred Securities, as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert other than
the defense of payment. The following payments with respect to the Preferred
Securities, to the extent not paid by or on behalf of the Trust (the "Guarantee
Payments"), will be subject to the Guarantee: (i) any accumulated and unpaid
distributions required to be paid on the Preferred Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
redemption price with respect to any Preferred Securities called for redemption
to the extent that the Trust has funds on hand available therefor at such time,
or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation
of the Trust (unless the Subordinated Debentures are distributed to holders of
the Preferred Securities), the lesser of (a) the liquidation distribution, to
the extent that the Trust has funds on hand available therefor at such time, and
(b) the amount of assets of the Trust remaining available for distribution to
holders of Preferred Securities. CMS Energy's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts of CMS Energy
to the holders of the Preferred Securities or by causing the Trust to pay such
amount to such holders.
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<PAGE> 90
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the Trust's obligations under the Preferred Securities, but will apply only to
the extent that the Trust has funds sufficient to make such payments, and is not
a guarantee of collection. If CMS Energy does not make interest payments on the
Subordinated Debentures held by the Trust, the Trust will not be able to pay
distributions on the Preferred Securities and will not have funds legally
available therefor.
CMS Energy has, through the Guarantee, the Trust Agreement, the
Subordinated Debentures, the Subordinated Debt Indenture and the Expense
Agreement, taken together, fully, irrevocably and unconditionally guaranteed all
of the Trust's obligations under the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Trust's obligations under the Preferred Securities.
CMS Energy has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities to
the same extent as the Guarantee, except that upon the occurrence and during the
continuation of a Trust Agreement Event of Default, holders of Preferred
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF CMS ENERGY
CMS Energy will covenant in the Guarantee that if and so long as (i) the
Trust is the holder of all the Subordinated Debentures, (ii) a Tax Event in
respect of the Trust has occurred and is continuing and (iii) CMS Energy has
elected, and has not revoked such election, to pay Additional Sums in respect of
the Preferred Securities and Common Securities, CMS Energy will pay to the Trust
such Additional Sums. CMS Energy will also covenant that it will not, and it
will not cause any of its subsidiaries to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of CMS Energy's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities (including guarantees of indebtedness for money borrowed) of CMS
Energy that rank pari passu with or junior to the Subordinated Debentures (other
than (a) any dividend, redemption, liquidation, interest, principal or guarantee
payment by CMS Energy where the payment is made by way of securities (including
capital stock) that rank pari passu with or junior to the securities on which
such dividend, redemption, interest, principal or guarantee payment is being
made, (b) payments under the Guarantee, (c) purchases of CMS Energy Common Stock
related to the issuance of CMS Energy Common Stock under any of CMS Energy's
benefit plans for its directors, officers or employees, (d) as a result of a
reclassification of CMS Energy's capital stock or the exchange or conversion of
one series or class of CMS Energy's capital stock for another series or class of
CMS Energy's capital stock and (e) the purchase of fractional interests in
shares of CMS Energy's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged)
if at such time (i) there shall have occurred any event of which CMS Energy has
actual knowledge that (a) with the giving of notice or the lapse of time, or
both, would constitute a Subordinated Debenture Event of Default and (b) in
respect of which CMS Energy shall not have taken reasonable steps to cure, (ii)
CMS Energy shall be in default with respect to its payment of any obligations
under the Guarantee or (iii) CMS Energy shall have given notice of its selection
of an Extension Period as provided in the Subordinated Debt Indenture with
respect to the Subordinated Debentures and shall not have rescinded such notice,
or such Extension Period, or any extension thereof, shall be continuing. CMS
Energy also covenant (i) for so long as Preferred Securities are outstanding,
not to convert Subordinated Debentures except pursuant to a notice of conversion
delivered to the Conversion Agent by a holder of Preferred Securities, (ii) to
maintain directly or indirectly 100% ownership of the Common Securities,
provided that certain successors which are permitted pursuant to the
Subordinated Debt Indenture may succeed to CMS Energy's ownership of the Common
Securities, (iii) not to
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voluntarily terminate, wind-up or liquidate the Trust, except (a) in connection
with a distribution of the Debentures to the holders of the Preferred Securities
in liquidation of the Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the Trust Agreement, (iv) to
maintain the reservation for issuance of the number of shares of CMS Energy
Common Stock that would be required from time to time upon the conversion of all
the Subordinated Debentures then outstanding, (v) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement, to cause the
Trust to remain classified as a grantor trust and not as an association taxable
as a corporation for United States federal income tax purposes and (vi) to
deliver shares of CMS Energy Common Stock upon an election by the holders of the
Preferred Securities to convert such Preferred Securities into CMS Energy Common
Stock.
As part of the Guarantee, CMS Energy will agree that it will honor all
obligations described therein relating to the conversion or exchange of the
Preferred Securities into or for CMS Energy Common Stock or Subordinated
Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority in aggregate liquidation amount of such
outstanding Preferred Securities. All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of CMS Energy and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the redemption price of the Preferred Securities, upon full
payment of the amounts payable upon liquidation of the Trust, upon the
distribution, if any, of CMS Energy Common Stock to the holders of Preferred
Securities in respect of the conversion of all such holders' Preferred
Securities into CMS Energy Common Stock or upon distribution of the Subordinated
Debentures to the holders of the Preferred Securities in exchange for all of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of CMS
Energy to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of the
Preferred Securities may institute a legal proceeding directly against CMS
Energy to enforce its rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person or
entity. In addition, any record holder of Preferred Securities shall have the
right, which is absolute and unconditional, to proceed directly against CMS
Energy to obtain Guarantee Payments, without first waiting to determine if the
Guarantee Trustee has enforced the Guarantee or instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. CMS
Energy has waived any right or remedy to require that any action be brought just
against the Trust, or any other person or entity before proceeding directly
against CMS Energy.
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<PAGE> 92
CMS Energy, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not CMS Energy is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of CMS Energy and
will rank subordinate and junior in right of payment to all other liabilities of
CMS Energy and will rank pari passu with any guarantee now or hereafter entered
into by CMS Energy in respect of any preferred or preference stock of any
affiliate of CMS Energy.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Trust or upon
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee does not place a limitation on the amount of
additional indebtedness that may be incurred by CMS Energy or any of its
subsidiaries.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
CMS Energy may issue Stock Purchase Contracts, representing contracts
obligating holders to purchase from CMS Energy, and CMS Energy to sell to the
holders, a specified number of shares of CMS Energy Common Stock at a future
date or dates. The price per share of CMS Energy Common Stock may be fixed at
the time the Stock Purchase Contracts are issued or may be determined by
reference to a specific formula set forth in the Stock Purchase Contracts. The
Stock Purchase Contracts may require CMS Energy to make periodic payments to the
holders of the Stock Purchase Units or visa versa, and such payments may be
unsecured or refunded on some basis. The Stock Purchase Contracts may require
holders to secure their obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in Prospectus
Supplement will not purport to be complete and will be qualified in its entirety
by reference to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
LEGAL OPINIONS
Opinions as to the legality of certain of the Offered Securities will be
rendered for CMS Energy by Michael D. Van Hemert, Esq., Assistant General
Counsel for CMS Energy. Certain matters of Delaware law relating to the validity
of the Preferred Securities will be passed upon on behalf of the Trusts by
special Delaware counsel to the Trusts, who will be named in the Prospectus
Supplement. Certain United States federal income taxation matters may be passed
upon for CMS Energy and the Trust by special tax counsel to CMS Energy and of
the Trust, who will be named in the Prospectus Supplement. Certain legal matters
with respect to Offered Securities will be passed upon by counsel for any
underwriters, dealers or agents, each of whom will be named in the related
Prospectus Supplement.
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EXPERTS
The consolidated financial statements and schedule 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 period ended March 31, 1997 and 1996, 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.
PLAN OF DISTRIBUTION
CMS Energy and/or the Trust may sell the Offered Securities (i) through the
solicitation of proposals of underwriters or dealers to purchase the Offered
Securities; (ii) through underwriters or dealers on a negotiated basis, (iii)
directly to a limited number of purchasers or to a single purchaser; or (iv)
through agents. The Prospectus Supplement with respect to any Offered Securities
will set forth the terms of such offering, including the name or names of any
underwriters, dealers or agents; the purchase price of the Offered Securities
and the proceeds to CMS Energy and/or the Trust from such sale; any underwriting
discounts and commissions and other items constituting underwriters'
compensation; any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchange on which
such Offered Securities may be listed. Any initial public offering price,
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, CMS Energy
and/or the Trust will sell such Offered Securities to the dealers as principals.
The dealers may then resell such Offered Securities to the public at varying
prices to be determined by such dealers at the time of resale. The
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names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
The Offered Securities may be sold directly by CMS Energy and/or the Trust
or through agents designated by CMS Energy and/or the Trust from time to time.
Any agent involved in the offer or sale of the Offered Securities in respect to
which this Prospectus is delivered will be named, and any commissions payable by
CMS Energy and/or the Trust to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
The Offered Securities may be sold directly by CMS Energy and/or the Trust
to institutional investors or others, who may be deemed to be underwriters
within the meaning of the Securities Act with respect to any resale thereof. The
terms of any such sales will be described in the Prospectus Supplement relating
thereto.
Agents, dealers and underwriters may be entitled under agreements with CMS
Energy and/or the Trust to indemnification by CMS Energy and/or the Trust
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments which such agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for CMS Energy and/or the Trust in the ordinary course of business.
The Offered Securities may or may not be listed on a national securities
exchange. Reference is made to the Prospectus Supplement with regard to such
matter. No assurance can be given that there will be a market for any of the
Offered Securities.
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==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR CMS
ENERGY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CMS Energy Corporation.................... S-5
CMS Energy Trust I........................ S-6
Summary Financial Information of CMS
Energy Corporation...................... S-8
The Offering.............................. S-9
Risk Factors.............................. S-16
Price Range of CMS Energy Common Stock and
Dividends............................... S-21
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends... S-24
Use of Proceeds........................... S-24
Capitalization............................ S-25
Accounting Treatment...................... S-25
Description of the Preferred Securities... S-26
Description of the Guarantee.............. S-45
Description of the Debentures............. S-48
Relationship Among the Preferred
Securities, the Debentures and the
Guarantee............................... S-59
Certain Federal Income Tax
Consequences............................ S-60
Underwriting.............................. S-64
Legal Matters............................. S-65
PROSPECTUS
Available Information..................... 2
Incorporation of Certain Documents By
Reference............................... 3
CMS Energy Corporation.................... 3
CMS Energy Trusts......................... 4
Use of Proceeds........................... 5
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends............... 5
Description of Securities................. 6
Legal Opinions............................ 25
Experts................................... 26
Plan of Distribution...................... 26
</TABLE>
==========================================================
==========================================================
3,000,000 PREFERRED SECURITIES
CMS ENERGY TRUST I
% CONVERTIBLE QUARTERLY INCOME
PREFERRED SECURITIES
(CONVERTIBLE QUIPS(SM))
(LIQUIDATION PREFERENCE $50 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY,
AND CONVERTIBLE INTO COMMON STOCK OF,
CMS ENERGY CORPORATION
---------------
[CMS ENERGY LOGO]
---------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS
==========================================================
<PAGE> 96
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.................. $ 90,909
Listing on New York Stock Exchange................................ 50,000*
Trustees expenses................................................. 18,000*
Printing and Engraving............................................ 250,000*
Services of counsel............................................... 100,000*
Services of independent public accountants, Arthur Anderson LLP... 20,000*
Rating Agency Fees, Collateral Agent's and Purchase Contract
Agent's Fees.................................................... 100,000*
Blue Sky fees and expenses........................................ 40,000*
Miscellaneous..................................................... 5,000*
--------
Total........................................................ $673,909
=========
</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
II-1
<PAGE> 97
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.
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 and Administrative Trustees of the Trust 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 Trusts provides that to the fullest extent
permitted by applicable law, the Trust shall indemnify and hold harmless each of
the Trustees, any Affiliate of the Trustees, any officer, director, shareholder,
employee, representative or agent of any Trustee and any employee or agent of
the Trust or its Affiliates (each a "Indemnified Person"), from and against any
loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason the creation, operation
or termination of the Trust or any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by the Trust Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of negligence or
willful misconduct with respect to such acts or omissions.
II-2
<PAGE> 98
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------
<S> <C> <C>
*(1)(a) -- Form of Underwriting Agreement with respect to the Offered Securities
(other than the Preferred Securities). (Designated in CMS Energy's Form S-3
Registration Statement filed February 15, 1995, File No. 33-57719, as
Exhibit (1).)
(1)(c) -- Form of Underwriting Agreement with respect to the Preferred Securities.
*(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).)
*(4)(b) -- Indenture dated as of January 15, 1994 between CMS Energy and The Chase
Manhattan Bank, as Trustee. (Designated in CMS Energy's Form 8-K dated
March 29, 1994, File No. 1-9513, as Exhibit (4)(a).)
First Supplemental Indenture dated as of January 20, 1994 between CMS
Energy and The Chase Manhattan Bank, as Trustee. (Designated in CMS
Energy's Form 8-K dated March 29, 1994, File No. 1-9513, as Exhibit
(4)(b).)
Second Supplemental Indenture dated as of March 19, 1996 between CMS Energy
Corporation and The Chase Manhattan Bank, as Trustee. (Designated in CMS
Energy's Form 10-Q for the quarter ended March 31, 1996, File No. 1-9513,
as Exhibit (4).)
Third Supplemental Indenture dated as of March 17, 1997 between CMS Energy
Corporation and The Chase Manhattan Bank, as Trustee. (Designated in CMS
Energy's Form 8-K dated May 1, 1997, File No. 1-9513, as Exhibit (4).)
*(4)(c) -- Credit Agreement dated as of November 21, 1995, among CMS Energy
Corporation, the Banks, the Co-Agents, the Documentation Agent, the
Operational Agent and the Co-Managers, all as defined therein, and the
Exhibits thereto. (Designated in CMS Energy's Form S-4 Registration
Statement filed January 12, 1996, File No. 33-60007, as Exhibit 4(ii).)
*(4)(d) -- Term Loan Agreement dated as of November 21, 1995, among CMS Energy
Corporation, the Banks, the Co-Agents, the Documentation Agent, the
Operational Agent and the Co-Managers, all as defined therein, and the
Exhibits thereto. (Designated in CMS Energy's Form S-4 Registration
Statement filed January 12, 1996, File No. 33-60007, as Exhibit 4(ii)(A).)
(4)(e) -- Form of Subordinated Debt Indenture between CMS Energy and The Bank of New
York, as Trustee.
(4)(f) -- Form of Supplemental Indenture to be used with the Subordinated Debentures
issued in connection with the Preferred Securities.
*(4)(g) -- Certificate of Trust of CMS Energy Trust I.
*(4)(h) -- Certificate of Trust of CMS Energy Trust II.
</TABLE>
II-3
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------
<S> <C> <C>
(4)(i) -- Form of Amended and Restated Trust Agreement of CMS Energy Trust I or CMS
Energy Trust II.
*(4)(j) -- 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)(k) -- 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)(l) -- Form of Subordinated Debenture (included in (4)(f).)
(4)(m) -- Form of Preferred Security (included in (4)(i).)
(4)(n) -- Form of Preferred Securities Guarantee Agreement of CMS Energy Trust I or
CMS Energy Trust II.
(4)(o) -- Form of Purchase Contract Agreement between CMS Energy and Purchase
Contract Agent (including as Exhibit A the form of the Security
Certificate).
(5)(a) -- Opinion of Michael D. Van Hemert, Assistant General Counsel for CMS Energy.
(5)(b) -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding the legality
of the Preferred Securities.
(8) -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.
*(12) -- Statement re computation of ratios of earnings to fixed charges and ratios
of earnings to fixed charges and preferred stock dividends. (Designated in
CMS Energy's Form 10-Q for the quarter ended March 31, 1997, File No.
1-9513, as Exhibit (12)).
*(15) -- Letter regarding unaudited interim financial information.
(23)(a) -- Consent of Michael D. Van Hemert, Assistant General Counsel for CMS Energy
(included in Exhibit (5)(a) above).
(23)(b) -- Consent (included in Exhibit (5)(b) above).
(23)(c) -- Consent (included in Exhibit 8 above).
*(23)(d) -- Consent of Arthur Andersen LLP.
*(24) -- Powers of Attorney.
*(25)(a) -- Statement of Eligibility and Qualification of The Bank of New York (Trustee
under the Subordinated Debt Indenture).
*(25)(b) -- Statement of Eligibility of Property Trustee of CMS Energy Trust I.
*(25)(c) -- Statement of Eligibility of Property Trustee of CMS Energy Trust II.
*(25)(d) -- Statement of Eligibility of the Preferred Security Guarantee Trustee of CMS
Energy Trust I.
*(25)(e) -- Statement of Eligibility of the Preferred Security Guarantee Trustee of CMS
Energy Trust II.
</TABLE>
- ---------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by reference with the same effect as
if filed with this Registration Statement.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which,
II-4
<PAGE> 100
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3 or Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) 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.
(5) 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.
(6) That (1) 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 (2) 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-5
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the 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 12th day of June, 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 the 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
------------------------------------- -------------------------------- -------------
<S> <C> <C>
(i) Principal executive officer
/s/ WILLIAM T. MCCORMICK, JR. Chairman of the Board, Chief June 12, 1997
------------------------------------- Executive Officer and Director
(William T. McCormick, Jr.)
(ii) Principal financial officer:
/s/ A. M. WRIGHT Senior Vice President, Chief June 12, 1997
------------------------------------- Financial Officer and
(Alan M. Wright) Treasurer
(iii) Controller or principal accounting officer:
/s/ P. D. HOPPER Senior Vice President, June 12, 1997
------------------------------------- Controller and Chief
(Preston D. Hopper) Accounting Officer
* Director June 12, 1997
-------------------------------------
(John M. Deutch)
* Director June 12, 1997
-------------------------------------
(James J. Duderstadt)
* Director June 12, 1997
-------------------------------------
(Kathleen R. Flaherty)
* Director June 12, 1997
-------------------------------------
(Victor J. Fryling)
* Director June 12, 1997
-------------------------------------
(Earl D. Holton)
</TABLE>
II-6
<PAGE> 102
<TABLE>
<CAPTION>
NAME TITLE DATE
------------------------------------- -------------------------------- -------------
<S> <C> <C>
* Director June 12, 1997
-------------------------------------
(Michael G. Morris)
* Director June 12, 1997
-------------------------------------
(William U. Parfet)
* Director June 12, 1997
-------------------------------------
(Percy A. Pierre)
* Director June 12, 1997
-------------------------------------
(Kenneth Whipple)
* Director June 12, 1997
-------------------------------------
(John B. Yasinsky)
*By: /s/ A. M. WRIGHT
-------------------------------------
Alan M. Wright
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CMS Energy
Trust I certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dearborn, State of Michigan, on the
12th day of June, 1997.
CMS ENERGY TRUST I
By: /s/ A. M. WRIGHT
-----------------------------------
Alan M. Wright, Trustee
By: /s/ THOMAS A. MCNISH
-----------------------------------
Thomas A. McNish, Trustee
II-8
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CMS Energy
Trust II certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dearborn, State of Michigan, on the
12th day of June, 1997.
CMS ENERGY TRUST II
By: /s/ A. M. WRIGHT
-----------------------------------
Alan M. Wright, Trustee
By: /s/ THOMAS A. MCNISH
-----------------------------------
Thomas A. McNish, Trustee
II-9
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------
<S> <C> <C>
*(1)(a) -- Form of Underwriting Agreement with respect to the Offered Securities
(other than the Preferred Securities). (Designated in CMS Energy's Form
S-3 Registration Statement filed February 15, 1995, File No. 33-57719, as
Exhibit (1).)
(1)(c) -- Form of Underwriting Agreement with respect to the Preferred Securities.
*(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).)
*(4)(b) -- Indenture dated as of January 15, 1994 between CMS Energy and The Chase
Manhattan Bank, as Trustee. (Designated in CMS Energy's Form 8-K dated
March 29, 1994, File No. 1-9513, as Exhibit (4)(a).)
First Supplemental Indenture dated as of January 20, 1994 between CMS
Energy and the Chase Manhattan Bank, as Trustee. (Designated in CMS
Energy's Form 8-K dated March 29, 1994, File No. 1-9513, as Exhibit
(4)(b).)
Second Supplemental Indenture dated as of March 19, 1996 between CMS
Energy Corporation and The Chase Manhattan Bank, as Trustee. (Designated
in CMS Energy's Form 10-Q for the quarter ended March 31, 1996, File No.
1-9513, as Exhibit (4).)
Third Supplemental Indenture dated as of March 17, 1997 between CMS Energy
Corporation and The Chase Manhattan Bank, as Trustee. (Designated in CMS
Energy's Form 8-K dated May 1, 1997, File No. 1-9513, as Exhibit (4).)
*(4)(c) -- Credit Agreement dated as of November 21, 1995, among CMS Energy
Corporation, the Banks, the Co-Agents, the Documentation Agent, the
Operational Agent and the Co-Managers, all as defined therein, and the
Exhibits thereto. (Designated in CMS Energy's Form S-4 Registration
Statement filed January 12, 1996, File No. 33-60007, as Exhibit 4(ii).)
*(4)(d) -- Term Loan Agreement dated as of November 21, 1995, among CMS Energy
Corporation, the Banks, the Co-Agents, the Documentation Agent, the
Operational Agent and the Co-Managers, all as defined therein, and the
Exhibits thereto. (Designated in CMS Energy's Form S-4 Registration
Statement filed January 12, 1996, File No. 33-60007, as Exhibit 4(ii)(A).)
(4)(e) -- Form of Subordinated Debt Indenture between CMS Energy and The Bank of New
York, as Trustee.
(4)(f) -- Form of Supplemental Indenture to be used with the Subordinated Debentures
issued in connection with the Preferred Securities.
*(4)(g) -- Certificate of Trust of CMS Energy Trust I.
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------
<S> <C> <C>
*(4)(h) -- Certificate of Trust of CMS Energy Trust II.
(4)(i) -- Form of Amended and Restated Trust Agreement of CMS Energy Trust I or CMS
Energy Trust II.
*(4)(j) -- 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)(k) -- 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)(l) -- Form of Subordinated Debenture (included in (4)(f).)
(4)(m) -- Form of Preferred Security (included in (4)(i).)
(4)(n) -- Form of Preferred Securities Guarantee Agreement of CMS Energy Trust I or
CMS Energy Trust II.
(4)(o) -- Form of Purchase Contract Agreement between CMS Energy and the Purchase
Contract Agent (including as Exhibit A the form of the Security
Certificate).
(5)(a) -- Opinion of Michael D. Van Hemert, Assistant General Counsel for CMS
Energy.
(5)(b) -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding the legality
of the Preferred Securities.
(8) -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.
*(12) -- Statement re computation of ratios of earnings to fixed charges and ratios
of earnings to fixed charges and preferred stock dividends. (Designated in
CMS Energy's Form 10-Q for the quarter ended March 31, 1997, File No.
1-9513, as Exhibit (12)).
*(15) -- Letter regarding unaudited interim financial information.
(23)(a) -- Consent of Michael D. Van Hemert, Assistant General for CMS Energy
(included in Exhibit (5)(a) above).
(23)(b) -- Consent (included in Exhibit (5)(b) above).
(23)(c) -- Consent (included in Exhibit 8 above).
*(23)(d) -- Consent of Arthur Andersen LLP.
*(24) -- Powers of Attorney.
*(25)(a) -- Statement of Eligibility and Qualification of The Bank of New York
(Trustee under the Subordinated Debt Indenture).
*(25)(b) -- Statement of Eligibility of Property Trustee of CMS Energy Trust I.
*(25)(c) -- Statement of Eligibility of Property Trustee of CMS Energy Trust II.
*(25)(d) -- Statement of Eligibility of the Preferred Security Guarantee Trustee of
CMS Energy Trust I.
*(25)(e) -- Statement of Eligibility of the Preferred Security Guarantee Trustee of
CMS Energy Trust II.
</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
EXHIBIT 1(C)
CMS ENERGY TRUST I
% CONVERTIBLE QUARTERLY INCOME PREFERRED SECURITIES
-- (CONVERTIBLE QUIPS(SM)*)
(liquidation amount $50 per preferred security)
fully and unconditionally guaranteed by,
and convertible into, common stock, $.01 par value, of
CMS ENERGY CORPORATION
------------------------------
UNDERWRITING AGREEMENT
, 1997
--------
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co.
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
CMS Energy Trust I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), and CMS Energy Corporation, a Michigan
corporation, as depositor of the Trust and as guarantor (the "Company"),
propose that the Trust, subject to the terms and conditions stated herein,
issue and sell to the firms named in Schedule I hereto (the "Underwriters") an
aggregate of 3,000,000 (the "Firm Securities") and, at the election of the
Underwriters, up to an additional 450,000 (the "Optional Securities"), of __%
Convertible Quarterly Income Preferred Securities (liquidation amount $50 per
preferred security), representing undivided beneficial interests in the assets
of the Trust, guaranteed on a subordinated basis by the Company as to the
payment of distributions, and as to payments on liquidation or redemption, to
the extent set forth in a guarantee agreement (the "Guarantee") between the
Company and The Bank of New York, as trustee (the "Guarantee Trustee") and
convertible into common stock, $.01 par value per share ("Common Stock") of the
Company. The Firm Securities
- -----------------------------
*QUIPS is a servicemark of Goldman, Sachs & Co.
<PAGE> 2
and the Optional Securities that the Underwriters elect to purchase pursuant to
Section 2 hereof are referred to collectively as the "Securities." The firms
designated as representatives of the Underwriters are referred to collectively
as the "Representatives." The Trust is to purchase, with the proceeds from the
sale of its Common Securities (liquidation amount $50 per common security) (the
"Common Securities") and the sale of the Securities, __% Convertible
Subordinated Debentures due , 2027 (the "Debentures") of the Company, to be
issued pursuant to a Subordinated Debt Indenture (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Debenture Trustee").
The Company will be the holder of 100% of the Common Securities. The
Trust will be subject to the terms of an Amended and Restated Trust Agreement
(the "Trust Agreement"), among the Company and the trustees of the Trust (the
"CMS Trustees"), including The Bank of New York, as property trustee (the
"Property Trustee").
1. Each of the Trust and the Company represents and warrants to, and
agrees with, each of the Underwriters that:
(a) A registration statement on Form S-3 (Registration
No. 333-27849) (the "Initial Registration Statement") in respect of
the Securities, the Debentures, the Guarantee and the Common Stock
issuable upon the conversion or exchange of the Securities and/or
Debentures has been filed with the Securities and Exchange Commission
(the "Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore
delivered or to be delivered to the Representatives and, excluding
exhibits to such registration statement, but including all documents
incorporated by reference in the prospectus included therein, to the
Representatives for each of the other Underwriters have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a "Rule 462(b)
Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein
has heretofore been filed, or transmitted for filing, with the
Commission (other than prospectuses filed pursuant to Rule 424(b) of
the rules and regulations of the Commission under the Act each in the
form heretofore delivered to the Representatives); no stop order
suspending the effectiveness of the Initial 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 (any
preliminary prospectus included in such registration statement or
filed with the Commission pursuant to Rule 424(a) under the Act, is
hereinafter called a "Preliminary Prospectus"); the various parts of
the Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in the Initial
Registration Statement at the time such part of the registration
statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective,
each as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the
"Registration Statement"; the prospectus relating to the Securities,
the Debentures, the Guarantee and the Common Stock issuable upon the
conversion or exchange of the Securities and/or the Debentures, in the
form in which it has most recently been filed, or transmitted for
filing, with the Commission on or prior to the date of this Agreement,
is hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include the documents incorporated by reference therein pursuant
to the applicable form under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or
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supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment to the
Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the
Registration Statement; and any reference to the Prospectus as amended
or supplemented shall be deemed to refer to the Prospectus as amended
or supplemented in relation to the Securities in the form in which it
is filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 4(a) hereof, including any documents
incorporated by reference therein as of the date of such filing);
(b) The Registration Statement and the Prospectus
conform, and any further amendments or supplements to the Registration
Statement or the Prospectus will conform, in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter of the Securities or through the Representatives on behalf
of any Underwriter expressly for use in the Prospectus as amended or
supplemented relating to such Securities or to any statements in or
omissions from that part of the Registration Statement that shall
constitute the Statements of Eligibility and Qualification under the
Trust Indenture Act (as defined herein) of the Debenture Trustee, the
Guarantee Trustee and the Property Trustee;
(c) The documents incorporated by reference in the
Registration Statement 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 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 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) There has not been any material and adverse change in
the business, properties or financial condition of the Company and its
Subsidiaries (as defined in Rule 405 under the Act, and hereinafter
called the "Subsidiaries"), taken as a whole, from that set forth in
the Registration
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Statement (other than changes referred to in or contemplated by the
Registration Statement or the Prospectus);
(e) 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 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; and the Company has the requisite
power and authority to authorize the offering of the Debentures, the
Guarantee and the Common Stock issuable upon the conversion or
exchange of the Securities and/or the Debentures, to exercise, deliver
and perform this Agreement, and to issue, sell and deliver the
Debentures, the Guarantee and the Common Stock issuable upon the
conversion or exchange of the Securities and/or the Debentures;
(f) The shares of Common Stock of the Company issued and
outstanding prior to the issuance of the Securities have been duly
authorized and are validly issued, fully paid and non-assessable; the
shares of Common Stock issuable upon the conversion or exchange of the
Securities and/or the Debentures have been duly authorized and
reserved for issuance and, when issued and delivered in accordance
with the provisions of the Securities and/or the Indenture, will be
validly issued, fully paid and non-assessable; the issuance of the
Common Stock upon the conversion or exchange of the Securities and/or
the Debentures will not be subject to preemptive or other similar
rights;
(g) The Securities have been duly and validly authorized
by the Trust, and, when the Securities are issued and delivered, such
Securities will be validly issued, fully paid and non-assessable
undivided beneficial interests in the assets of the Trust; the
Securities will conform in all material respects to the description
thereof contained in the Prospectus; the issuance of the Securities is
not subject to any preemptive or other similar rights; the Securities
will have the rights set forth in the Trust Agreement, and the terms
of the Securities are valid and binding on the Trust;
(h) The Common Securities have been duly and validly
authorized by the Trust and upon delivery by the Trust to the Company
against payment therefor as described in the Prospectus, will be duly
and validly issued undivided beneficial interests in the assets of the
Trust and will conform in all material respects to the description
thereof contained in the Prospectus; the issuance of the Common
Securities is not subject to preemptive or other similar rights; at
each Time of Delivery (as defined in Section 3 hereof), all of the
issued and outstanding Common
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Securities of the Trust will be directly owned by the Company free and
clear of any security interest, mortgage, pledge, claim, lien or
encumbrance (each, a "Lien"); and the Common Securities and the
Securities are the only interests authorized to be issued by the
Trust;
(i) Except for the outstanding shares of preferred stock
of Consumers Power Company and the 8.36% Trust Originated Preferred
Securities of Consumers Power Company Financing I, 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 Lien, and 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 capital stock, any such
convertible or exchangeable securities or any such rights, warrants or
options;
(j) The capital stock of the Company, including the
Common Stock, conforms in all material respects to the description
thereof in the Prospectus;
(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, except such as have been obtained
or may be required under state securities or Blue Sky laws or as
referred to in the Prospectus in connection with the purchase and
distribution of the Securities, the Guarantee and the Debentures;
(m) The execution and delivery of this Agreement by the
Trust, the compliance by the Trust with all of the provisions of this
Agreement, the issuance and sale of the Securities and the Common
Securities by the Trust, the purchase of the Debentures by the Trust,
the distribution of the Debentures by the Trust in the circumstances
contemplated by the Trust Agreement, the performance of this Agreement
and the consummation of the transactions contemplated by this
Agreement and by the Trust Agreement did not and will not 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
Trust Agreement, any material terms or provisions of any material
agreement or instrument to which the Trust is a party, any existing
material applicable law, rule or regulation or any judgment, order or
decree of any governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Trust 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;
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<PAGE> 6
(n) The execution and delivery of this Agreement by the
Company, the compliance by the Company with all of the provisions of
this Agreement, the issuance and sale of the Securities and the Common
Securities by the Trust, the sale of the Debentures by the Company to
the Trust, the issuance by the Company of the Guarantee, the
execution, delivery and performance by the Company of the Guarantor
Agreements (as defined below), the issuance by the Company of the
Common Stock upon the conversion or exchange of the Securities and/or
the Debentures, the distribution of the Debentures by the Trust in the
circumstances contemplated by the Trust Agreement, the performance of
this Agreement and the consummation of the transactions contemplated
by this Agreement and the Guarantor Agreements did not and will not
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 terms
or provisions of any material agreement or instrument to which the
Company is a party, any existing material applicable law, rule or
regulation or any judgment, order or decree of any 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;
(o) 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
authority that (i) questions the validity, enforceability or
performance of this Agreement or the Securities or (ii) if determined
adversely, is likely to have a material adverse effect on the business
or financial condition of the Company and its 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;
(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 Company, the Trust nor any of the
Subsidiaries is and, after giving effect to the offering and sale of
the Securities, will not be an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment
Company Act"). The Trust is not required to be registered under the
Investment Company Act;
(r) The Securities and the shares of Common Stock
issuable upon the conversion or exchange of the Securities and/or the
Debentures have been approved for listing on the New York Stock
Exchange, subject to notice of issuance;
(s) The Trust has been duly created and is validly
existing as a statutory business trust in good standing under the
Business Trust Act of the State of Delaware (the "Delaware Business
Trust Act") with the trust power and authority to own property and
conduct its business as described in the Prospectus, and has conducted
and will conduct no business other than the transactions contemplated
by this Agreement and described in the Prospectus; the Trust is not a
party to or bound by any agreement or instrument other than this
Agreement, the Trust
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<PAGE> 7
Agreement between the Company and the CMS Trustees named therein and
the agreements and instruments contemplated by the Trust Agreement and
described in the Prospectus; based on expected operations and current
law, the Trust is not and will not be classified as an association
taxable as a corporation for United States federal income tax
purposes; and, to the knowledge of each of the Company and the Trust,
the Trust is not a party to or subject to any action, suit or
proceeding of any nature;
(t) The Guarantee, the Debentures, the Trust Agreement
and the Indenture (collectively, the "Guarantor Agreements") have each
been duly authorized and when validly executed and delivered by the
Company and, in the case of the Guarantee, by the Guarantee Trustee
and, in the case of the Trust Agreement, by the CMS Trustees and, in
the case of the Indenture, by the Debenture Trustee, and, in the case
of the Debentures, when validly authenticated and delivered by the
Debenture Trustee and, in the case of the Guarantee, upon due
execution, authentication and delivery of the Debentures and upon
payment therefor, will constitute valid and binding obligations of the
Company, enforceable in accordance with their respective terms,
subject, as to enforcement, to 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 Debentures are
entitled to the benefits of the Indenture; the Indenture has been duly
qualified under the Trust Indenture Act of 1939 (the "Trust Indenture
Act"); and
(u) Each of the Preferred Securities, Guarantee,
Debentures and the relationship among each of them will conform in all
material respects to the description thereof contained in the
Prospectus.
2. Subject to the terms and conditions herein set forth, (a) the
Trust and the Company agree that the Trust shall issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly,
to purchase from the Trust, at a purchase price per share of $50 per Security,
the number of Securities set forth opposite the name of such Underwriter in
Schedule I hereto and (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Securities as provided below,
the Trust agrees, and the Company agrees to cause the Trust to, issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase, at the purchase price per Security set forth in
Clause (a) of this Section 2, that portion of the number of Optional Securities
as to which such election shall have been exercised (to be adjusted by the
Representatives so as to eliminate fractional Securities) determined by
multiplying such number of Optional Securities by a fraction, the numerator of
which is the maximum number of Securities which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I
hereto and the denominator of which is the maximum number of Securities that
all of the Underwriters are entitled to purchase pursuant to clause (a) of this
Section 2.
The Trust and the Company hereby grant to the Underwriters the
right to purchase at their election up to 450,000 Optional Securities, at the
purchase price per Security set forth in the paragraph above, for the sole
purpose of covering over-allotments in the sale of the Firm Securities. Any
such election to purchase Optional Securities may be exercised only by written
notice from the Representatives to the Company, given within a period of 30
calendar days after the date of this Agreement, setting forth the aggregate
number of Optional Securities to be determined by the Representatives but in no
event earlier than the first Time of Delivery (as defined in Section 3 hereof)
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<PAGE> 8
or, unless the Representatives and the Trust and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of
such notice.
As compensation to the Underwriters for their commitments
hereunder, and in view of the fact that the proceeds of the sale of the
Securities will be used by the Trust to purchase the Debentures of the Company,
the Company at each Time of Delivery will pay to Goldman, Sachs & Co., for the
accounts of the several Underwriters, an amount equal to $___ per Security for
the Securities to be delivered by the Company hereunder at the Time of
Delivery.
3. (a) The Securities to be purchased by each Underwriter
shall be delivered by or on behalf of the Trust to Goldman, Sachs & Co.,
through the facilities of The Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by certified or official bank check or checks, payable
to the order of the Trust in federal or other immediately available funds. The
Trust will cause the certificates representing the Securities to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) at the office of DTC or its designated
custodian (the "Designated Office"). The Securities to be purchased by each
Underwriter hereunder will be represented by one or more definitive global
Securities in book-entry form which will be deposited by or on behalf of the
Trust with the DTC or its designated custodian. The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on _________, 1997
or such other time and date as Goldman, Sachs & Co. and the Trust and the
Company may agree upon in writing. Such time and date are herein called the
"Time of Delivery".
At each Time of Delivery, the Company will pay, or cause to be
paid, the commission payable at such Time of Delivery to the Underwriters under
Section 2 hereof in immediately available funds.
(b) The documents to be delivered at the Time of Delivery
by or on behalf of the parties hereto pursuant to Section 6 hereof, including
the cross-receipt for the Securities and any additional documents requested by
the Underwriters pursuant to Section 6(m) hereof, will be delivered at such
time and date at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022-3897 (the "Closing Location"), and the
Securities will be delivered at the Designated Office, all at the Time of
Delivery. A meeting will be held at the Closing Location prior to the Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 3, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York are generally authorized or obligated by
law or executive order to close.
4. The Trust and the Company, jointly and severally, agree with
each of the Underwriters:
(a) To prepare the Prospectus as amended and supplemented
in relation to the Securities in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of this
Agreement or, if applicable, such earlier time as may be required by
Rule 424(b); prior to the Time of Delivery, to make no further
amendment or any supplement to the Registration Statement or
Prospectus as amended or supplemented unless the Company has furnished
the Representatives and counsel to the Underwriters with a copy for
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<PAGE> 9
their review and comment a reasonable time prior to filing and has
reasonably considered any comments of the Representatives, and to make
no such amendment or supplement to which such counsel shall reasonably
object on legal grounds in writing, after consultation with the
Representatives; to timely file all reports and any definitive proxy
or information statements required to be filed by the Trust or the
Company with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act for so long as the delivery of a prospectus
is required in connection with the offering or sale of the Securities,
and during such same period to advise the Representatives, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
with the Commission, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
prospectus relating to the Securities, of the suspension of the
qualification of the Securities, the Debentures or the shares of
Common Stock, if any, issuable upon the conversion or exchange of the
Securities and/or the Debentures for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Regis- tration Statement or Prospectus or for
additional information; and, in the event of the issuance of any such
stop order or of any such order preventing or suspending the use of
any prospectus relating to the Securities or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of this Agreement and from
time to time during the period of time (not exceeding nine months)
after the date of the Prospectus when a Prospectus is required to be
delivered under the Act to furnish the Underwriters in New York City
with copies of the Prospectus as amended or supplemented in such
quantities as the Representatives may reasonably request, and, if the
delivery of a prospectus is required at any time after the expiration
of nine months in connection with the offering or sale of the
Securities, the Debentures or the shares of Common Stock, if any,
issuable upon the conversion or exchange of the Securities and/or the
Debentures and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such same period to amend or supplement
the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with
the Act or the Exchange Act, to prepare and file such document and to
furnish without charge to each Underwriter as many copies as the
Representatives may reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance;
(c) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act;
(d) To make generally available to the Company's
securityholders, as soon as practicable but in any event not later
than eighteen months after the effective date of the
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Registration Statement, 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 the provisions of Section 11(a)
of the Act and Rule 158 under the Act);
(e) To use its best efforts to qualify the Securities,
the Debentures, the Guarantee and the shares of Common Stock issuable
upon conversion or exchange of the Securities and/or the Debentures
for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may designate, to comply with
such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Securities, 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
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;
(f) During the period beginning from the date hereof and
continuing for a period of 90 days after the issuance of the
Securities, not to offer, sell, contract to sell or otherwise dispose
of (i) any Securities or any preferred stock or any other securities
of the Company which are substantially similar to the Securities,
including any guarantee of such securities, or any securities
convertible into or exchangeable for or representing the right to
receive any of the foregoing securities, or (ii) any shares of any
class of Common Stock of the Company, other than shares of Common
Stock issuable upon conversion of the Securities or pursuant to the
Company's Stock Purchase Plan, the Performance Incentive Stock Plan,
the Employee Stock Ownership Plan and the Employee Savings and
Incentive Plan, without the prior written consent of the
Representatives;
(g) To issue the Guarantee concurrently with the issuance
and sale of the Securities as contemplated herein;
(h) To use the net proceeds received by it from the sale
of the Securities in the case of the Trust, and the Debentures, in the
case of the Company, pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of
issuance, the Securities and the shares of Common Stock issuable upon
the conversion or exchange of the Securities and/or, if the Securities
are exchanged for Debentures, Debentures on the New York Stock
Exchange; and
(j) To reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling
the Company to satisfy any obligation to issue shares of its Common
Stock upon the conversion or exchange of the Securities and/or the
Debentures.
5. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Trust's and the Company's counsel and
accountants in connection with the registration of the Securities and the
shares
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<PAGE> 11
of Common Stock issuable upon conversion of the Securities and/or the
Debentures and all other expenses in connection with the preparation, printing
and filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
any delivery to the Underwriters of any Blue Sky Memorandum; (iii) all expenses
in connection with the qualification of the Securities, the Debentures and the
shares of Common Stock issuable upon the conversion or exchange of the
Securities and/or the Debentures for offering and sale under state securities
laws as provided in Section 4(e) hereof, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey(s) up to an aggregate amount not to exceed
$5,000; (iv) any fees charged by securities rating services for rating the
Securities; (v) the cost of preparing the certificates for the Securities and
the Debentures; (vi) the fees and expenses of the CMS Trustees, the Debenture
Trustee and the Guarantee Trustee and any other agent thereof and the fees and
disbursements of their counsel (it being understood that as among the Company
and the Trust and such trustees, such fees and expenses shall not exceed
$5,000); (vii) the cost and charges of any transfer agent or registrar or
dividend disbursing agent; and (viii) all other reasonable costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Section 7 hereof, the
Underwriters will pay all of their own costs and expenses, including, without
limitation, the fees of their counsel, transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected with any offers they
may make.
6. The obligations of the Underwriters shall be subject, in the
discretion of the Representatives, to the condition that all representations
and warranties and other statements of the Trust and the Company herein are, at
and as of each Time of Delivery, true and correct, the condition that the Trust
and the Company shall have performed all of their respective obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus as amended or supplemented in relation
to the Securities shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance
with Section 4(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to the
Representatives' reasonable satisfaction;
(b) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
the Underwriters, shall have furnished to the Representatives such
written opinion or opinions (a draft of each such opinion is attached
as Annex II(a) hereto), dated the Time of Delivery, with respect to
the incorporation of the Company and the formation of the Trust,
insofar as the federal laws of the United States and the laws of the
State of New York or the General Corporation Law of the State of
Delaware or the Delaware Business Trust Act are concerned, the
validity of the Securities, the Debentures, the Guarantee and the
Prospectus, as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
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<PAGE> 12
(c) Michael D. Van Hemert, Assistant General Counsel to
the Company, shall have furnished to the Representatives his written
opinion or opinions (a draft of each such opinion is attached as Annex
II(b) hereto), dated the Time of Delivery, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company is a duly organized and validly
existing corporation in good standing under the laws of
Michigan, with power and authority (corporate and other) to
own its properties and conduct its business as described in
the Prospectus, as amended and supplemented;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, as amended or supplemented,
and all of the issued shares of capital stock of the Company
(including the Securities) have been duly and validly
authorized and issued and are fully paid and non-assessable;
the shares of Common Stock issuable upon the conversion or
exchange of the Securities and/or Debentures have been duly
authorized and reserved for issuance and, if and when issued
and delivered in accordance with the provisions of the Trust
Agreement and the Indenture, will be validly issued, fully
paid and non- assessable, and will conform to the description
of the Common Stock contained in the Prospectus in all
material respects; and the issuance of such Common Stock is
not subject to any preemptive or other similar rights;
(iii) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or
any of its Subsidiaries is a party or of which any property of
the Company or any of its Subsidiaries is the subject which,
if determined adversely to the Company or any of its
Subsidiaries, would in the aggregate have a material adverse
effect on the current or future consolidated financial
position, securityholders' equity or results of operations of
the Company and its Subsidiaries; and to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(iv) Each of this Agreement, the Indenture and the
Guarantee have been duly authorized, executed and delivered by
the Company; and the Debentures have been duly authenticated
in accordance with the Indenture and delivered and paid for in
accordance herewith;
(v) To the best knowledge of such counsel, there
are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments or sale or Liens
related to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of, or other ownership
interest in, any Significant Subsidiary;
(vi) The issuance and sale of the Securities being
delivered at the Time of Delivery, the compliance by the
Company with all the provisions of this Agreement and the
consummation of the transactions contemplated herein, the
issuance and sale of the Securities and the Common Securities
by the Trust, the sale of the Debentures by the Company to the
Trust, the issuance by the Company of the Guarantee, the
execution, delivery and performance by the Company of the
Guarantor Agreements, the issuance by the Company of the
Common Stock upon the conversion or exchange of the Securities
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<PAGE> 13
and/or the Debentures, the distribution of the Debentures by the Trust
in the circumstances contemplated by the Trust Agreement and the
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement and the Guarantor Agreements will not
conflict with or result in a breach or violation of any of the
material terms or provisions of, or constitute a default under, any
material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or
any of its Subsidiaries is a party or by which the Company is bound or
to which any of the property or assets of the Company or any of its
Subsidiaries is subject (except for such breaches or violations or
defaults that would not have a material adverse effect on the
business, property or financial condition of the Trust or of the
Company and its Subsidiaries, taken as a whole), nor will such action
result in any violation of the provisions of the Articles of
Incorporation or by-laws of the Company or any statute or any
currently existing order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over the
Company or any of its Subsidiaries or any of its properties (other
than the securities or Blue Sky laws of the various states, as to
which such counsel need express no opinion);
(vii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of
the Securities or the consummation by the Company of the transactions
contemplated herein, except such as have been obtained under the Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws (as to which such counsel need express no opinion) in connection
with the purchase and distribution of the Securities;
(viii) Neither the Company nor any of its
Significant Subsidiaries is in violation of its respective charters
or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it
or any of its properties may be bound, except for such violations or
defaults the existence of which would not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole;
(ix) The statements made in the Prospectus under
the captions "Description of the Preferred Securities", "Description
of the Guarantee", "Description of the Debentures", and "Relationship
Among the Preferred Securities, the Debenture and the Guarantee",
insofar as such statements constitute summaries of legal matters or
documents referred to therein, are accurate in all material respects;
the Securities, the Debentures, the Guarantee, the Trust Agreement,
the Indenture and the Common Securities conform as to legal matters
to the description thereof and to the statements in regard thereto
contained in the Registration Statement and the Prospectus;
(x) The Company is not an "investment company"
within the meaning of the Investment Company Act. The Trust is not
required to be registered under the Investment Company Act;
(xi) The documents incorporated by reference in
the Prospectus as amended or supplemented (other than the [operating
statistics,] financial statements, notes,
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<PAGE> 14
auditors' reports and related schedules therein, and any other
financial [or statistical] data included or incorporated by reference
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder; [and they have no reason to
believe that any of such documents, when they became effective or were
so filed, as the case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed under
the Act or the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading];
(xii) The Registration Statement and the Prospectus
as amended or supplemented, and any further amendments and
supplements thereto made by the Company prior to the Time of Delivery
(other than the [operating statistics,] financial statements, notes,
auditors' reports and related schedules and any other financial [or
statistical] data included or incorporated by reference therein, as
to which such counsel need express no opinion), comply as to form in
all material respects with the requirements of the Act and the rules
and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (ix) of
this Section 6(c), they have no reason to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to the Time of Delivery (other than
the [operating statistics,] financial statements, notes, auditors'
reports and related schedules and any other financial [or statistical]
data included or incorporated by reference therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus as amended or
supplemented or any further amendment or supplement thereto made by
the Company prior to the Time of Delivery (other than the [operating
statistics,] financial statements, notes, auditors' reports and related
schedules and any other financial [or statistical] data included or
incorporated by reference therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that, as of the Time of Delivery, either the
Registration Statement or the Prospectus as amended or supplemented
or any further amendment or supplement thereto made by the Company
prior to the Time of Delivery (other than the [operating statistics,]
financial statements, notes, auditors' reports and related schedules
and any other financial [or statistical] data included or
incorporated by reference therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or any contracts or other
documents of a character required to be
14
<PAGE> 15
filed as an exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus as amended or
supplemented or required to be described in the Registration Statement
or the Prospectus as amended or supplemented which are not filed or
incorporated by reference or described as required;
(xiii) Upon due execution, authentication and
delivery of the Securities and upon payment therefor, the Guarantor
Agreements will be legally valid and binding obligations of the
Company enforceable in accordance with their terms, subject, as to
enforcement, to 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 Debentures are
entitled to the benefits of the Indenture; the Indenture has been duly
qualified under the Trust Indenture Act; and
(xiv) To the best of such counsel's knowledge, the
Trust is not a party to or bound by any agreement or instrument other
than this Agreement, the Trust Agreement and the agreements and
instruments contemplated by the Trust Agreement and described in the
Prospectus; and to the best of such counsel's knowledge, there are no
legal or governmental proceedings pending to which the Trust is a
party or of which any property of the Trust is the subject and no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others.
The foregoing opinions may be limited to the laws of Delaware,
Michigan and the federal law of the United States. In giving such opinion,
such counsel may rely, as to matters of Delaware law, upon the opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, special Delaware counsel to the Trust
and the Company, in which case the opinion shall state that such counsel
believes that you and he are entitled to so rely.
(d) Skadden, Arps, Slate, Meagher & Flom LLP, special tax
counsel to the Trust and the Company, shall have furnished to the
Representatives such opinion or opinions (a draft of each such opinion
is attached as Annex II(c) hereto), dated the Time of Delivery, in
form and substance satisfactory to the Representatives, to the effect
that:
(i) The Trust will be classified as a grantor
trust and not as an association taxable as a corporation; and
(ii) The discussion set forth in the Prospectus
under the captions "Risk Factors -- Option to Extend Interest
Payment Period; Tax Consequences" and "-- Proposed Tax Legislation"
and "Certain Federal Income Tax Consequences" is a fair and accurate
summary of the matters addressed therein, based upon the assumptions
stated or referred to therein.
(e) Skadden, Arps, Slate, Meagher & Flom LLP, special
Delaware counsel to the Trust and the Company, shall have furnished to
the Representatives, the Company and the Trust their written opinion
or opinions (a draft of each such opinion is attached as Annex II(d)
hereto), dated the Time of Delivery, in form and substance
satisfactory to the Representatives, to the effect that:
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<PAGE> 16
(i) This Agreement has been duly authorized,
executed and delivered by the Trust;
(ii) The Trust has been duly created and is
validly existing in good standing as a business trust under
the Delaware Business Trust Act and has the business trust
power and authority to conduct its business as described in
the Registration Statement and the Prospectus;
(iii) The Trust Agreement has been duly authorized,
executed and delivered by each of the Company and the Trust,
and constitutes a valid and binding agreement of each of
the Company and the Trust, enforceable against the Company
in accordance with its terms, except as enforcement
thereof may be limited by (a) bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of
equity (regardless of whether enforcement is considered in
a proceeding in equity or at law);
(iv) Under the Delaware Business Trust Act and the
Trust Agreement, the Trust has the power and authority to
(a) execute and deliver, and to perform its obligations
pursuant to, this Agreement, and (b) issue and perform its
obligations under the Securities and Common Securities;
(v) The execution and delivery by the Trust of
this Agreement, and the performance by the Trust of its
obligations thereunder, have been duly authorized by all
necessary action on the part of the Trust;.
(vi) The Securities have been duly authorized for
issuance by the Trust and, when executed and authenticated
by the property trustee in accordance with the terms of the
Trust Agreement and delivered and paid for in accordance
with this Agreement, will be fully paid and non-assessable
undivided beneficial interests in the assets of the Trust and
will entitle the holders thereof to the benefits of this
Agreement except to the extent that enforcement of the Trust
Agreement may be limited by (a) bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of
equity (regardless of whether enforcement is considered
in a proceeding in equity or at law); and the holders of the
Securities will be entitled to the same limitation of
personal liability extended to stockholders of private
corporations for profit organized under the General
Corporation Law of the State of Delaware, except that the
holders of Securities may be obligated, pursuant to the
Trust Agreement, to make payments, including (i) to provide
indemnity and/or security in connection with and pay taxes
or governmental charges arising from transfers of the
Securities and (ii) to provide security and indemnity in
connection with requests of or directions to the property
trustee to exercise its rights and powers under the
Trust Agreement; the issuance of the Securities is not
subject to preemptive or other similar rights under the
Delaware Business Trust Act or the Trust Agreement;
(vii) The Common Securities have been duly
authorized for issuance by the Trust and, when executed and
authenticated by the property trustee in accordance with
16
<PAGE> 17
the terms of the Trust Agreement and delivered and paid in accordance
with the Common Securities Purchase Agreement, dated as of June __,
1997, between the Company and the Trust, will be validly issued,
undivided beneficial interests in the assets of the Trust; the
issuance of the Common Securities is not subject to preemptive or
other similar rights under the Delaware Business Trust Act or the
Trust Agreement;
(viii) None of the execution and delivery by the
Trust of, or the performance by the Trust of its obligations
under, this Agreement, or the issuance and sale of the Securities by
the Trust in accordance with the terms of this Agreement or the
consummation of the other transactions contemplated hereby, will
contravene any provision of applicable law or the Trust Agreement or
any agreement or other instrument governed by the laws of the State
of Delaware binding upon the Trust as set forth in the Trust's
certificate, or any judgment, order or decree applicable to
the Trust as set forth in the Trust's certificate, of any
governmental authority; and
(ix) No governmental approval is required for the
issuance and sale of the Securities and the Common Securities by the
Trust pursuant to this Agreement or the consummation of the other
transactions contemplated hereby, except such as have been obtained
and made.
(f) [On the date of the Prospectus and also] at the Time of
Delivery, the independent accountants of the Company who have certified the
financial statements of the Company and its consolidated Subsidiaries included
or incorporated by reference in the Registration Statement shall have furnished
to the Representatives a letter, dated as of such date, (i) confirming that
they are independent public accountants within the meaning of the 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;
(g) That, between the date of the execution of this Agreement and
the Time of Delivery, no material and adverse change shall have occurred in the
business, properties or financial condition of the Company and its
Subsidiaries, taken as a whole, which, in the judgment of the Representatives,
impairs the marketability of the Securities (other than changes referred to in
or contemplated by the Registration Statement or Prospectus);
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization", as that
term is defined by the Commission for purposes of Rule 436(g)(2) under the Act,
[and (ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities or preferred stock or the Company's financial
strength or claims paying ability];
(i) The Trust Agreement, the Guarantee and the Indenture shall
have been executed and delivered, in each case in a form reasonably
satisfactory to the Representatives;
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<PAGE> 18
(j) The Securities and the shares of Common Stock issuable upon
the conversion or exchange of the Securities and/or Debentures shall have
been duly listed, subject to notice of issuance, on the New York Stock
Exchange;
(k) The Company shall have complied with the provisions of Section
4(b) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(l) The Trust and the Company shall have furnished or caused to be
furnished to the Representatives at the Time of Delivery certificates of
officers of the Trust and the Company to the effect that to the best of
such person's knowledge, information and belief (i) there has been no
material adverse change in the business, properties or financial condition
of the Company and its Subsidiaries, taken as a whole or the Trust from
that set forth in the Registration Statement or Prospectus (other than
changes referred to in or contemplated by the Registration Statement or
Prospectus), (ii) the representations and warranties of the Trust and the
Company herein at and as of such Time of Delivery are true and correct,
(iii) the Trust and the Company have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or
prior to the Time of Delivery, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or threatened by the
Commission.
7. The obligations of the Company and the Trust shall be subject,
in the discretion of the Company and the Trust, to the condition that the
Registration Statement shall be effective under the Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or proceedings therefor initiated or threatened by the
Commission.
8. (a) The Trust and the Company, jointly and severally, will, to the
extent permitted by law, indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with [investigating or] defending any such
action or claim as such expenses are incurred; provided, however, that (i)
neither the Trust nor the Company shall be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Trust and the Company by any Underwriter through
the Representatives expressly for use in the Prospectus as amended or
supplemented relating to such Securities or with any statements in or omissions
from that part of the Registration Statement that shall constitute the
Statements of Eligibility and Qualification under the Trust Indenture Act of
the Debenture Trustee, the Guarantee Trustee and the Property Trustee, and
except that this indemnity shall not inure to the benefit of any Underwriter
(or any person controlling such
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<PAGE> 19
Underwriter) on account of any losses, claims, damages, liabilities or actions,
suits or proceedings arising from the sale of the Securities 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 Securities 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.
(b) Each Underwriter, severally and not jointly, will indemnify
and hold harmless the Trust and the Company against any losses, claims, damages
or liabilities to which the Trust and the Company may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented and any other prospectus relating to
the Securities, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Securities, or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Trust and the Company by such Underwriter through the
Representatives expressly for use therein; and will reimburse the Trust and the
Company for any legal or other expenses reasonably incurred by the Trust and
the Company in connection with [investigating or] defending any such action or
claim as such expenses are incurred.
(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 subsection (a) or (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 subsection (a) or (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 subsection (b)
and by the Company in the case of parties indemnified pursuant to subsection
(a). Any Indemnified Person shall have the right to participate in such
litigation or proceeding and to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the
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<PAGE> 20
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 for 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. Such firms shall be selected and designated in writing by
Goldman, Sachs & Co.
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:
(a) 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;
(b) 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
(c) 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.
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.
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<PAGE> 21
(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party 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 Trust and the Company on the one hand and
the Underwriters on the other from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above and such failure resulted in the
indemnifying party being prejudiced in a material way, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Trust and the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Trust and the Company on the one hand and
such Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from such offering (before deducting expenses) received
by the Trust and the Company and the total underwriting discounts and
commissions received by such Underwriters. 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 Trust and the
Company on the one hand or such Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Trust, the Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) 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 subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim, provided that the provisions of
subsection (c) have been complied with (in all material respects) in respect of
any separate counsel for such indemnified party. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount greater than the excess of (i) the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Trust and the Company under this
Section 7 shall be in addition to any liability which the Trust and the Company
may otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section 7 shall be in
addition to any liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company, each Regular Trustee and to each person, if any, who
controls the Trust and the Company within the meaning of the Act.
21
<PAGE> 22
9. (a) 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
Securities 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 in the Company to purchase, upon the terms herein
set forth, the principal amount of Securities 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:
(a) to require such non-defaulting Underwriters to purchase
and pay for the respective principal amounts of Securities which they
had severally agreed to purchase hereunder, as hereinabove provided,
and, in addition, the principal amount of Securities 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 Securities 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
Securities 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 9 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 9 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.
22
<PAGE> 23
10. The respective indemnities, agreements, representations,
warranties and other statements of the Trust and the Company and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Trust, the Company, or any officer, director, Regular
Trustee or controlling person of the Trust or the Company, and shall survive
delivery of and payment for the Securities.
11. This Agreement may be terminated at any time prior to the Time
of Delivery by the Representatives if, prior to such time, any of the following
events shall have occurred: (i) a suspension or material limitation in trading
in securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the outbreak
or escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this Clause (v) in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities on the terms and in the manner contemplated in
the Prospectus;
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 Securities 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 and 7
shall survive any termination of this Agreement.
12. In all dealings hereunder, the Representatives shall act on
behalf of each of the Underwriters, and the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by the Representatives jointly or by Goldman, Sachs &
Co. on behalf of the Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to the Representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Trust or the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth
in the Registration Statement, Attention: Secretary; provided, however, that
any notice to an Underwriter pursuant to Section 7(c) hereof shall be delivered
or sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Trust and the Company
by the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
23
<PAGE> 24
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Trust, the Company and, to the extent
provided in Sections 7 and 9 hereof, the officers, directors and administrative
trustees of the Trust, the Company and each person who controls the Trust, the
Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of
the Securities from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the
parties hereto and thereto 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.
24
<PAGE> 25
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Trust, the Company and one for each of the
Representatives plus one for each counsel counterparts hereof.
Very truly yours,
CMS ENERGY TRUST I
By:---------------------------------------
Name:
Title: Administrative Trustee
CMS ENERGY CORPORATION
By:
---------------------------------------
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO.
BY:
---------------------------------------
(GOLDMAN, SACHS & CO.)
25
<PAGE> 1
EXHIBIT 4(e)
================================================================================
CMS Energy Corporation, Issuer
and
The Bank of New York, Trustee
INDENTURE
Dated as of June __, 1997
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
_____________
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as
of June __, 1997 between CMS Energy Corporation and The Bank of New York:
Section of the Act Section of Indenture
- ------------------ --------------------
310(a)(1) and (2).............. 6.9
310(a)(3) and (4).............. Inapplicable
310(b)......................... 6.8 and 6.10(a), (b) and (d)
310(c)......................... Inapplicable
311(a)......................... 6.13(a) and (c)(1) and (2)
311(b)......................... 6.13(b)
311(c)......................... Inapplicable
312(a)......................... 4.1 and 4.2(a)
312(b)......................... 4.2(a) and (b)(i) and (ii)
312(c)......................... 4.2(c)
313(a)......................... 4.4(a)
313(b)(1)...................... Inapplicable
313(b)(2)...................... 4.4(b)
313(c)......................... 4.4(c)
313(d)......................... 4.4(d)
314(a)......................... 4.3
314(b)......................... Inapplicable
314(c)(1) and (2).............. 13.5
314(c)(3)...................... Inapplicable
314(d)......................... Inapplicable
314(e)......................... 13.5
314(f)......................... Inapplicable
315(a), (c) and (d)............ 6.1
315(b)......................... 5.11
315(e)......................... 5.12
316(a)(1)...................... 5.9
316(a)(2)...................... Not required
316(a) (last sentence)......... 7.4
316(b)......................... 5.7
316(c)......................... Not required
317(a)......................... 5.2
317(b)......................... 3.4(a) and (b)
318(a)......................... 13.7
________________
* This Cross Reference Sheet is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
ARTICLE ONE DEFINITIONS ...................... 1
Section 1.1 Certain Terms Defined ...................................... 1
Affiliate .......................................................... 2
Authenticating Agent ............................................... 2
Board of Directors ................................................. 2
Board Resolution ................................................... 2
Business Day ....................................................... 2
CMS Energy Trust ................................................... 2
Commission ......................................................... 2
Common Securities .................................................. 2
Common Securities Guarantee ........................................ 3
Common Stock ....................................................... 3
Conversion Agent ................................................... 3
Convertible Securities ............................................. 3
Corporate Trust Office ............................................. 3
Declaration ........................................................ 3
Depository ......................................................... 3
Event of Default ................................................... 3
Global Security .................................................... 3
Government Obligations ............................................. 3
Holder, Holder of Securities, Securityholder ....................... 4
Indenture .......................................................... 4
Interest ........................................................... 4
Interest Payment Date .............................................. 4
Issuer ............................................................. 4
Issuer Order ....................................................... 4
Maturity ........................................................... 4
Officers' Certificate .............................................. 5
Opinion of Counsel ................................................. 5
Original Issue Discount ............................................ 5
Original Issue Discount Security ................................... 5
Outstanding ........................................................ 5
Periodic Offering .................................................. 6
Person ............................................................. 6
Preferred Securities ............................................... 6
Preferred Securities Guarantee ..................................... 6
Principal .......................................................... 7
Property Trustee ................................................... 7
Record Date ........................................................ 7
Responsible Officer ................................................ 7
Security ........................................................... 7
Security or Securities ............................................. 7
Security Register and Security Registrar ........................... 7
Senior Indebtedness ................................................ 7
Subsidiary ......................................................... 7
Stated Maturity .................................................... 8
Trust Indenture Act of 1939 or Trust Indenture Act ................. 8
Trust Securities ................................................... 8
Trustee ............................................................ 8
Yield to Maturity .................................................. 8
i
<PAGE> 4
Section 1.2 OTHER DEFINITIONS ......................................... 8
ARTICLE TWO SECURITIES ............................ 8
Section 2.1 Forms Generally ........................................... 8
Section 2.2 Form of Trustee's Certificate of Authentication ........... 9
Section 2.3 Amount Unlimited; Issuable in Series ...................... 10
Section 2.4 Authentication and Delivery of Securities ................. 13
Section 2.5 Execution of Securities ................................... 16
Section 2.6 Certificate of Authentication ............................. 17
Section 2.7 Denomination of Securities; Payments of
Interest ............................................... 17
Section 2.8 Registration, Transfer and Exchange ....................... 18
Section 2.9 Mutilated, Defaced, Destroyed, Lost
and Stolen Securities .................................. 21
Section 2.10 Cancellation of Securities; Destruction
Thereof ................................................ 22
Section 2.11 Temporary Securities ...................................... 22
Section 2.12 Computation of Interest ................................... 23
ARTICLE THREE COVENANTS OF THE ISSUER ..................... 23
Section 3.1 Payment of Principal and Interest ......................... 23
Section 3.2 Offices for Payments, etc. ................................ 23
Section 3.3 Appointment to Fill a Vacancy in Office
Of Trustee ............................................. 24
Section 3.4 Paying Agents ............................................. 24
Section 3.5 Limitation on Dividends; Transactions with
Affiliates ............................................. 25
ARTICLE FOUR SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE ................................ 26
Section 4.1 Issuer to Furnish Trustee Names and
Addresses of Securityholders ........................... 26
Section 4.2 Preservation and Disclosure of
ii
<PAGE> 5
Securityholders Lists .................................. 27
Section 4.3 Reports by the Issuer .................................... 28
Section 4.4 Reports by the Trustee ................................... 29
ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT .................................. 30
Section 5.1 Event of Default Defined; Acceleration of
Maturity; Waiver of Default ............................ 30
Section 5.2 Collection of Indebtedness by Trustee;
Trustee May Prove Debt ................................. 33
Section 5.3 Application of Proceeds .................................. 36
Section 5.4 Suits for Enforcement .................................... 37
Section 5.5 Restoration of Rights on Abandonment of
Proceedings ............................................ 37
Section 5.6 Limitations on Suits by Securityholders .................. 37
Section 5.7 Unconditional Right of Securityholders
to Receive Principal and Interest and
to Institute Certain Suits ............................. 38
Section 5.8 Powers and Remedies Cumulative; Delay or
Omission Not Waiver of Default ......................... 38
Section 5.9 Control by Holders of Securities ......................... 39
Section 5.10 Waiver of Past Defaults .................................. 39
Section 5.11 Trustee to Give Notice of Default, But
May Withhold in Certain Circumstances .................. 40
Section 5.12 Right of Court to Require Filing of
Undertaking to Pay Costs ............................... 40
Section 5.13 Waiver of Stay or Extension Laws ......................... 41
ARTICLE SIX CONCERNING THE TRUSTEE ..................... 41
Section 6.1 Duties and Responsibilities of the
Trustee; During Default; Prior to Default .............. 41
Section 6.2 Certain Rights of the Trustee ............................ 42
Section 6.3 Trustee Not Responsible for Recitals,
iii
<PAGE> 6
Disposition of Securities or
Application of Proceeds Thereof ...................... 44
Section 6.4 Trustee and Agents May Hold Securities;
Collections, etc. .................................... 44
Section 6.5 Moneys Held by Trustee .................................. 44
Section 6.6 Compensation and Indemnification of
Trustee and Its Prior Claim .......................... 44
Section 6.7 Right of Trustee to Rely on Officers'
Certificate, etc. .................................... 45
Section 6.8 Qualification of Trustee; Conflicting
Interests ............................................ 45
Section 6.9 Persons Eligible for Appointment as
Trustee .............................................. 45
Section 6.10 Resignation and Removal; Appointment
of Successor Trustee ................................. 46
Section 6.11 Acceptance of Appointment by Successor
Trustee .............................................. 47
Section 6.12 Merger, Conversion, Consolidation or
Succession to Business of Trustee .................... 48
Section 6.13 Preferential Collection of Claims Against
the Issuer ........................................... 49
Section 6.14 Appointment of Authenticating Agent ..................... 49
ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS ............... 50
Section 7.1 Evidence of Action Taken by Securityholders .............. 50
Section 7.2 Proof of Execution of Instruments and of
Holding of Securities .................................. 50
Section 7.3 Holders to Be Treated as Owners .......................... 51
Section 7.4 Securities Owned by Issuer Deemed Not
Outstanding ............................................ 51
Section 7.5 Right of Revocation of Action Taken ...................... 52
Section 7.6 Calculation of Original Issue Discount ................... 52
ARTICLE EIGHT SUPPLEMENTAL INDENTURES .................. 52
iv
<PAGE> 7
Section 8.1 Supplemental Indentures Without
Consent of Securityholders ............................. 52
Section 8.2 Supplemental Indentures With
Consent of Securityholders ............................. 54
Section 8.3 Effect of Supplemental Indenture ......................... 56
Section 8.4 Documents to Be Given to Trustee ......................... 56
Section 8.5 Notation on Securities in Respect of
Supplemental Indentures ................................ 56
ARTICLE NINE CONSOLIDATION, MERGER, SALE OR CONVEYANCE .......... 56
Section 9.1 Covenant of Issuer Not to Merge,
Consolidate, Sell or Convey Property
Except Under Certain Conditions ........................ 56
Section 9.2 Successor Corporation Substituted
for Issuer ............................................. 57
Section 9.3 Opinion of Counsel Delivered to Trustee .................. 58
ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS .............................................. 58
Section 10.1 Satisfaction and Discharge of Indenture ................. 58
Section 10.2 Application by Trustee of Funds Deposited
for Payment of Securities .............................. 61
Section 10.3 Repayment of Moneys Held by Paying Agent ................ 61
Section 10.4 Return of Moneys Held by Trustee and
Paying Agent Unclaimed for Three Years ................ 61
Section 10.5 Indemnity for Government Obligations .................... 62
ARTICLE ELEVEN REDEMPTION OF SECURITIES AND SINKING FUNDS ....... 62
Section 11.1 Applicability of Article ................................ 62
Section 11.2 Notice of Redemption; Partial Redemptions ............... 62
Section 11.3 Payment of Securities Called for Redemption ............. 64
Section 11.4 Exclusion of Certain Securities from
Eligibility for Selection for Redemption ............... 65
v
<PAGE> 8
Section 11.5 Mandatory and Optional Sinking Funds ..................... 65
Section 11.6 Conversion Arrangement on call for
Redemption .............................................. 68
ARTICLE TWELVE SUBORDINATION ....................... 68
Section 12.1 Applicability of Article; Securities
Subordinated to Senior Indebtedness ..................... 68
Section 12.2 Issuer Not to Make Payments with
Respect to Subordinated Securities
in Certain Circumstances ................................ 70
Section 12.3 Subordinated Securities Subordinated
to Prior Payment of All Senior
Indebtedness on Dissolution,
Liquidation or Reorganization
of Issuer ............................................... 71
Section 12.4 Holders of Subordinated Securities
to be Subrogated to Right of
Holders of Senior Indebtedness .......................... 72
Section 12.5 Obligation of the Issuer Unconditional ................... 73
Section 12.6 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice ......................... 74
Section 12.7 Application by Trustee of Monies or
Government Obligations Deposited with It ................ 74
Section 12.8 Subordination Rights Not Impaired by
Acts or Omissions of Issuer or Holders
of Senior Indebtedness .................................. 75
Section 12.9 Securityholders Authorize Trustee to
Effectuate Subordination of Securities .................. 76
Section 12.10 Right of Trustee to Hold Senior
Indebtedness ............................................ 76
Section 12.11 Article Twelve Not to Prevent Events of
Defaults ................................................ 76
ARTICLE THIRTEEN CONVERSIONS ........................ 76
Section 13.1 Applicability of Article ................................. 77
Section 13.2 Conversion Privilege ..................................... 77
Section 13.3 Conversion Procedure ..................................... 77
vi
<PAGE> 9
Section 13.4 Fractional Shares ......................................... 78
Section 13.5 Taxes on Conversion ....................................... 79
Section 13.6 Issuer to Provide Stock ................................... 79
Section 13.7 Adjustment for Change in Capital Stock .................... 79
Section 13.8 Adjustment for Rights Issue ............................... 80
Section 13.9 Adjustments for Other Distributions ....................... 81
Section 13.10 Voluntary Adjustment ..................................... 82
Section 13.11 Certain Definitions ...................................... 83
Section 13.12 When Adjustment May Be Deferred .......................... 84
Section 13.13 When Adjustment Is Not Required .......................... 85
Section 13.14 Notice of Adjustment ..................................... 85
Section 13.15 Notice of Certain Transactions ........................... 85
Section 13.16 Consolidation, Merger or Sale of
the Issuer ............................................... 86
Section 13.17 Issuer Determination Final ............................... 86
Section 13.18 Trustee's Disclaimer ..................................... 86
Section 13.19 Simultaneous Adjustments ................................. 87
ARTICLE FOURTEEN MISCELLANEOUS PROVISIONS ................... 87
Section 14.1 Incorporators, Stockholders, Officers
and Directors of Issuer Exempt
from Individual Liability ................................ 87
Section 14.2 Provisions of Indenture for the Sole
Benefit of Parties and Holders of
Securities ............................................... 87
Section 14.3 Successors and Assigns of Issuer Bound
by Indenture ............................................. 88
Section 14.4 Notices and Demands on Issuer, Trustee
and Holders of Securities ................................ 88
Section 14.5 Officers' Certificates and Opinions
of Counsel; Statements to be
Contained Therein ........................................ 89
vii
<PAGE> 10
Section 14.6 Payments Due on Saturdays, Sundays
and Holidays ........................................ 90
Section 14.7 Conflict of any Provision of Indenture
with Trust Indenture Act of 1939 .................... 90
Section 14.8 New York Law to Govern ............................... 90
Section 14.9 Counterparts ......................................... 90
Section 14.10 Effect of Headings and Table of Contents ............. 90
Section 14.11 Separability Clause .................................. 91
viii
<PAGE> 11
THIS INDENTURE dated as of June __, 1997 between CMS Energy
Corporation, a Michigan corporation (the "Issuer"), and The Bank of New York, a
New York banking corporation, as trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue from time to time of
its debentures, notes, bonds or other evidences of indebtedness to be issued in
one or more series (the "Securities") up to such principal amount or amounts as
may from time to time be authorized in accordance with the terms of this
Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of
this Indenture to provide, among other things, for the authentication, delivery
and administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture
and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities
by the holders thereof, the Issuer and the Trustee mutually covenant and agree
for the equal and proportionate benefit of the respective holders from time to
time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1 Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture that are defined in the Trust Indenture Act of 1939,
including terms defined therein by reference to the Securities Act of 1933, as
amended (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of this
Indenture. All accounting terms used herein and not expressly defined shall
have the meanings assigned to such terms in accordance with generally accepted
accounting principles, and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted in the United States
of America at the time of any computation. References to any statute mean such
statute as
1
<PAGE> 12
amended at the time and includes any successor legislation. The words "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision. The terms defined in this Article include the plural as well as
the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" shall have the meaning set forth in Section
6.14.
"Board of Directors" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act on its behalf.
"Board Resolution" means a copy of one or more resolutions, certified
by the secretary or an assistant secretary of the Issuer to have been duly
adopted or consented to by the Board of Directors and to be in full force and
effect, and delivered to the Trustee.
"Business Day" means a day on which banking institutions in New York,
New York or Delaware are not authorized or required by law or regulation to
close.
"CMS Energy Trust" means a Delaware business trust formed by the
Issuer for the purpose of purchasing the Securities of the Issuer.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act of 1939, then the body performing such duties at such
time.
"Common Securities" means undivided beneficial interests in the assets
of a CMS Energy Trust which rank pari passu with Preferred Securities issued by
such trust; provided, however, that upon the occurrence of an Event of Default,
the rights of holders of Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and maturity are
subordinated to the rights of holders of Preferred Securities.
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"Common Securities Guarantee" means any guarantee that the Issuer may
enter into that operates directly or indirectly for the benefit of holders of
Common Securities of Consumers Trust.
"Common Stock" means the Common Stock, $.01 par value, of the Issuer
as it exists on the date of this Indenture and stock of any other class into
which such Common Stock may thereafter have been changed.
"Coversion Agent" shall mean the office or agency where the Securities
of each series that is convertible may be presented for conversion as set forth
in Section 3.2.
"Convertible Securities" means any or all options, warrants,
securities and rights, except the Securities, which are convertible into or
exercisable or exchangeable for Common Stock or which otherwise entitle the
holder thereof to subscribe for, purchase or otherwise acquire Common Stock.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at 101 Barclay St., New York, New York 10286; Attn.
Corporate Trust, Trustee Administration.
"Declaration" means, in respect of a Consumers Trust, the amended and
restated declaration of trust of such Consumers Trust or any other governing
instrument of such Trust.
"Depository" means, with respect to the Securities of any series
issuable or issued in the form of one or more Global Securities, the Person
designated as Depository by the Issuer pursuant to Section 2.3, which must be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended, and any other applicable statute or regulation, until a successor
Depository shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depository" shall mean each Person who is then a
Depository hereunder; and if at any time there is more than one such Person,
"Depository" as used with respect to the Securities of any such series shall
mean each Depository with respect to the Global Securities of such series.
"Event of Default" means any event or condition specified as such in
Section 5.1.
"Global Security" means a Security evidencing all or a part of a
series of Securities issued to the Depository, or its nominee, for such series
in accordance with Section 2.4, and bearing the legend prescribed in Section
2.4.
"Government Obligations" means direct obligations of the United States
for the payment of which its full faith and credit is pledged, or obligations of
a person controlled or supervised by and
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acting as an agency or instrumentality of the United States and the payment of
which is unconditionally guaranteed by the United States, and shall also include
a depository receipt issued by a bank or trust company as custodian with respect
to any such Government Obligation or a specific payment of interest on or
principal of any such Government Obligation held by such custodian for the
account of a holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"Holder" or other similar terms mean the Person in whose name such
Security is registered in the Security Register kept by the Issuer for that
purpose in accordance with the terms hereof.
"Indenture" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or supplemented
or both, and shall include the forms and terms of particular series of
Securities established as provided hereunder.
"Interest" means, when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity or upon default
in any other payment due on such Security, interest payable after Maturity or
upon such default, as the case may be.
"Interest Payment Date" means (a) the date or dates, if any, on which
interest is to be paid on any Security as established pursuant to Section
2.3(f), (b) the date of maturity or redemption of such Security, and (c) only
with respect to defaulted interest on such Security, the date established for
the payment of such defaulted interest pursuant to Section 2.7 hereof.
"Issuer" means (except as otherwise provided in Article Six) CMS
Energy Corporation, a Michigan corporation, and, subject to Article Nine, its
successors and assigns.
"Issuer Order" means a written statement, request or order of the
Issuer signed in its name by the Chairman, the President or any Vice President
(whether or not designated by a number or numbers or a word or words added
before or after the title "Vice President") or by the Treasurer of the Issuer.
"Maturity" means, when used with respect to any Security, the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
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<PAGE> 15
"Officers' Certificate" means a certificate signed by the Chairman,
the President or any Vice President (whether or not designated by a number or
numbers or a word or words added before or after the title "Vice President"),
and by the Chief Financial Officer, Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary, of the Issuer and delivered to the
Trustee. Except as otherwise provided herein, each such certificate shall
include the statements provided for in Section 14.5.
"Opinion of Counsel" means an opinion in writing signed by the counsel
of the Issuer as designated by the Board of Directors or by such other legal
counsel who may be an employee of or regular counsel to the Issuer and who shall
be satisfactory to the Trustee. Each such opinion shall include the statements
provided for in Section 13.5, if and to the extent required thereby.
"Original Issue Discount" of any debt security, including any Original
Issue Discount Security, means the difference between the principal amount of
such debt security and the initial issue price of such debt security (as set
forth, in the case of an Original Issue Discount Security, on the face of such
Security).
"Original Issue Discount Security" means any Security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 5.1.
"Outstanding" (except as otherwise provided in Section 6.8), when used
with reference to Securities, shall, subject to the provisions of Section 7.4,
mean, as of any particular time, all Securities theretofore authenticated and
delivered by the Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which moneys or Government Obligations (as provided for in Section 10.1) in
the necessary amount shall have been theretofore deposited in trust with
the Trustee or with any paying agent (other than the Issuer) or shall have
been set aside, segregated and held in trust by the Issuer for the Holders
of such Securities (if the Issuer shall act as its own paying agent),
provided that if such Securities, or portions thereof, are to be redeemed
prior to the Maturity thereof, notice of such redemption shall have been
given as herein provided, or provision satisfactory to the Trustee shall
have been made for giving such notice; and
(c) Securities which shall have been paid or in substitution for
which other Securities shall have been authenticated and delivered pursuant
to the terms of
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Section 2.9 (except with respect to any such Security as to which proof
satisfactory to the Trustee is presented that such Security is held by a
Person in whose hands such Security is a legal, valid and binding
obligation of the Issuer).
In determining whether the Holders of the requisite principal amount
of Outstanding Securities of any or all series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (a) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the Maturity thereof pursuant to Section 5.1, and (b)
Securities owned by the Issuer or any other obligor upon the Securities of any
Affiliate of the Issuer or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded. Securities so owned as described in clause (b)
above which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the Issuer
or any other obligor upon the Securities or an Affiliate of the Issuer or of
such other obligor.
"Periodic Offering" means an offering of Securities of any series from
time to time, the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the stated maturity
or maturities thereof and the redemption provisions, if any, with respect
thereto are to be determined by the Issuer or its agents upon the issuance of
such Securities.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Securities" means undivided beneficial interests in the
assets of a Consumers Trust which rank pari passu with Common Securities issued
by such trust; provided however, that upon the occurrence of an Event of
Default, the rights of holders of Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Issuer
may enter into that operates directly or indirectly for the benefit of holders
of Preferred Securities of a Consumers Trust.
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"Principal", of a debt security, including any Security, means the
amount (including, without limitation, if and to the extent applicable, any
premium and, in the case of an Original Issue Discount Security, any accrued
original issue discount, but excluding interest) that is payable with respect to
such debt security as of any date and for any purpose (including, without
limitation, in connection with any sinking fund, upon any redemption at the
option of the Issuer, upon any purchase or exchange at the option of the Issuer
or the Holder of such debt security and upon any acceleration of the Maturity of
such debt security) and shall be deemed to include the words "and premium, if
any".
"Property Trustee" means the entity performing the functions of the
Property Trustee of a Consumers Trust under the applicable Declaration of such
Consumers Trust.
"Record Date" shall have the meaning set forth in Section 2.7.
"Responsible Officer", when used with respect to the Trustee, means
any vice president (whether or not designated by numbers or words added before
or after the title "vice president"), any trust officer, any assistant vice
president,any assistant secretary, any assistant treasurer or any other officer
of the Trustee 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 the particular subject.
"Security" means any Security registered on the Security Register of
the Issuer.
"Security" or "Securities" (except as otherwise provided in Section
6.8) shall have the meaning stated in the first recital of this Indenture and,
more particularly, any Securities that have been authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" shall have the respective
meanings set forth in Section 2.8.
"Security Indebtedness" shall have the meaning set forth in Section
12.1(b).
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Issuer or by 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.
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"Stated Maturity" means, when used with respect to any Security or any
installment of principal thereof or interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.
"Trust Indenture Act of 1939" or "Trust Indenture Act" (except as
otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was originally executed.
"Trust Securities" means Common Securities and Preferred Securities.
"Trustee" means the Person identified as the "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Six, shall also
include any successor trustee. "Trustee" shall also mean or include each Person
who is then a trustee hereunder; and if at any time there is more than one such
Person, "Trustee" as used with respect to the Securities of any series shall
mean the trustee with respect to the Securities of such series.
"Yield to Maturity" means the yield to Maturity on a series of
Securities, calculated at the time of issuance of such series, or, if
applicable, at the most recent redetermination of interest on such series, in
accordance with accepted financial practice.
Section 1.2 OTHER DEFINITIONS.
TERM
DEFINED IN SECTION
Average Market Price ............... 13.11
Current market price ............... 13.11
Determination Date ................. 13.11
Ex-Dividend Date ................... 13.11
Senior Indebtedness ................ 12.1(b)
ARTICLE TWO
SECURITIES
Section 2.1 Forms Generally. The Securities of each series shall be
substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions (as set forth in a
Board Resolution or, to the extent established pursuant to rather than set forth
in a Board Resolution, an Officers' Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with
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such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have imprinted or otherwise
reproduced thereon such letters, numbers or other marks of identification and
such legend or legends or endorsements, not inconsistent with the provisions of
this Indenture, as may be required to comply with any law or with any rules or
regulations pursuant thereto, or with any rules of any securities exchange or to
conform to general usage, all as may be determined by the officers executing
such Securities as evidenced by their execution of such Securities.
The definitive Securities 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 Securities as evidenced by their
execution of such Securities.
Section 2.2 Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication on all Securities shall be in
substantially the following form:
"This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
The Bank of New York ,
----------------------------
as Trustee
Dated: By
---------- ------------------------
Authorized Signatory"
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Trustee's certificate of
authentication to be borne by the Securities of each such series shall be
substantially as follows:
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"This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.
-------------------------,
as Authenticating Agent
Dated: By
-----------------------
Authorized Officer"
Section 2.3 Amount Unlimited; Issuable in Series.
(a) The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
(b) The Securities may be issued in one or more series and shall be
direct obligations of the Issuer.
(c) Each Security shall be dated and issued as of the date of its
authentication by the Trustee.
(d) Each Security shall bear interest from the later of its original
date of authentication or the most recent Interest Payment Date to which
interest has been paid or duly provided for with respect to such Security until
the principal of such Security is paid or made available for payment, and
interest on each Security shall be payable on each Interest Payment Date after
the date of such Security.
(e) Each Security shall mature on a date specified in the Security not
less than nine months nor more than 40 years after the date of its issuance, and
the principal amount of each outstanding Security shall be payable on the
Maturity specified therein.
(f) There shall be established in or pursuant to one or more Board
Resolutions (and, to the extent established pursuant to rather than set forth in
a Board Resolution, in an Officers' Certificate detailing such establishment) or
established in one or more indentures supplemental hereto, prior to the initial
issuance of Securities of any series:
(1) the designation of the Securities of such series, which shall
distinguish the Securities of such series from the Securities of all other
series;
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(2) any limit upon the aggregate principal amount of the Securities
of such series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of such
series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 11.3);
(3) subject to Section 2.3(e), the date or dates (and whether fixed
or extendible) on which the principal of the Securities of such series is
payable;
(4) the rate or rates at which the Securities of such series shall
bear interest, if any, the Interest Payment Date or Dates for the
Securities of such series and the Record Date for interest payable on any
Interest Payment Date and/or the method by which such rate or rates shall
be determined;
(5) the place or places where the principal of and any interest on
Securities of such series shall be payable and where such Securities may be
registered or transferred (if in addition to, or other than, as provided in
Section 3.2);
(6) any provisions relating to the issuance of Securities of such
series at an original issue discount (including, without limitation, the
issue price thereof, the rate or rates at which such original issue
discount shall accrue, if any, and the dates from or to which or periods
during which such original issue discount shall accrue at such rate or
rates);
(7) the right, if any, of the Issuer to redeem or purchase Securities
of such series, in whole or in part, at its option and the period or
periods within which, the price or prices at which and any terms and
conditions upon which Securities of such series may be so redeemed;
(8) the obligation, if any, of the Issuer to redeem, purchase or
repay Securities of such series pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of a Holder thereof
and the price or prices at which and the period or periods within which and
any terms and conditions upon which Securities of such series shall be
redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of [$1,000] and any integral multiple
thereof, the denominations in which Securities of such series shall be
issuable;
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(10) the obligation, if any, of the Issuer to permit the conversion
of Securities of such series into Common Stock and the terms and conditions
upon which such conversion shall be effected (including, without
limitation, the initial conversion price or rate, the conversion period and
any other provision in addition to or in lieu of those set forth in Article
Thirteen of this Indenture relative to such obligation);
(11) if other than the entire principal amount thereof, the portion
of the principal amount of Securities of such series which shall be payable
upon acceleration of the Maturity thereof pursuant to Section 5.1 or, if
applicable, which is convertible in accordance with Article Thirteen;
(12) whether the Securities of such series will be subordinated to
the payment of Senior Indebtedness on the terms and conditions set forth in
Article Twelve and whether such subordination shall be subject to any
provisions in addition to or in lieu of those set forth in Article Twelve;
(13) whether the Securities of such series will be issuable as Global
Securities;
(14) whether and under what circumstances the Issuer will pay
additional amounts on the Securities of such series held by a person who is
not a U.S. Person in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Issuer will have the option to
redeem such Securities rather than pay such additional amounts;
(15) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, and
the form and terms of any such certificates, documents or conditions;
(16) any trustees, depositaries, authenticating or paying agents,
transfer agents, conversion agents or registrars or any other agents with
respect to the Securities of such series;
(17) any events of default or covenants with respect to the
Securities of such series other than those specified herein;
(18) the Person to whom any interest on a Security of such series
shall be payable, if other than the Person in whose name the Security (or
one or more predecessor
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Securities) is registered at the close of business on the Record Date for
such interest;
(19) if the Securities of such series shall be issued in whole or in
part in the form of one or more Global Securities, whether beneficial
owners of interests in any such Global Security may exchange such interests
for Securities of such series of like tenor and of authorized form and
denomination and the circumstances under which any such changes may occur,
if other than in the manner provided in Section 2.8;
(20) the right of the Issuer, if any, to defer any payment of
principal of or interest on the Securities of such series, and the maximum
length of any such deferral period;
(21) whether any property will be pledged to secure the Securities;
and
(22) any other terms of such series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical,
except as to denomination and except as may otherwise be provided by or pursuant
to the Board Resolution or Officers' Certificate referred to above or as set
forth in any indenture supplemental hereto referred to above. All Securities of
any one series need not be issued at the same time and may be issued from time
to time, consistent with the terms of this Indenture, if so provided by or
pursuant to such Board Resolution, such Officers' Certificate or in any such
indenture supplemental hereto.
Section 2.4 Authentication and Delivery of Securities. The Issuer
may from time to time deliver Securities of any series, executed by the Issuer
to the Trustee for authentication, together with the applicable documents
referred to below in this Section, and the Trustee shall thereupon authenticate
and make available for delivery such Securities to or upon the order of the
Issuer (contained in the Issuer Order referred to below in this Section) or
pursuant to such procedures acceptable to the Trustee and to such recipients as
may be specified from time to time by an Issuer Order. If so provided in the
Board Resolution, Officers' Certificate or supplemental indenture establishing
the Securities of any series, the maturity date, interest accrual date,
interest rate, Interest Payment Date or Dates and any other terms of any or all
of the Securities of such series may be determined by or pursuant to such
Issuer Order and procedures. If provided for in such procedures, such Issuer
Order may authorize authentication and delivery pursuant to instructions (from
the Issuer or its duly authorized agent) in writing, by facsimile or any other
method mutually agreed upon by the Issuer and Trustee. In authenticating the
Securities of a series and accepting the additional responsibilities under this
Indenture in relation to such
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<PAGE> 24
Securities, the Trustee shall be entitled to receive (but, in the case of
subparagraphs 2, 3 and 4 below, only at or before the time of the first request
of the Issuer to the Trustee to authenticate Securities of such series, however,
any request after the first shall be deemed to include the representation of the
Issuer that the document previously delivered pursuant to subparagraphs 2, 3 and
4 below are still true and in effect) and (subject to Section 6.1) shall be
fully protected in relying upon, unless and until such documents have been
superseded or revoked:
(1) an Issuer Order requesting such authentication and setting forth
delivery instructions if the Securities are not to be delivered to the
Issuer, provided that, with respect to Securities of a series subject to a
Periodic Offering, (a) such Issuer Order may be delivered by the Issuer to
the Trustee at any time prior to the delivery to the Trustee of the
Securities of such series for authentication and delivery, (b) the Trustee
shall authenticate and deliver the Securities of such series for original
issue from time to time, in an aggregate principal amount not exceeding the
aggregate principal amount established for such series, pursuant to an
Issuer Order or pursuant to such procedures acceptable to the Trustee as
may be specified from time to time by an Issuer Order, (c) if so provided
in the Board Resolution or supplemental indenture establishing the
Securities of such series, the maturity date, original issue date, interest
rate, the Interest Payment Date or Dates and any other terms of any or all
of the Securities of such series may be determined by an Issuer Order or
pursuant to such procedures and (d) if provided for in such procedures,
such Issuer Order may authorize authentication and delivery pursuant to
instructions in writing, by facsimile or any other method mutually agreed
upon by the Issuer and Trustee;
(2) any Board Resolution, Officers' Certificate and/or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant
to which the forms and terms of the Securities of such series were
established;
(3) an Officers' Certificate setting forth the form or forms and
terms of the Securities of such series stating (a) that such form or forms
and terms have been established pursuant to Sections 2.1 and 2.3 and comply
with this Indenture, (b) the aggregate principal amount of all of the
Securities outstanding under this Indenture and (c) covering such other
matters as the Trustee may reasonably request; and
(4) at the option of the Issuer, either an Opinion of Counsel, or a
letter addressed to the Trustee
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<PAGE> 25
permitting it to rely on an Opinion of Counsel, substantially to the effect
that:
(a) the forms of the Securities of such series have been duly
authorized and established in conformity with the provisions of this
Indenture;
(b) the terms of the Securities of such series have been duly
authorized and established in conformity with the provisions of this
Indenture;
(c) when the Securities of such series have been executed by the
Issuer and authenticated by the Trustee in accordance with the
provisions of this Indenture and delivered to and duly paid for by the
purchasers thereof, they will have been duly issued under this
Indenture and will be valid and legally binding obligations of the
Issuer, enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors'
rights and to general principles of equity, and will be entitled to
the benefits of this Indenture;
(d) the Indenture has been duly authorized, executed and
delivered by the Issuer and constitutes a legal, valid and binding
agreement of the Issuer, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting the enforcement of
creditors' rights and to general principles of equity;
(e) the issuance of the Securities will not result in any
default under this Indenture, or any other contract, indenture, loan
agreement or other instrument to which the Issuer is a party or by
which it or any of its property is bound; and
(f) no consent, approval, authorization, order, registration or
qualification of or with any governmental agency or body having
jurisdiction over the Issuer is required for the execution and
delivery of the Securities of such series by the Issuer, except such
as have been obtained (except that no opinion
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<PAGE> 26
need be expressed as to state securities or Blue Sky laws).
The Trustee shall have the right to decline to authenticate and
deliver any Securities of any series under this Section (other than Securities
the forms and terms of which shall have been established by supplemental
indenture) if the Trustee, being advised by counsel, determines that such action
may not lawfully be taken by the Issuer or if the Trustee in good faith by its
board of directors or board of trustees, executive committee or a trust
committee of directors, trustees or Responsible Officers shall determine that
such action would expose the Trustee to personal liability to existing Holders
or would affect the Trustee's rights, duties or immunities under the Securities
of any such series, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the
Securities of a series are to be issued in the form of one or more Global
Securities, then the Issuer shall execute and the Trustee shall, in accordance
with this Section and the Issuer Order with respect to such series, authenticate
and make available for delivery one or more Global Securities that (i) shall be
in an aggregate amount equal to the aggregate principal amount specified in such
Issuer Order, (ii) shall be registered in the name of the Depository therefor or
its nominee, (iii) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Securities in definitive registered form, this Security may
not be transferred except as a whole by the Depository to the nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository."
Section 2.5 Execution of Securities. The Securities shall be signed
on behalf of the Issuer by both (a) its Chairman, its President or any Vice
President (whether or not designated by a number or numbers or a word or words
added before or after the title "Vice President"), reproduced thereon, which
need not be attested and (b) by its Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary. Such signatures
may be the manual or facsimile signatures of such officers. Typographical and
other minor errors or defects in any such signature shall not affect the
validity or enforceability of any Security that has been duly authenticated and
delivered by the Trustee.
In case any officer of the Issuer who shall have so signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer
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of the Issuer; and any Security may be so signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such an officer.
Section 2.6 Certificate of Authentication. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized signatories, shall be entitled to the benefits of this Indenture
or be valid or obligatory for any purpose. The execution of such certificate by
the Trustee upon any Security executed by the Issuer shall be conclusive
evidence that the Security so authenticated has been duly authenticated and
delivered hereunder and that the Holder is entitled to the benefits of this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Issuer,
and the Issuer shall deliver such Security to the Trustee for cancellation as
provided in Section 2.10, together with a written statement (which need not
comply with Section 14.5 and need not be accompanied by an Opinion of Counsel)
stating that such Security has never been issued and sold by the Issuer, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 2.7 Denomination of Secutities; Payments of Interest. The
Securities of each series shall be issuable in registered form in denominations
established as contemplated by Section 2.3. The Securities of each series shall
be numbered, lettered or otherwise distinguished in such manner or in accordance
with such plan as the officers of the Issuer executing the same may determine
with the approval of the Trustee, as evidenced by the execution and
authentication thereof.
The Securities of each series shall bear interest, if any, from the
date, and such interest shall be payable on the Interest Payment Dates,
established as contemplated by Section 2.3.
The Person in whose name any Security of any series is registered at
the close of business on any Record Date applicable to such series with respect
to any Interest Payment Date for such series shall be entitled to receive the
interest, if any, payable on such Interest Payment Date notwithstanding any
transfer, exchange or conversion of such Security subsequent to the Record Date
and prior to such Interest Payment Date, except if and to the extent the Issuer
shall default in the payment of the interest due on such Interest Payment Date,
in which case such defaulted interest shall be paid to the Persons in whose
names Outstanding Securities of such series are 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) established by
notice given by mail by or on behalf of
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the Issuer to the Holders of Securities of such series not less than 15 days
preceding such subsequent Record Date. The term "Record Date", as used with
respect to any Interest Payment Date (except a date for payment of defaulted
interest) for the Securities of any series, shall mean the date specified as
such in the terms of the Securities of such series established as contemplated
by Section 2.3.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 2.8 Registration, Transfer and Exchange. The Issuer will
keep, or cause to be kept, at the Corporate Trust Office and at each other
office or agency to be maintained for the purpose as provided in Section 3.2 for
each series of Securities a register or registers (collectively, the "Security
Register") in which, subject to such reasonable regulations as it may prescribe,
it will provide for the registration of Securities of such series and the
registration of transfer of Securities of such series. The Security Register
shall be in written form in the English language or in any other form capable of
being converted into such form within a reasonable time. At all reasonable
times such register or registers not maintained by the Trustee shall be open for
inspection by the Trustee. Unless and until otherwise determined by the Issuer
pursuant to Section 2.3, the Security Register with respect to each series of
Securities shall be kept solely at the Corporate Trust Office and, for this
purpose, the Trustee shall be designated the "Security Registrar."
Upon due presentation for registration of transfer of any Security of
any series at any such office or agency, the Issuer shall execute and the
Trustee shall authenticate and make available for delivery in the name of the
transferee or transferees a new Security or Securities of the same series,
maturity date and interest rate in authorized denominations for a like aggregate
principal amount.
At the option of the Holder thereof, Securities of any series (other
than a Global Security, except as set forth below) may be exchanged for one or
more Securities of such series in authorized denominations for a like aggregate
principal amount, upon surrender of such Securities to be exchanged at the
office or agency to be maintained for such purpose in accordance with Section
3.2 and upon payment, if the Issuer shall so require, of the charges hereinafter
provided. Whenever any Securities are so surrendered for exchange, the Issuer
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive. All Securities surrendered upon any exchange or transfer provided for
in this Indenture shall be promptly cancelled by the Trustee and
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the Trustee will deliver a certificate of cancellation thereof to the Issuer.
All Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Issuer or the Trustee) be
duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer and the Trustee duly executed by,
the Holder or his attorney duly authorized in writing.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange or
registration of transfer of Securities, other than exchanges pursuant to
Sections 2.11, 8.5 , 11.2 and 13.3 not involving any transfer. No service
charge shall be made for any such transaction.
The Issuer shall not be required to (a) issue, exchange or register a
transfer of any Securities of any series for a period of 15 days next preceding
the first mailing or publication of notice of redemption of Securities of such
series to be redeemed or (b) exchange or register the transfer of any Securities
selected, called or being called for redemption, in whole or in part, except, in
the case of any Security to be redeemed in part, the portion thereof not so to
be redeemed.
Notwithstanding any other provision of this Section, unless and until
it is exchanged in whole or in part for Securities in definitive registered
form, a Global Security representing all or a portion of the Securities of a
series may not be transferred except as a whole by the Depository for such
Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by such
Depository or any such nominee to a successor Depository for such Global
Security or a nominee of such successor Depository.
If at any time a Depository for any Securities of a series represented
by one or more Global Securities notifies the Issuer that it is unwilling or
unable to continue as Depository for such Securities or if at any time any such
Depository shall no longer be eligible as a Depository, the Issuer shall appoint
a successor Depository with respect to the Securities held by such Depository.
If a successor Depository is not appointed by the Issuer within 90 days after
the Issuer receives such notice or becomes aware of such ineligibility, the
Securities of such series shall no longer be represented by one or more Global
Securities held by such Depository, and the Issuer shall execute, and the
Trustee, upon receipt of an Issuer Order for the authentication and delivery of
definitive Securities of such series, shall authenticate and make available for
delivery Securities of such series in definitive registered form without
coupons, in any authorized denominations and in an aggregate principal amount
equal to the principal amount of the Global Security or Securities held
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by such Depository in exchange for such Global Security or Securities.
The Issuer may at any time and in its sole discretion determine that
the Securities of a particular series shall no longer be represented by a Global
Security or Securities. In such event, the Issuer shall execute, and the
Trustee, upon receipt of an Issuer Order for the authentication and delivery of
definitive Securities of such series, shall authenticate and deliver, Securities
of such series in definitive registered form in any authorized denominations and
in an aggregate principal amount equal to the principal amount of the Global
Security or Securities representing Securities of such series in exchange for
such Global Security or Securities.
If so specified by the Issuer pursuant to Section 2.3 with respect to
Securities of a particular series represented by a Global Security, the
Depository for such Global Security may surrender such Global Security in
exchange in whole or in part for Securities of such series in definitive
registered form on such terms as are acceptable to the Issuer and such
Depository. Thereupon, the Issuer shall execute, and the Trustee shall
authenticate and make available for delivery:
(i) to each Person specified by such Depository a new Security or
Securities of such series, in any authorized denominations requested by
such Person, in an aggregate principal amount equal to, and in exchange
for, such Person's beneficial interest in the Global Security; and
(ii) to such Depository a new Global Security in a denomination equal
to the difference between the principal amount of the surrendered Global
Security and the aggregate principal amount of Securities authenticated and
delivered pursuant to clause (i) above.
Upon the exchange of any Global Security for Securities in definitive
registered form in authorized denominations, such Global Security shall be
cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities
in definitive registered form without coupons issued in exchange for a Global
Security pursuant to this Section shall be registered in such names and in such
authorized denominations as the Depository for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or an agent of the Issuer or the Trustee. The Trustee or
such agent shall deliver such Securities to or as directed by the Persons in
whose names such Securities are so registered.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under
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this Indenture, as the Securities surrendered upon such registration of transfer
or exchange.
Section 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen
Securities. In case any temporary or definitive Security shall become
mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion
may execute, and upon receipt of an Issuer Order, the Trustee shall authenticate
and make available for delivery a new Security of the same series, maturity date
and interest rate, bearing a number or other distinguishing symbol not
contemporaneously outstanding, in exchange and substitution for the mutilated or
defaced Security, or in lieu of and in substitution for the Security so
destroyed, lost or stolen. In every case the applicant for a substitute
Security shall furnish to the Issuer and to the Trustee or any agent of the
Issuer or the Trustee such security or indemnity as may be required by them to
indemnify and defend and to save each of them and any agent of either of them
harmless and, in every case of destruction, loss or theft, evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof and, in the case of mutilation or defacement, shall surrender
the Security to the Trustee or such agent.
Upon the issuance of any substitute Security the Issuer 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 or its agent) connected therewith. In case any
Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Issuer may, instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Issuer and to the Trustee or any agent of the Issuer or the
Trustee such security or indemnity as may be required by them to save each of
them harmless, and, in every case of destruction, loss or theft, evidence to
their satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof.
Every substitute Security of any series issued pursuant to the
provisions of this Section by virtue of the fact that any such Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Issuer, whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities of such series
duly authenticated and delivered hereunder. All Securities shall be held and
owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any
and all other rights or remedies notwithstanding
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any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities without
their surrender.
Section 2.10 Cancellation of Securities; Destruction Thereof. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, or for credit against any payment in respect of a sinking or analogous
fund, if surrendered to the Issuer or any agent of the Issuer or any agent of
the Trustee, shall be delivered to the Trustee or its agent for cancellation or,
if surrendered to the Trustee, shall be cancelled by it; and no Securities shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. The Trustee or its agent shall cancel Securities held by it
and deliver a certificate of cancellation to the Issuer. If the Issuer or its
agent shall acquire any of the Securities, such acquisition shall not operate as
a redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are delivered to the Trustee or its agent for
cancellation.
Section 2.11 Temporary Securities. Pending the preparation of
definitive Securities for any series, the Issuer may execute and the Trustee
shall authenticate and make available for delivery temporary Securities for such
series (printed, lithographed, typewritten or otherwise reproduced, in each case
in form satisfactory to the Trustee). Temporary Securities of any series shall
be issuable as registered Securities of any authorized denomination, and
substantially in the form of the definitive Securities of such series but with
such omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Issuer with the concurrence of the
Trustee as evidenced by the execution and authentication thereof. Temporary
Securities may contain such references to any provisions of this Indenture as
may be appropriate. Every temporary Security shall be executed by the Issuer and
be authenticated by the Trustee upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Securities. Without
unreasonable delay the Issuer shall execute and shall furnish definitive
Securities of such series and thereupon temporary Securities of such series may
be surrendered in exchange for such definitive Securities in registered form
without charge at each office or agency to be maintained for such purpose in
accordance with Section 3.2 and the Trustee shall authenticate and make
available for delivery in exchange for such temporary Securities of such series
an equal aggregate principal amount of definitive Securities of the same series
in authorized denominations. Until so exchanged, the temporary Securities of
any series shall be entitled to the same benefits under this Indenture as
definitive Securities of such series, unless otherwise established pursuant to
Section 2.3. The provisions of this Section are subject to any restrictions or
limitations on the issue and delivery of temporary Securities of any series that
may be established pursuant to Section 2.3.
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Section 2.12 Computation of Interest. Except as otherwise specified
as contemplated by Section 2.3 for Securities of any series, interest, if any,
on the Securities of each series shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 2.13 CUSIP Numbers. The Issuer in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Issuer will
promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE THREE
COVENANTS OF THE ISSUER
Section 3.1 Payment of Principal and Interest. The Issuer covenants
and agrees for the benefit of each series of Securities that it will duly and
punctually pay or cause to be paid the principal of, and interest, if any, on,
each of the Securities of such series (together with any additional amounts
payable pursuant to the terms of such Securities) at the place or places, at the
respective times and in the manner provided in such Securities and in this
Indenture. The interest on Securities (together with any additional amounts
payable pursuant to the terms of such Securities) shall be payable only to or
upon the written order of the Holders thereof and, at the option of the Issuer,
may be paid by wire transfer or by mailing checks for such interest payable to
or upon the written order of such Holders at their last addresses as they appear
on the registry books of the Issuer. If interest is to be paid by wire
transfer, such Holders must notify the Trustee within 5 Business Days prior to
the Record Date of the wire instructions.
Section 3.2 Offices for Payments, etc. So long as any Securities are
outstanding hereunder, the Issuer will maintain in The City of New York, State
of New York an office or agency where the Securities of each series may be
presented for payment, where the Securities of each series may be presented for
exchange as in this Indenture provided, and where the Securities of each series
may be presented for registration of transfer as in this Indenture provided and
where the Securities of each series that is convertible may be presented for
conversion as in this Indenture provided.
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The Issuer will maintain in The City of New York an office or agency
where notices and demands to or upon the Issuer in respect of the Securities of
any series, or this Indenture may be served.
The Issuer will give to the Trustee prompt written notice of the
location of each such office or agency and of any change of location thereof.
In case the Issuer shall fail to maintain any office or agency required by this
Section to be located in The City of New York, State of New York or shall fail
to give such notice of the location or of any change in the location of any of
the above offices or agencies, presentations and demands may be made and notices
may be served at the Corporate Trust Office of the Trustee, and, in such event,
the Trustee shall act as the Issuer's agent to receive all such presentations,
surrenders, notices and demands.
The Issuer may from time to time designate one or more additional
offices or agencies where the Securities of any series may be presented for
payment, where the Securities of such series may be presented for exchange as in
this Indenture provided, where the Securities of such series may be presented
for registration of transfer as in this Indenture provided and where the
Securities of each series that is convertible may be presented for conversion as
in this Indenture provided, and the Issuer may from time to time rescind any
such designation; provided, however, that no such designation or rescission
shall in any manner relieve the Issuer of its obligation to maintain any office
or agency provided for in this Section. The Issuer will give to the Trustee
prompt written notice of any such designation or rescission thereof and of
change in the location of any such other office or agency.
Section 3.3 Appointment to Fill a Vacancy in Office of Trustee. The
Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 6.10, a Trustee, so that there
shall at all times be a Trustee with respect to each series of Securities
hereunder.
Section 3.4 Paying Agents. Whenever the Issuer shall appoint a
paying agent other than the Trustee with respect to the Securities of any
series, it will cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section:
(a) that such paying agent will hold all sums received by it as such
agent for the payment of the principal of or interest, if any, on the
Securities of such series (whether such sums have been paid to it by the
Issuer or by any other obligor on the Securities of such series) in trust
for the benefit of the Holders of the Securities of such series entitled
thereto or of the Trustee until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
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(b) that such paying agent will give the Trustee prompt notice of any
failure by the Issuer (or by any other obligor on the Securities of such
series) to make any payment of the principal of or interest on the
Securities of such series when the same shall be due and payable; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such paying agent.
The Issuer will, on or prior to each due date of the principal of or
interest, if any, on the Securities of any series, deposit with the paying agent
a sum sufficient to pay such principal or interest so becoming due, such sum to
be held in trust for the benefit of the Holders of the Securities of such series
entitled to such principal or interest, and (unless such paying agent is the
Trustee) the Issuer will promptly notify the Trustee of any failure to take such
action.
If the Issuer shall act as its own paying agent with respect to the
Securities of any series, it will, on or before each due date of the principal
of or interest, if any, on the Securities of such series, set aside, segregate
and hold in trust for the benefit of the Holders of the Securities of such
series a sum sufficient to pay such principal or interest, if any, so becoming
due until such sums shall be paid to such Holders or otherwise disposed of as
herein provided. The Issuer will promptly notify the Trustee of any failure to
take such action.
Anything in this section to the contrary notwithstanding, but subject
to Section 10.1, the Issuer may at any time, for the purpose of obtaining a
satisfaction and discharge with respect to one or more or all series of
Securities hereunder, or for any other reason, pay or cause to be paid to the
Trustee all sums held in trust for any such series by the Issuer or any paying
agent hereunder, as required by this Section, such sums to be held by the
Trustee upon the trusts herein contained, 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.
Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Sections 10.3 and 10.4.
Section 3.5 Limitation on Dividends; Transactions with Affiliates.
(a) If Securities are issued to a CMS Energy's Trust or a trustee of such trust
in connection with the issuance of Trust Securities by such CMS Energy Trust and
(i) there shall have occurred any event of which the Issuer has actual knowledge
that (A) with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder and (B) in respect of which the Issuer
shall not have taken reasonable steps to cure,
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(ii) the Issuer shall be in default with respect to its payment of any
obligations under the Preferred Securities Guarantee or (iii) the Issuer shall
have given notice of its election to defer payments of interest on such
Securities by extending the interest payment period as provided in any
indentures supplemental hereto and shall not have rescinded such notice, or such
period, or any extension thereof, shall be continuing, then the Issuer shall
not, and shall cause any Subsidiary not to, (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any shares of the Issuer's capital stock or (y) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees of indebtedness for money
borrowed) of the Issuer that rank pari passu with or junior to the Securities
(other than (1) any dividend, redemption, liquidation, interest, principal or
guarantee payment by the Issuer where the payment is made by way of securities
(including capital stock) that rank pari passu with or junior to the securities
on which such dividend, redemption, interest, principal or guarantee payment is
being made,(2) payments under the Preferred Securities Guarantee, (4) purchases
of Common Stock related to the issuance of Common Stock under any of the
Issuer's benefit plans for its directors, officers or employees, (5) as a result
of a reclassification of the Issuer's capital stock or the exchange or
conversion of one series or class of the Issuer's capital stock for another
series or class of the Issuer's capital stock and (6) the purchase of fractional
interests in shares of the Issuer's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged).
The Issuer also covenants with each Holder of the Securities (i) that
for so long as Trust Securities are outstanding not to convert the Securities
except pursuant to a notice of conversion delivered to the Conversion Agent by a
holder of Trust Securities and (ii) to maintain directly or indirectly 100%
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Issuer hereunder may succeed to the Issuer's
ownership of such Common Securities, (iii) not to voluntarily terminate, wind-up
or liquidate the Trust, except (a) in connection with a distribution of the
Securities to the holders of Trust Securities in liquidation of the Trust or (b)
in connection with certain mergers, consolidations or amalgamations permitted by
the Declaration and (iv) to use its reasonable efforts, consistent with the
terms and provisions of the Declaration to cause the Trust to remain a business
trust and not to be classified as an association taxable as a corporation for
United States Federal income tax purposes.
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ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
Section 4.1 Issuer to Furnish Trustee Names and Addresses of
Securityholders. The Issuer and any other obligor on the Securities covenant
and agree that they will furnish or cause to be furnished to the Trustee a list
in such form as the Trustee may reasonably require of the names and addresses of
the Holders of the Securities of each series:
(a) semi-annually and not more than 15 days after each Record Date
for the payment of interest on such Securities, as of such Record Date and
on dates to be determined pursuant to Section 2.3 for non-interest bearing
Securities, in each year; and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request, as of a date not
more than 15 days prior to the time such information is furnished;
provided that if and so long as the Trustee shall be the Security Registrar for
such series such list shall not be required to be furnished.
Section 4.2 Preservation and Disclosure of Securityholders Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
each series of Securities (i) contained in the most recent list furnished to it
as provided in Section 4.1, (ii) received by it in the capacity of Security
Registrar for such series, if so acting, and (iii) filed with it within the two
preceding years pursuant to Section 4.4(c)(ii). The Trustee may destroy any
list furnished to it as provided in Section 4.1 upon receipt of a new list so
furnished.
(b) In case three or more Holders of Securities (hereinafter referred
to as "applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with Holders of all Securities with respect to
their rights under this Indenture or under such Securities and such application
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved at
the time by the Trustee in
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accordance with the provisions of subsection (a) of this Section; or
(ii) inform such applicants as to the approximate number of Holders
of Securities of such series or of all Securities, as the case may be,
whose names and addresses appear in the information preserved at the time
by the Trustee, in accordance with the provisions of such subsection (a)
and as to the approximate cost of mailing to such Holders the form of proxy
or other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of such series or all Holders of Securities,
whose name and address appears in the information preserved at the time by the
Trustee in accordance with the provisions of such subsection (a) a copy of the
form of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interests of the Holders
of Securities of such series or of all Securities, as the case may be, or would
be in violation of applicable law. Such written statement shall specify the
basis of such opinion. If the Commission, after opportunity for a hearing upon
the objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met, and shall enter an order so declaring, the Trustee shall mail copies
of such material to all such Holders with reasonable promptness after the entry
of such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every Holder of Securities by receiving and holding the
same, agrees with the Issuer and the Trustee that neither the Issuer nor the
Trustee nor any agent of the Issuer or the Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Holders of Securities in accordance with the provisions of subsection (b)
of this Section, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under such subsection (b).
Section 4.3 Reports by the Issuer. The Issuer covenants:
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(a) to file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, 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 Commission may from time to time by
rules and regulations prescribe) which the Issuer may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or if the Issuer is not required to file
information, documents or reports pursuant to either of such Sections, then
to file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, 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 in
respect of a debt security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(b) to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Issuer with the conditions and covenants provided for in this Indenture
as may be required from time to time by such rules and regulations;
(c) to transmit by mail to the Holders of Securities within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Section 4.4(c), such summaries of any information, documents
and reports required to be filed by the Issuer pursuant to subsections (a)
and (b) of this Section as may be required to be transmitted to such
Holders by rules and regulations prescribed from time to time by the
Commission; and
(d) to furnish to the Trustee, 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
Issuer's compliance with all conditions and covenants under this Indenture
(such compliance to be determined without regard to any period of grace or
requirement of notice provided under this Indenture).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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Section 4.4 Reports by the Trustee. (a) Annually, not later than 60
days after May 15 of each year, the Trustee shall transmit to the Holders and
the Commission a report with respect to events described in Section 313(a) of
the Trust Indenture Act, in such manner and to the extent revised thereunder.
(b) The Trustee shall transmit to the Holders of each series, as
provided in subsection (c) of this Section, a brief report with respect to the
character and amount of any advances (and if the Trustee elects so to state, the
circumstances surrounding the making thereof) made by the Trustee, as such,
since the date of the last report transmitted pursuant to the provisions of
subsection (a) of this Section (or if no such report has yet been so
transmitted, since the date of this Indenture) for the reimbursement of which it
claims or may claim a lien or charge, prior to that of the Securities of such
series, on property or funds held or collected by it as Trustee and which it has
not previously reported pursuant to this subsection (b), except that the Trustee
shall not be required (but may elect) to report such advances if such advances
remaining unpaid at any time aggregate 10% or less of the principal amount of
the Securities of such series outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail to
all Holders of Securities, as the names and addresses of such Holders appear
upon the Security Register;
(d) A copy of each such report shall, at the time of such
transmission to the Holders, be furnished to the Issuer and be filed by the
Trustee with each stock exchange, if any, upon which the Securities of any
series are listed and also with the Commission. The Issuer agrees to notify the
Trustee when and as the Securities of such series become admitted to trading on
any national securities exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
Section 5.1 Event of Default Defined; Acceleration of Maturity;
Waiver of Default. "Event of Default" with respect to Securities of any series,
wherever used herein, means each of the following events which shall have
occurred and be continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any installment of interest upon any of
the Securities of such series as and
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when the same shall become due and payable, (whether or not payment is
prohibited by the provisions of Article 12 hereof), and continuance of such
default for a period of 30 days; provided, however, that if the Issuer is
permitted by the terms of the Securities of such series to defer the
payment in question, the date on which such payment is due and payable
shall be the date on which the Issuer is required to make payment following
such deferral, if such deferral has been elected pursuant to the terms of
the Securities; or
(b) default in the payment of all or any part of the principal of the
Securities of such series as and when the same shall become due and payable
(whether or not payment is prohibited by the provisions of Article 12
hereof), whether at Maturity, upon purchase by the Issuer at the option of
the Holder, upon any redemption, by declaration or otherwise; provided,
however, that if the Issuer is permitted by the terms of the Securities of
such series to defer the payment in question, the date on which such
payment is due and payable shall be the date on which the Issuer is
required to make payment following such deferral, if such deferral has been
elected pursuant to the terms of the Securities; or
(c) default in the deposit or payment of any sinking fund or
analogous payment [(whether or not payment is prohibited by the provisions
of Article 12 hereof)] for the benefit of the Securities of such series as
and when the same shall become due and payable; or
(d) failure on the part of the Issuer duly to observe or perform any
other of the covenants or agreements on the part of the Issuer in the
Securities of such series or in this Indenture contained (other than a
covenant or agreement expressly included herein solely for the benefit of
Securities of other series) for a period of 60 days after the date on which
written notice specifying such failure, stating that such notice is a
"Notice of Default" hereunder and demanding that the Issuer remedy the
same, shall have been given by registered or certified mail, return receipt
requested, to the Issuer by the Trustee, or to the Issuer and the Trustee
by the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of all series affected thereby; or
(e) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Issuer in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, adjudging the Issuer a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or
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composition of or in respect of the Issuer under any applicable law, or
appointing a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Issuer or for any substantial
part of the property of the Issuer, or ordering the winding up or
liquidation of the affairs of the Issuer, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(f) the Issuer shall commence a voluntary case or proceeding under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect or any other case or proceeding to be adjudicated a bankrupt or
insolvent, or consent to the entry of a decree or order for relief in an
involuntary case under any such law, or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable law, or consent to the filing of such petition or to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the Issuer or
for any substantial part of the property of the Issuer, or make any general
assignment for the benefit of creditors, or the notice by it in writing of
its inability to pay its debts generally as they become due, or the taking
of any corporate action by the Issuer in furtherance of any such action;
(g) entry of final judgments against the Issuer or Consumers Power
Company aggregating in excess of $25,000,000 which remain undischarged or
unbonded for a period (during which execution shall not be effectively
stayed) of 60 days;
(h) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Issuer (including a default with
respect to Securities of any series other than that series) or under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed
by the Issuer (including this Indenture), whether such indebtedness now
exists or shall hereafter be created, which default shall have resulted in
such indebtedness in an aggregate principal amount exceeding $25,000,000
becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such acceleration
having been rescinded or annulled within a period of 10 days after there
shall have been given, by registered or certified mail, to the Issuer by
the Trustee or to the Issuer and the Trustee by the Holders of at least 10%
in principal amount of the Outstanding Securities of that series a written
notice specifying
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such default and requiring the Company to cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
hereunder; or
(i) any other Event of Default provided in the supplemental
indenture or Board Resolution establishing the terms of such series of
Securities as provided in Section 2.3 or in the form of Security for such
series.
If an Event of Default shall have occurred and be continuing then, unless the
principal of all the Securities shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of all the Securities of such series then Outstanding, by notice in
writing to the Issuer (and to the Trustee if given by such Holders), may declare
the entire principal of all the Securities of such series then Outstanding and
interest accrued thereon, if any, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.
The foregoing paragraph, however, is subject to the condition that if,
at any time after the principal of the Securities of one or more series shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Issuer shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest upon all the Securities
of such series and the principal of all Securities of such series which shall
have become due otherwise than by acceleration (with interest upon such
principal and, to the extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest at the same rate as the rate
of interest (or Yield to Maturity, in the case of Original Issue Discount
Securities) specified in the Securities of such series, to the date of such
payment or deposit) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee, its agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Trustee except
as a result of negligence or bad faith, and if any and all Events of Default
under this Indenture with respect to such series, other than the non-payment of
the principal of Securities of such series which shall have become due by
acceleration, shall have been cured, waived or otherwise remedied as provided
herein - then, and in every such case, the Holders of a majority in aggregate
principal amount of all the Securities of such affected series then Outstanding
by written notice to the Issuer and to the Trustee, may direct the Trustee to
waive all defaults with respect to such series and rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
For all purposes under this Indenture, if a portion of the principal
of any Original Issue Discount Securities shall have
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been accelerated and declared due and payable pursuant to the provisions hereof,
then, from and after such declaration, unless such declaration has been
rescinded and annulled, the principal amount of such Original Issue Discount
Securities shall be deemed, for all purposes hereunder, to be such portion of
the principal thereof as shall be due and payable as a result of such
acceleration, and payment of such portion of the principal thereof as shall be
due and payable as a result of such acceleration, together with interest, if
any, thereon and all other amounts owing thereunder, shall constitute payment in
full of such Original Issue Discount Securities.
Section 5.2 Collection of Indebtedness by Trustee; Trustee May Prove
Debt. The Issuer covenants that (a) in case default shall be made in the
payment of any installment of interest on any of the Securities of any series
when such interest shall have become due and payable, and such default shall
have continued for a period of 30 days, or (b) in case default shall be made in
the payment of all or any part of the principal of any of the Securities of any
series when the same shall have become due and payable, whether at Maturity,
upon redemption, by declaration or otherwise -- then, upon demand of the
Trustee, the Issuer will pay to the Trustee for the benefit of the Holders of
the Securities of such series the whole amount that then shall have become due
and payable on all Securities of such series for principal or interest, as the
case may be (with interest to the date of such payment upon the overdue
principal and, to the extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest at the same rate as the rate
of interest (or Yield to Maturity, in the case of Original Issue Discount
Securities) specified in the Securities of such series); and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee, its
agents, attorneys and counsel, and any expenses and liabilities incurred by such
parties, and all advances made by the Trustee except as a result of its
negligence or bad faith.
Until such demand is made by the Trustee, the Issuer may pay the
principal of and interest on the Securities of such series to the Holders,
whether or not the Securities of such series be overdue.
In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or other obligor upon the Securities
of such series and collect in the manner provided by law out of the property of
the Issuer or other obligor upon the Securities of such series, wherever
situated the moneys adjudged or decreed to be payable.
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In case there shall be pending proceedings relative to the Issuer or
any other obligor upon the Securities of any series under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to the
Issuer or such other obligor, or to the creditors or property of the Issuer or
such other obligor, the Trustee, irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section, shall be entitled
and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of the
principal and interest (or, if the Securities of any series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of such series) owing and unpaid in respect of the
Securities of each series, and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and its
agents, attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Trustee, except as a
result of negligence or bad faith) and of the Securityholders allowed in
any judicial proceedings relative to the Issuer or such other obligor, or
to the creditors or property of the Issuer or such other obligor;
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of the Securities of each series in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or person performing similar
functions in comparable proceedings; and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their
behalf; and any trustee, receiver, liquidator, custodian or other similar
official is hereby authorized by each of the Securityholders to make
payments to the Trustee, and, in the event that the Trustee shall consent
to the making of payments directly to the Securityholders, to pay to the
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, and its agents,
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attorneys and counsel, and all other expenses and liabilities incurred, and
all advances made, by the Trustee except, in each case, as a result of
negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities of any series or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities of any series may be prosecuted and enforced by the
Trustee without the possession of any of the Securities of such series or the
production thereof at any trial or other proceedings relative thereto, and any
such action or proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee and
its agents, attorneys and counsel, shall be for the ratable benefit of the
Holders of the Securities in respect of which such action was taken.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Securities in respect to which action was taken, and it shall not
be necessary to make any Holders of such Securities parties to any such
proceedings.
Section 5.3 Application of Proceeds. Any moneys collected by the
Trustee pursuant to this Article in respect of the Securities of any series
shall be applied in the following order at the date or dates fixed by the
Trustee and, in case of the distribution of such moneys on account of principal
or interest, upon presentation of the several Securities in respect of which
moneys have been collected and stamping (or otherwise noting) thereon the
payment, and upon surrender thereof if fully paid, or issuing Securities of the
same series in reduced principal amounts in exchange for the presented
Securities if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection applicable
to such series, including reasonable compensation to the Trustee and its
agents, attorneys and counsel and of all expenses and liabilities incurred,
and all advances made, by the Trustee except as a result of negligence or
bad faith;
SECOND: In case the principal of the Securities of such series in
respect of which moneys have been
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collected shall not have become and be then due and payable, to the payment
of interest, if any, on the Securities of such series in default in the
order of the maturity of the installments of such interest, with interest
(to the extent that such interest has been collected by the Trustee and to
the extent permitted by law) upon the overdue installments of interest at
the same rate as the rate of interest (or Yield to Maturity, in the case of
Original Issue Discount Securities) specified in such Securities, such
payments to be made ratably to the Persons entitled thereto, without
discrimination or preference;
THIRD: In case the principal of the Securities of such series in
respect of which moneys have been collected shall have become and be then
due and payable, to the payment of the whole amount then owing and unpaid
upon all the Securities of such series for principal and interest, if any,
with interest upon the overdue principal, and (to the extent that such
interest has been collected by the Trustee and to the extent permitted by
law) upon overdue installments of interest at the same rate as the rate of
interest (or Yield to Maturity, in the case of Original Issue Discount
Securities) specified in the Securities of such series; and in case such
moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Securities of such series, then to the payment of such
principal and interest, without preference or priority of principal over
interest, or of interest over principal, or of any installment of interest
over any other installment of interest, or of any Security of such series
over any other Security of such series, ratably to the aggregate of such
principal and accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Issuer or any
other Person lawfully entitled thereto.
Section 5.4 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 5.5 Restoration of Rights on Abandonment of Proceedings. In
case the Trustee or any Holder shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
for any
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reason, or shall have been determined adversely to the Trustee or to such
Holder, then, and in every such case, the Issuer, the Trustee and the Holders
shall be restored respectively to their former positions and rights hereunder,
and all rights, remedies and powers of the Issuer, the Trustee and the Holders
shall continue as though no such proceedings had been taken.
Section 5.6 Limitations on Suits by Securityholders. No Holder of
any Security of any series shall have any right by virtue or by availing of any
provision of this Indenture to institute any action or proceeding at law or in
equity or in bankruptcy or otherwise upon or under or with respect to this
Indenture, or for the appointment of a trustee, receiver, liquidator, custodian
or other similar official or for any other remedy hereunder, unless such Holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
not less than 25% in aggregate principal amount of the Securities of each
affected series then Outstanding (determined as provided herein and voting as
one class) shall have made written request upon the Trustee to institute such
action or proceedings in its own name as trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby and the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 5.9; it being understood and intended, and being
expressly covenanted by the taker and Holder of every Security with every other
taker and Holder and the Trustee, that no one or more Holders of Securities of
any series shall have any right in any manner whatever by virtue or by availing
of any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holder of Securities or to obtain or seek to obtain priority over or
preference to any other such Holder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Securities of the affected series. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 5.7 Unconditional Right of Securityholders to Receive
Principal and Interest and to Intstitute Certain Suits. Notwithstanding any
other provision in this Indenture and any provision of any Security, the right
of any Holder of any Security to receive payment of the principal of and
interest, if any, on such Security on or after the respective due dates
expressed in such Security or any date fixed for redemption, or to institute
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
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Section 5.8 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. Except as provided in Section 5.6, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders of Securities is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of Securities to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and, subject to Section 5.6, every right and power given by this
Indenture or by law to the Trustee or to the Holders of Securities may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Holders of Securities, as the case may be.
Section 5.9 Control by Holders of Securities. The Holders of a
majority in aggregate principal amount of the Securities of each series affected
at the time Outstanding (determined as provided herein and voting as one class)
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee with respect to the Securities of such affected
series by this Indenture; provided that such direction shall not be otherwise
than in accordance with law and the provisions of this Indenture; and provided
further that (subject to the provisions of Section 6.1) the Trustee shall have
the right to decline to follow any such direction if the Trustee, being advised
by counsel of its choice, shall determine that the action or proceeding so
directed may not lawfully be taken or if the Trustee in good faith by its board
of directors, its executive committee or a trust committee of directors or
Responsible Officers of the Trustee shall determine that the action or
proceedings so directed would involve the Trustee in personal liability or that
the actions or forbearances specified in or pursuant to such direction would be
unduly prejudicial to the interests of Holders of the Securities of all affected
series not joining in the giving of said direction, it being understood that
(subject to Section 6.1) the Trustee shall have no duty to ascertain whether or
not such actions or forbearances are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction or directions by Securityholders.
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Section 5.10 Waiver of Past Defaults. Prior to the declaration of
acceleration of the Maturity of any Securities as provided in Section 5.1, the
Holders of a majority in aggregate principal amount of the Securities of all
series at the time Outstanding with respect to which a default or an Event of
Default shall have occurred and be continuing (determined as provided herein and
voting as one class) may on behalf of the Holders of all such affected
Securities waive any past default or Event of Default described in Section 5.1
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 Security of such series, or (ii)
in respect of a covenant or provision hereof or of any Security which cannot be
modified or amended without the consent of the Holder of each Security affected.
In the case of any such waiver, the Issuer, the Trustee and the Holders of all
such affected Securities shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
Section 5.11 Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall, within 90 days after the occurrence
of a default with respect to the Securities of any series, give notice of all
defaults with respect to such series actually known to the Trustee to all
Holders of Securities of such series in the manner and to the extent provided in
Section 4.4(c), unless in each case such defaults shall have been cured before
the mailing or publication of such notice (the term "default" for the purpose of
this Article being hereby defined to mean any event or condition which is, or
with notice or lapse of time or both would become, an Event of Default);
provided that, except in the case of default in the payment of the principal of
or the interest, if any, on any of the Securities of such series, or in the
payment of any sinking fund installment or analogous payment on such series, 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 or
trustees and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders
of such series.
Section 5.12 Right of Court to Require Filing of Undertaking to Pay
Costs. All parties to this Indenture agree, and each Holder of any Security by
his or her acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee for any
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action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder or group of
Securityholders of any series holding in the aggregate more than 10% in
aggregate principal amount of the Securities of such series, or, in the case of
any suit relating to or arising under clause (d) or (g) of section 5.1 (if the
suit relates to the Securities of more than one but less than all series), 10%
in aggregate principal amount of the Securities then Outstanding and affected
thereby, or, in the case of any suit relating to or arising under clause (d) or
(g) (if the suit relates to all the Securities then Outstanding), 10% in
aggregate principal amount of all Securities then Outstanding, or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of or the interest on any Security on or after the due date expressed
in such Security or any date fixed for redemption.
Section 5.13 Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
CONCERNING THE TRUSTEE
Section 6.1 Duties and Responsibilities of the Trustee; During
Default; Prior to Default. The Trustee, prior to the occurrence of an Event of
Default with respect to the Securities of a particular series and after the
curing or waiving of all Events of Default which may have occurred with respect
to such series, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default with
respect to the Securities of a particular series has occurred (which has not
been cured or waived), the Trustee shall exercise with respect to such series
such of the rights and powers vested in it by this Indenture, 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 his own affairs.
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No provision of this Indenture 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
(a) prior to the occurrence of an Event of Default with respect to
the Securities of any series and after the curing or waiving of all such
Events of Default which may have occurred with respect to such series:
(i) the duties and obligations of the Trustee with respect to
the Securities of such series shall be determined solely by the
express provisions of this Indenture, and the Trustee shall not be
liable except for the performance of such duties and obligations as
are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of
any such statements, certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(c) 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 an
appropriate direction of the Holders pursuant to Section 5.9 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 Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there
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shall be reasonable grounds for believing that the repayment of such funds or
adequate indemnity against such liability is not reasonably assured to it.
Section 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate
or other certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, security 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, direction, order or demand of the Issuer mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of the
Issuer;
(c) the Trustee may consult with counsel of its choice and any advice
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken
by it hereunder in good faith and in accordance with such advice or Opinion
of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities which might be
incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default with respect to
the Securities of any series and after the curing or waiving of all such
Events of Default, 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, consent, order, approval,
appraisal, bond, debenture, note, security or other paper or document
unless requested in writing so to do by the Holders of not less than a
majority in aggregate
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principal amount of the Securities of all affected series then Outstanding;
provided that, if the payment within a reasonable time to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such costs, expenses or liabilities as a condition to proceeding;
the reasonable expenses of every such investigation shall be paid by the
Issuer or, if paid by the Trustee, shall be repaid by the Issuer upon
demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
Section 6.3 Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Issuer, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities, other than as to the due execution and delivery of the Indenture by
the Trustee. The Trustee shall not be accountable for the use or application by
the Issuer of any of the Securities or of the proceeds thereof.
Section 6.4 Trustee and Agents May Hold Securities; Collections, etc.
The Trustee or any agent of the Issuer or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect,
hold and retain collections from the Issuer with the same rights it would have
if it were not the Trustee or such agent.
Section 6.5 Moneys Held by Trustee. Subject to the provisions of
Section 10.4, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
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Section 6.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to
time,, and the Trustee shall be entitled to, such reasonable compensation as the
parties shall agree in writing(which shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust), and the
Issuer covenants and agrees to pay or reimburse the Trustee upon its written
request for all reasonable expenses and fees, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all agents and other persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its negligence or bad faith. The Issuer also covenants to indemnify the
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee arising out
of or in connection with the acceptance or administration of this Indenture or
the trusts hereunder and the Trustee's duties hereunder, including the costs and
expenses of defending itself against or investigating any claim of liability in
the premises. The obligations of the Issuer under this Section to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses and
fees, disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this Indenture.
Such additional indebtedness shall not be deemed to be Subordinated Securities,
as that term is defined in Section 12.1, and shall be a senior claim to that of
the Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the Holders of particular
Securities, and the Securities are hereby subordinated to such senior claim.
When the Trustee incurs expenses after the occurrence of a default, the expenses
are intended to constitute expenses of administration under any bankruptcy law.
Section 6.7 Right of Trustee to Rely on Officers' Certificate, etc.
Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture in reliance thereon.
Section 6.8 Qualification of Trustee; Conflicting Interests. If the
Trustee has or shall acquire any "conflicting interest" within the meaning of
Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in
all respects
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comply with the provisions of Section 310(b) of the Trust Indenture Act.
Section 6.9 Persons Eligible for Appointment as Trustee. There shall
at all times be a Trustee hereunder which shall be a corporation organized and
doing business under the laws of the United States of America or of any State
thereof or the District of Columbia having a combined capital and surplus of at
least $50,000,000, and which is authorized under such laws to exercise corporate
trust powers and is subject to supervision or examination by Federal, State or
District of Columbia authority. Such corporation shall have its principal place
of business in The City of New York, if there be such a corporation in such
location willing to act upon reasonable and customary terms and conditions. If
such corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then, for the purposes of this Section, 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 condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 6.10.
Section 6.10 Resignation and Removal; Appointment of Successor
Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign and be discharged of the trusts created by this Indenture by
giving written notice of resignation to the Issuer and by mailing notice of such
resignation to the Holders of the then Outstanding Securities at their addresses
as they shall appear on the Security registry books. Upon receiving such notice
of resignation, the Issuer shall promptly appoint a successor trustee or
trustees with respect to the applicable series by written instrument, in
duplicate, executed by authority of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee or trustees.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
6.8 after written request therefor by the Issuer or by any Holder who has
been a bona fide Holder of a Security or Securities of such series for at
least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.9 and shall fail to resign after written request
therefor by the Issuer or by any Holder; or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a
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receiver or liquidator 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 such case, the Issuer may remove the Trustee with respect to the
Securities of any or all series, as appropriate, and appoint a successor trustee
for such series by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee or trustees, or,
subject to the provisions of Section 5.12, any Holder who has been a bona fide
Holder of a Security or Securities of such series for at least six months may,
on behalf of such Holder and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding may at any time remove the Trustee and
appoint a successor trustee by delivering to the Trustee so removed, to the
successor trustee so appointed and to the Issuer the evidence provided for in
Section 7.1 of the action in that regard taken by the Holders.
(d) Any resignation or removal of the Trustee and any appointment of
a successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.11. If no successor trustee shall have been so appointed
with respect to any series and shall have accepted appointment within 30 days
after the mailing of a notice of resignation or removal, the retiring trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Holder who has been a bona fide Holder of a Security
or Securities of such series for at least six months may, subject to the
provisions of Section 5.12, on behalf of such Holder and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(e) Except in the case of a default in the payment of the principal
of or interest on any Security, or in the payment of any sinking or purchase
fund installment, the Trustee shall not be required to resign as provided by
Section 6.8 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that:
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(i) the default under this Indenture may be cured or waived during a
reasonable period and under the procedures described in such application;
and
(ii) a stay of the Trustee's duty to resign will not be inconsistent
with the interests of the Securityholders.
Section 6.11 Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 6.10 shall execute,
acknowledge and deliver to the Issuer and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all rights, powers, trusts and duties of its predecessor hereunder, with like
effect as if originally named as trustee hereunder; but, nevertheless, on the
written request of the Issuer or of the successor Trustee, upon payment of its
charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4,
pay over and transfer to the successor Trustee all moneys and property at the
time held by it hereunder and shall execute, acknowledge and deliver an
instrument transferring to such successor Trustee all such rights, powers,
trusts and duties. Upon request of any such successor Trustee, the Issuer shall
execute and acknowledge any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor Trustee all such money,
property, rights, powers and trusts. Any Trustee ceasing to act shall,
nevertheless, retain a prior claim upon all property or funds held or collected
by such Trustee for the benefit of such applicable series to secure any amounts
then due it pursuant to the provisions of Section 6.6.
No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 6.8 and eligible under the provisions
of Section 6.9.
Upon acceptance of appointment by any successor Trustee as provided in
this Section, the Issuer shall give notice thereof to the Holders of Securities,
by mailing such notice to such Holders at their addresses as they shall appear
on the Security registry books. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
6.10. If the Issuer fails to give such notice within 10 days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Issuer.
Section 6.12 Merger, Conversion, Consolidation or Succession to
Business of Trustee. 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,
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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 that such corporation shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time of such succession to the Trustee any of the
Securities of any series shall have been authenticated but not delivered, any
such successor Trustee may adopt the certificate of authentication of any
predecessor Trustee and deliver the Securities so authenticated; and, in case at
that time any of the Securities of any series shall not have been authenticated,
any successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of such successor Trustee; and in all such
cases such certificate of authentication shall have the full force which is
anywhere in the Securities of such series or in this Indenture provided that the
certificate of authentication of the Trustee shall have; provided that the right
to adopt the certification of any predecessor Trustee or to authenticate
Securities of any series in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 6.13 Preferential Collection of Claims Against the Issuer.
The Trustee shall comply with its obligations under the applicable provisions of
Section 311 of the Trust Indenture Act.
Section 6.14 Appointment of Authenticating Agent. As long as any
Securities of a series remain Outstanding, the Trustee may, by an instrument in
writing, appoint with the approval of the Issuer an authenticating agent (the
"Authenticating Agent") which shall be authorized to act on behalf of, but
subject to the direction of, the Trustee to authenticate and deliver Securities
of such series, including Securities issued upon exchange, registration of
transfer, partial redemption or pursuant to Section 2.9. Securities of such
series so authenticated and delivered shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee. Whenever reference is made in this Indenture to the
authentication and delivery of Securities of any series by the Trustee or to the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent for such series and a certificate of authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any State thereof
or of the District of Columbia authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000
(determined as provided in
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Section 6.9 with respect to the Trustee) and subject to supervision or
examination by Federal or State authority.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of any Authenticating Agent, shall be the successor to
such Authenticating Agent with respect to all series of Securities for which it
served as Authenticating Agent without the execution or filing of any paper or
any further act on the part of the Trustee or such Authenticating Agent.
Any Authenticating Agent may at any time, and if it shall cease to be
eligible hereunder shall, resign by giving written notice of resignation to the
Trustee and to the Issuer. The Trustee may at any time terminate the agency of
any Authenticating Agent by giving written notice thereof to such Authenticating
Agent and the Issuer. Upon receiving such a notice of resignation or upon such
a termination, or in case at any time any Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
upon receipt of an Issuer Order appoint a successor Authenticating Agent and
shall provide notice of such appointment to all Holders of Securities affected
thereby in the manner and to the extent provided in Section 6.11 with respect to
the appointment of a successor trustee. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. The Authenticating Agent for the
Securities of any series shall have no responsibility or liability for any
action taken by it as such at the direction of the Trustee.
Sections 6.2, 6.3, 6.4, 6.6 and 7.3 shall be applicable to any
Authenticating Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
Section 7.1 Evidence of Action Taken by Securityholders. Any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by a specified percentage
in aggregate principal amount of the Holders of one or more series of Securities
may be evidenced (i) by one or more instruments of substantially similar tenor
signed by such specified percentage of Holders 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; (ii) by the record of such specified percentage of
Holders voting in favor thereof at any meeting of such Holders duly called and
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held by the Trustee; and (iii) by a combination of such instrument or
instruments and any such record of a meeting.
Section 7.2 Proof of Execution of Instruments and of Holding of
Securities. Subject to Sections 6.1 and 6.2, the execution of any instrument by
a Holder or his agent or proxy and proof of the holding by any Person of any of
the Securities of any series shall be sufficient if made in the following
manner:
(a) The fact and date of the execution by any such Person of any
instrument 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 other such officer. Where
such execution is by or on behalf of any legal entity other than an
individual, such certificate or affidavit shall also constitute sufficient
proof of the authority of the Person executing the same.
(b) The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security Registrar.
Section 7.3 Holders to be Treated as Owners. The Issuer, the Trustee
and any agent of the Issuer or the Trustee may deem and treat the Person in
whose name any Security of any series shall be registered upon the Security
Register for such series as the absolute owner of such Security (whether or not
such Security shall be overdue and notwithstanding any notation of ownership or
other writing thereon) for the purpose of receiving payment of or on account of
the principal of and, subject to the provisions of Section 2.7 of this
Indenture, interest, if any, on such Security and for all other purposes; and
none of the Issuer, the Trustee and any agent of the Issuer or the Trustee shall
be affected by any notice to the contrary. All such payments so made to any
such Person, or upon his order, shall be valid, and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Security.
No holder of any beneficial interest in any Global Security held on
its behalf by a Depository shall have any rights under this Indenture with
respect to such Global Security, and such Depository may be treated by the
Issuer, the Trustee, and any agent of the Issuer or the Trustee as the owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall impair, as between a Depository and such holders
of beneficial interests, the operation of customary practices governing the
exercise of the rights of the Depository as holder of any Security.
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Section 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of one or more series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Issuer or any other
obligor on the Securities with respect to which such determination is being made
shall be disregarded and deemed not to be Outstanding for the purposes of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver,
only Securities which the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Issuer or any other obligor upon such Securities or any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any other obligor on such Securities.
In case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above described Persons; and, subject to Sections 6.1 and
6.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purposes of any such
determination.
Section 7.5 Right of Revocation of Action Taken. At any time prior
to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of
the taking of any action by the Holders of the requisite percentage in aggregate
principal amount of the Securities of one or more series, as the case may be,
specified in this Indenture in connection with such action, any Holder of a
Security the serial number of which is shown by the evidence to be included
among the serial numbers of the Securities the Holders of which have consented
to such action may, by filing written notice at the Corporate Trust Office and
upon proof of ownership as provided in Section 7.2, revoke such action so far as
concerns such Security. Except as aforesaid, any such action taken by the
Holder of any Security of any series shall be conclusive and binding upon such
Holder and upon all future Holders and owners of such Security and of any
Securities of such series issued in exchange or substitution therefor or on
registration of transfer thereof, irrespective of whether or not any notation in
regard thereto is made upon any such Security. Any action taken by the Holders
of the requisite percentage in aggregate principal amount of the Securities of
one or more series, as the case may be, specified in
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this Indenture in connection with such action shall be conclusively binding upon
the Issuer, the Trustee and the Holders of all the Securities of such series.
Section 7.6 Calculation of Original Issue Discount. The Company
shall file with the Trustee promptly at the end of each calendar year a written
notice specifying the amount of original issue discount (including daily
accruals and accrual periods) accrued on Outstanding Securities as of the end of
such year and (ii) such other specific information relating to such original
issue discount as may then be relevant under the Internal Revenue Code of 1986,
as amended from time to time.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
Section 8.1 Supplemental Indentures Without Consent of
Securityholders. The Issuer, when authorized by a resolution of the Board of
Directors (which resolution may provide general terms or parameters for such
action and may provide that the specific terms of such action may be determined
in accordance with or pursuant to an Issuer Order), and the Trustee may, from
time to time and at any time, enter into an indenture or indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act of 1939
as in force at the date of the execution thereof) for one or more of the
following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Issuer pursuant to
Article Nine;
(c) to add to the covenants of the Issuer for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) such further covenants, restrictions, conditions or provisions as
the Issuer and the Trustee shall consider to be for the protection of the
Holders of Securities of any series, and to make the occurrence, or the
occurrence and continuance, of a default in complying with any such
additional covenant, restriction,
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condition or provision an Event of Default permitting the enforcement of
all or any of the several remedies provided in this Indenture as herein set
forth; in respect of any such additional covenant, restriction, condition
or provision, such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer than
that allowed in the case of other defaults) or may provide for an immediate
enforcement upon such an Event of Default or may limit the remedies
available to the Trustee upon such an Event of Default or may limit the
right of the Holders of a majority in aggregate principal amount of the
Securities of such series to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions as the Issuer may
deem necessary or desirable, with respect to matters or questions arising
under this Indenture, provided that no such action shall adversely affect
the interests of the Holders of the Securities of any series appertaining
thereto;
(e) to establish the form and terms of the Securities of any series
as permitted by Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add
to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by
more than one trustee, all as provided in Section 6.11.
The Trustee is hereby authorized to join with the Issuer in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer, assignment, mortgage or pledge of any property or assets
thereunder, but the Trustee shall not be obligated to enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed without the consent of the Holders of any of the
Securities at the time Outstanding, notwithstanding any of the provisions of
Section 8.2.
Section 8.2 Supplemental Indentures With Consent of Securityholders.
With the consent (evidenced as provided in Article Seven) of the Holders of not
less than a majority in aggregate principal amount of the Securities of all
series at the time Outstanding affected by such supplemental indenture (voting
as one class), the Issuer, when authorized by a resolution of the
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Board of Directors (which resolution may provide general terms or parameters for
such action and may provide that the specific terms of such action may be
determined in accordance with or pursuant to an Issuer Order), and the Trustee
may, from time to time and at any time, enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act of 1939 as in force at the date of execution thereof) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Securities of each such
series; provided that no such supplemental indenture shall (a) change the time
of payment of the principal, or any installment of the principal, of any
Security or reduce the principal amount thereof, or reduce the rate or change
the time of payment of interest, if any, thereon, or reduce any amount payable
on the redemption thereof, or make the principal thereof or the interest thereon
payable in any coin or currency other than that provided in such Security in
accordance with the terms thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the Maturity thereof pursuant to Section 5.1 or the amount
thereof provable in bankruptcy, pursuant to Section 5.2, or impair or affect the
right to institute suit for the payment thereof when due, or, if such Security
shall so provide, any right of repayment at the option of the Holder, in each
case without the consent of the Holder of each Security so affected, (b) reduce
the percentage in principal amount of the Outstanding Securities of the affected
series, the consent of whose Holders is required for any such supplemental
indenture or for any waiver provided for in this Indenture, without the consent
of the Holders of each Security so affected or (c) without the consent of the
Holders of each Security so affected, modify any of the provisions of this
Section or Section 5.10, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the consent
of any Holder with respect to changes in the references to "the Trustee" and
concomitant changes in this Section, or the deletion of this proviso, in
accordance with the requirements of Sections 6.11 and 8.1(f).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more series of Securities, or which modifies the rights of
the Holders of Securities of such series appertaining to such Securities with
respect to such covenant or provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series.
Upon the request of the Issuer, accompanied by a Board Resolution
complying with the first paragraph of this Section and evidence of the consent
of the Holders of the Securities as
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aforesaid and such other documents, if any, as may be required by Section 7.1,
the Trustee shall join with the Issuer in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall give notice thereof to the Holders of then Outstanding Securities of each
series affected thereby, by mailing a notice thereof by first-class mail to such
Holders at their addresses as they shall appear on the Security Register, and in
each case such notice shall set forth in general terms the substance of such
supplemental indenture. Any failure of the Issuer to give such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 8.3 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 8.4 Documents to Be Given to Trustee. The Trustee, subject
to the provisions of Sections 6.1 and 6.2, may receive an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article complies with the applicable provisions of
this Indenture.
Section 8.5 Notation on Securities in Respect of Supplemental
Indentures. Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this
Article may bear a notation in form approved by the Trustee as to any matter
provided for by such supplemental indenture. If the Issuer or the Trustee shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental
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indenture may be prepared and executed by the Issuer, authenticated by the
Trustee and delivered in exchange for the Securities of such series then
Outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1 Covenant of Issuer Not to Merge, Consolidate, Sell or
Convey Property Except Under Certain Conditions. Nothing contained in this
Indenture or in any of the Securities shall prevent any consolidation of the
Issuer with, or merger of the Issuer into, any other corporation or corporations
(whether or not affiliated with the Issuer), or successive consolidations or
mergers to which the Issuer or its successor or successors shall be a party or
parties, shall prevent any sale, lease or conveyance of the property of the
Issuer as an entirety or substantially as an entirety, shall prevent any
consolidation of any Person with, or the merger of any Person into, the Issuer
or shall prevent any sale, lease or conveyance of the property of any Person as
an entirety or substantially as an entirety to the Issuer; provided, that, and
the Issuer hereby covenants and agrees, upon any such consolidation, merger,
sale, lease or conveyance, the due and punctual payment of the principal of and
interest, if any, on all the Securities, according to their tenor, and the due
and punctual performance and observance of all of the covenants and conditions
of this Indenture to be performed or observed by the Issuer, shall be expressly
assumed, by supplemental indenture satisfactory in form to the Trustee, executed
and delivered to the Trustee by the corporation formed by such consolidation, or
into which the Issuer shall have been merged, or which shall have acquired such
property; provided, further, that the corporation formed by such consolidation
or into which the Issuer merged or the Person which acquired by conveyance or
sale, or which leases, the properties and assets of the Issuer 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
Issuer or a Subsidiary as a result of such transaction as having been incurred
by the Issuer 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; provided, further,
if, as a result of any such consolidation or merger or such conveyance, transfer
or lease, properties or assets of the Issuer would become subject to a mortgage,
pledge, lien, security interest or other encumbrance which would not be
permitted by this Indenture, the Issuer or such successor corporation or Person,
as the case may be, shall take such steps as shall be necessary effectively to
secure the Securities equally and ratably with (or prior to) all indebtedness
secured thereby.
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Section 9.2 Successor Corporation Substituted for Issuer. In case of
any consolidation, merger, sale, lease or conveyance referred to in, and in
accordance with, Section 9.1, and following such an assumption by the successor
corporation, such successor corporation shall succeed to and be substituted for
the Issuer, with the same effect as if it had been named herein as Issuer.
Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Issuer prior to such succession,
any or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Issuer and delivered to the Trustee; and, upon the order of
such successor corporation, instead of the Issuer, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Issuer to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Securities theretofore or thereafter issued
in accordance with the terms of this indenture as though all of such Securities
had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance
such changes in phraseology and form (but not in substance) may be made in the
Securities thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance
by way of lease), the Issuer or any successor corporation which shall
theretofore have become such in the manner described in this Article shall be
discharged from all obligations and covenants under this Indenture and the
Securities and may be liquidated and dissolved.
Section 9.3 Opinion of Counsel Delivered to Trustee. The Trustee,
subject to the provisions of Sections 6.1 and 6.2, may receive an Opinion of
Counsel 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 Indenture and that all
conditions precedent herein provided for relating to such transactions have been
complied with.
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ARTICLE TEN
SATISFACTION AND DISCHAREGE OF INDENTURE;
UNCLAIMED MONEYS
Section 10.1 Satisfaction and Discharge of Indenture. (A) If at any
time (a) the Issuer shall have paid or caused to be paid the principal of, and
interest, if any, on all the Securities of each series theretofore
authenticated, (other than Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 2.9), in accordance
with the terms of this Indenture and such Securities or (b) as to Securities not
so paid, the Issuer shall have delivered to the Trustee for cancellation all
Securities of each series theretofore authenticated (other than any Securities
which shall have been destroyed, lost or stolen and which shall have been
replaced or paid as provided in Section 2.9) or (c) as to Securities not so paid
or delivered for cancellation, [in the case of any series of Securities as to
which the exact amount of principal of and interest, if any, due can be
determined at the time of making the deposit referred to in clause (ii)
below,](i) all the Securities of such series shall have become due and payable,
or are by their terms to become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption, and (ii) the Issuer shall have
irrevocably deposited or caused to be deposited with the Trustee as trust funds
money in an amount (other than moneys repaid by the Trustee or any paying agent
to the Issuer in accordance with Section 10.4) or Government Obligations,
maturing as to principal and interest at such times and in such amounts as will
insure the availability of money, or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
(A) the principal and interest, if any, on all Securities of such series on each
date that such principal or interest, if any, is due and payable and (B) any
mandatory sinking fund or analogous payments on the dates on which such payments
are due and payable in accordance with the terms of this Indenture and the
Securities of such series; and if, in any such case, the Issuer shall also pay
or cause to be paid all other sums payable hereunder by the Issuer then this
Indenture shall cease to be of further effect (except as to (i) rights of
registration of transfer and exchange of Securities [and the Issuer's right of
optional redemption, if any,] (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities, (iii) the rights of Holders of Securities
to receive payments of principal thereof, and interest, if any, thereon, upon
the original stated due dates therefor or any date of redemption (but not upon
acceleration), and remaining rights of such Holders to receive mandatory sinking
fund or analogous payments, if any, (iv) the rights, obligations, duties and
immunities of the Trustee hereunder, (v) the rights of Holders of Securities as
beneficiaries hereof with respect to the property so deposited with the Trustee
and payable to all or any of them and (vi) the obligations of the
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Issuer under Section 3.2) and the Trustee, on demand of the Issuer accompanied
by an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with, and at the cost and expense
of the Issuer, shall execute proper instruments acknowledging such satisfaction
and discharge of this Indenture, provided that the rights of Holders of the
Securities to receive amounts in respect of principal of and interest on the
Securities held by them shall not be delayed longer than required by then
applicable mandatory rules or policies of any national securities exchange upon
which the Securities are listed. The Issuer agrees to reimburse the Trustee for
any costs or expenses thereafter reasonably and properly incurred and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Securities.
(B) The following provisions shall apply to the Securities of each
series unless specifically otherwise provided in the Board Resolution, Officers'
Certificate or supplemental indenture relating thereto provided pursuant to
Section 2.3. In addition to discharge of this Indenture pursuant to the next
preceding paragraph (A) the Issuer shall be deemed to have paid and discharged
the entire indebtedness on all the Securities of such series on the 123rd day
after the date of making the deposit referred to in clause (a), and the
provisions of this Indenture with respect to the Securities of such series shall
no longer be in effect (except as to (i) rights of registration of transfer and
exchange of Securities of such series [and the Issuer's right of optional
redemption, if any,] (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) the rights of Holders of Securities of such series
appertaining thereto to receive payments of principal thereof and interest, if
any, thereon, upon the original stated due dates therefor or any date of
redemption (but not upon acceleration), and remaining rights of such Holders to
receive mandatory sinking fund or analogous payments, if any, solely from the
trust fund referred to in subparagraph (a) below, (iv) the rights, obligations,
duties and immunities of the Trustee hereunder, (v) the rights of Holders of
Securities of such series as beneficiaries hereof with respect to the property
so deposited with the Trustee and payable to all or any of them and (vi) the
obligations of the Issuer under Section 3.2), and the Trustee, at the cost and
expense of the Issuer, shall, at the Issuer's written request, execute proper
instruments acknowledging the same, if:
(a) the Issuer shall have irrevocably deposited or caused to be
irrevocably deposited with the Trustee as a trust fund specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Securities of such series (i) money in an amount, or (ii) Government
Obligations, maturing as to principal and interest at such times and in
such amounts as will insure the availability of money, or (iii) a
combination
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thereof, sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay (A) the principal and interest, if any, on
all Securities of such series on each date that such principal or interest,
if any, is due and payable and (B) any mandatory sinking fund or analogous
payments on the dates on which such payments are due and payable in
accordance with the terms of this Indenture and the Securities of such
series;
(b) no Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit or at any time during the period ending on the 123rd day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(c) such deposit shall not result in a breach or violation of, or
constitute a default under, this Indenture or any other material agreement
or instrument to which the Issuer is a party or by which it is bound;
(d) such deposit shall not cause any Securities of such series then
listed on any national securities exchange registered under the Securities
Exchange Act of 1934, as amended, to be delisted;
(e) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) if such deposits shall include Government
Obligations in respect of any government other than the United States of
America, such deposit shall not result in the Issuer, the Trustee or such
trust constituting an "investment company" under the Investment Company Act
of 1940, as amended, and (ii) if any such deposit occurs more than one year
prior to the stated maturity or redemption date of the Securities of such
series, the Holders of the Securities of such series then Outstanding will
not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit, defeasance and discharge
had not occurred; and
(f) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the defeasance contemplated by
this paragraph have been complied with.
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(C) The Issuer shall be released from its obligations under Article
Three and Article Nine with respect to the Securities of a particular series
Outstanding on and after the date the conditions set forth below are satisfied
(hereinafter, "covenant defeasance"). Covenant defeasance means that, with
respect to the Outstanding Securities of such series, the Issuer may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in Article Nine, whether directly or indirectly by reason
of any reference elsewhere herein to such Article by reason of any reference in
such Article to any other provision herein or by reason of any reference to such
Article in any other document, and such omission to comply shall not constitute
an Event of Default under Section 5.1 with respect to the Outstanding Securities
of such series, but the remainder of this Indenture and other Outstanding
Securities shall be unaffected thereby. The following shall be the conditions
to application of this paragraph (C):
(a) the Issuer shall have irrevocably deposited or caused to be
irrevocably deposited with the Trustee as a trust fund specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Securities of such series, (i) money in an amount, or (ii) Government
Obligations, maturing as to principal and interest at such times and in
such amounts as will insure the availability of money, or (iii) a
combination thereof, sufficient in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay (A) the principal and interest, if
any, on all Securities of such series on each date that such principal or
interest, if any, is due and payable and (B) any mandatory sinking fund or
analogous payments on the dates on which such payments are due and payable
in accordance with the terms of this Indenture and the Securities of such
series;
(b) no Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such
deposit or at any time during the period ending on the 123rd day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(c) such covenant defeasance shall not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Issuer is a party or by which
it is bound;
(d) such covenant defeasance shall not cause any Securities of such
series then listed on any national
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securities exchange registered under the Securities Exchange Act of 1934,
as amended, to be delisted;
(e) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) if such deposits shall include Government
Obligations in respect of any government other than the United States of
America, such deposit shall not result in the Issuer, the Trustee or such
trust constituting an "investment company" under the Investment Company Act
of 1940, as amended, and (ii) the Holders of the Securities of such series
then Outstanding will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(f) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such covenant defeasance have
been complied with.
Section 10.2 Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 10.4, all moneys and Government Obligations
deposited with the Trustee (or other trustee), and all money received by the
Trustee in respect of Government Obligations deposited with the Trustee,
pursuant to Section 10.1 in respect of the Outstanding Securities of a
particular series shall be held in trust and applied by it to the payment,
either directly or through any paying agent (including the Issuer acting as its
own paying agent), to the Holders of such Securities of all sums due and to
become due thereon for principal and interest, if any; but such money need not
be segregated from other funds except to the extent required by law.
Section 10.3 Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the
Securities of any series, all moneys then held by any paying agent under the
provisions of this Indenture with respect to such series of Securities shall,
upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon
such paying agent shall be released from all further liability with respect to
such moneys.
Section 10.4 Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Three Years. Any moneys deposited with or paid to the Trustee or
any paying agent for the payment of the principal of or interest, if any, on any
Security of any series and not applied but remaining unclaimed for three years
after the date upon which such principal or interest shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee or such paying agent, and
any Holder of the Securities of such series shall, unless otherwise required by
mandatory provisions of applicable escheat or abandoned
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or unclaimed property laws, thereafter look only to the Issuer for any payment
which such Holder may be entitled to collect, and all liability of the Trustee
or any paying agent with respect to such moneys shall thereupon cease; provided,
however, that the Trustee or such paying agent, before being required to make
any such repayment with respect to moneys deposited with it for any payment
shall at the expense of the Issuer, mail by first-class mail to Holders of such
Securities at their addresses as they shall appear on the Security Register for
the Securities of such series, notice that such moneys remain and that, after a
date specified therein, which shall not be less than 30 days from the date of
such mailing any unclaimed balance of such moneys then remaining will be repaid
to the Issuer.
Section 10.5 Indemnity for Government Obligations. The Issuer shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the Government Obligations deposited pursuant to Section 10.1
or the principal or interest received in respect of such Government Obligations,
other than any such tax, fee or other charge which by law is for the account of
the Holders of the Securities for whose benefit such Government Obligations are
held.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES AND SINKING FUNDS
Section 11.1 Applicability of Article. The provisions of this
Article shall be applicable to the Securities of any series which are redeemable
before their maturity or to any Securities of a series which have the benefit of
a sinking fund, except as otherwise specified as contemplated by Section 2.3 for
Securities of any series.
Section 11.2 Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Securities of any series to be redeemed as a whole
or in part shall be given by mailing notice of such redemption by first class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption, to such Holders at their last addresses as they shall
appear upon the registry books for such Securities. Any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the Holder receives the notice. Failure to give notice by
mail, or any defect in the notice to the Holder of any Security of any series
designated for redemption as a whole or in part, shall not affect the validity
of the proceedings for the redemption of any other Security of such series.
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The notice of redemption to each such Holder shall specify (a) the
principal amount to be redeemed, (b) the date fixed for redemption, (c) the
redemption price, (d) if applicable, the current conversion price or rate, (e)
if applicable, the name and address of the Conversion Agent, (f) if applicable,
that the right of the Holder to convert Securities called for redemption shall
terminate at the close of business on the fifteenth day prior to the redemption
date (or such other day as may be specified as contemplated by Section 2.3 for
Securities of any series), (g) if applicable, that Holders who elect to convert
Securities called for redemption must satisfy the requirements for conversion
contained in such Securities, (h) the place or places of payment, that payment
will be made upon presentation and surrender of such Securities, (i) that such
redemption is pursuant to the mandatory or optional sinking or other analogous
fund, or both, if such be the case, (j) that interest accrued to the date fixed
for redemption will be paid as specified in such notice and (k) that on and
after said date interest thereon or on the portions thereof to be redeemed will
cease to accrue, (l) place for presentment and (m) the CUSIP number. In case
any Security is to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities of such series in authorized
denominations for an aggregate principal amount equal to the unredeemed portion
thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at
the option of the Issuer shall be given by the Issuer or, at the Issuer's
request, by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section, the Issuer will deposit with the Trustee or
with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.4) an
amount of money sufficient to redeem on the redemption date all the Securities
of any series so called for redemption at the applicable redemption price,
together with accrued interest to the date fixed for redemption. The Issuer
will deliver to the Trustee at least 60 days prior (except that the Trustee may
in its sole discretion waive such notice period at any time) to the date fixed
for redemption an Officers' Certificate stating such date, the aggregate
principal amount of Securities of each series to be redeemed and that no Events
of Default with respect to the Securities of such series have occurred (which
have not been waived or cured). In case of a redemption at the option of the
Issuer prior to the expiration of any restriction on such redemption, the Issuer
shall deliver to the Trustee, prior to the giving of any notice of redemption to
Holders pursuant to this Section, an Officers' Certificate stating that such
restriction has been complied with. If less than all the Securities of any
series are to be redeemed, the Trustee shall select by lot or, in such manner
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as it shall deem appropriate and fair, Securities of such series to be redeemed
in whole or in part. Securities may be redeemed in part in multiples equal to
the minimum authorized denomination for Securities of such series or any
multiple thereof. The Trustee shall promptly notify the Issuer in writing of
the Securities of such series selected for redemption and, in the case of any
Securities of such series selected for partial redemption, the principal amount
thereof to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities of
any series shall relate, in the case of any Security redeemed or to be redeemed
only in part, to the portion of the principal amount of such Security which has
been or is to be redeemed.
Section 11.3 Payment of Securities Called for Redemption. If
notice of redemption has been given as provided in Section 11.2, the Securities
or portions of Securities specified in such notice shall become due and payable
on the date and at the place stated in such notice at the applicable redemption
price, together with interest accrued to the date fixed for redemption, and on
and after said date (unless the Issuer shall default in the payment of such
Securities at the applicable redemption price, together with interest accrued to
said date) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue and, except as provided in Sections 6.5 and
10.4, such Securities shall cease from and after the date fixed for redemption
to be entitled to any benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the applicable redemption price thereof and unpaid interest to the date
fixed for redemption and the right to convert such Securities, if such
Securities are convertible. On presentation and surrender of such Securities at
a place of payment specified in said notice, redemption, such Securities or the
specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest accrued thereon to the date
fixed for redemption.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate of
interest or Yield to Maturity (in the case of an Original Issue Discount
Security) borne by such Security.
Upon presentation of any Security redeemed in part only, the Issuer
shall execute and the Trustee shall authenticate and make available for delivery
to or on the order of the Holder thereof, at the expense of the Issuer, a new
Security or Securities of such series, of authorized denominations, in principal
amount equal to the unredeemed portion of the Security so presented.
Section 11.4 Exclusion of Certain Securities from Eligibility for
Selection for Redemption. Securities shall be
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excluded from eligibility for selection for redemption if they are identified by
registration and certificate number in an Officers' Certificate delivered to the
Trustee at least 60 days prior to the last date on which notice of redemption
may be given as being owned of record and beneficially by, and not pledged or
hypothecated by either (a) the Issuer or (b) an entity specifically identified
in such Officers' Certificate as an Affiliate of the Issuer.
Section 11.5 Mandatory and Optional Sinking Funds. The minimum
amount of any sinking fund payment provided for by the terms of the Securities
of any series is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund
payment with respect to any series of Securities in cash, the Issuer may at its
option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except upon redemption pursuant to the
mandatory sinking fund) by the Issuer or receive credit for Securities of such
series (not previously so credited) theretofore purchased or otherwise acquired
(except as aforesaid) by the Issuer and delivered to the Trustee for
cancellation pursuant to Section 2.10, (b) receive credit for optional sinking
fund payments (not previously so credited) made pursuant to this Section or (c)
receive credit for Securities of such series (not previously so credited)
redeemed by the Issuer through any optional redemption provision contained in
the terms of such series. Securities so delivered or credited shall be received
or credited by the Trustee at the sinking fund redemption price specified in
such Securities.
On or before the 60th day next preceding each sinking fund payment
date for any series, the Issuer will deliver to the Trustee an Officers'
Certificate (which need not contain the statements required by Section 14.5) (a)
specifying the portion of the mandatory sinking fund payment due on such date to
be satisfied by payment of cash and the portion to be satisfied by credit of
Securities of such series and the basis for such credit, (b) stating that none
of the Securities of such series to be so credited has theretofore been so
credited, (c) stating that no defaults in the payment of interest or Events of
Default with respect to such series have occurred and are continuing (which have
not been waived or cured) and (d) stating whether or not the Issuer intends to
exercise its right to make an optional sinking fund payment on such date with
respect to such series and, if so, specifying the amount of such optional
sinking fund payment which the Issuer intends to pay on or before the next
succeeding sinking fund payment date. Any Securities of such series to be so
credited and required to be delivered to the Trustee in order for the Issuer to
be entitled to credit therefor as aforesaid which have not theretofore been
delivered to the Trustee shall be delivered for
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cancellation pursuant to Section 2.10 to the Trustee with such Officers'
Certificate (or reasonably promptly thereafter if acceptable to the Trustee).
Such Officers' Certificate shall be irrevocable, and upon its receipt by the
Trustee the Issuer shall become unconditionally obligated to make all the cash
payments or other deliveries therein referred to, if any, on or before the next
succeeding sinking fund payment date. Failure of the Issuer, on or before any
such 60th day, to deliver such Officers' Certificate and securities specified in
this paragraph, if any, shall not constitute a default but shall constitute, on
and as of such 60th day, the irrevocable election of the Issuer that (i) the
mandatory sinking fund payment for such series due on the next succeeding
sinking fund payment date shall be paid entirely in cash without the option to
deliver or credit Securities of such series in respect thereof and (ii) the
Issuer will make no optional sinking fund payment with respect to such series on
such date as provided in this Section.
If the sinking fund payment or payments (mandatory or optional or
both) to be made in cash on the next succeeding sinking fund payment date plus
any unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 and if the Issuer shall so request with respect to the Securities
of any particular series, such cash shall be applied on the next succeeding
sinking fund payment date to the redemption of Securities of such series at the
applicable sinking fund redemption price, together with accrued interest to the
date fixed for redemption. If such amount shall be $50,000 or less and the
Issuer makes no such request, then such amount shall be carried over until a sum
in excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 11.2, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
nearly as may be, and shall (if requested in writing by the Issuer) inform the
Issuer of the serial numbers of the Securities of such series (or portions
thereof) so selected. Securities shall be excluded from eligibility for
redemption under this Section if they are identified by registration and
certificate number in an Officers' Certificate delivered to the Trustee at least
40 days prior to the sinking fund payment date as being owned of record and
beneficially by, and not pledged or hypothecated by either (a) the Issuer or (b)
an entity specifically identified in such Officers' Certificate as an Affiliate
of the Issuer. The Trustee, in the name and at the expense of the Issuer (or
the Issuer, if it shall so request the Trustee in writing), shall cause notice
of redemption of the Securities of such series to be given in substantially the
manner provided in Section 11.2 (and with the effect provided in Section 11.3)
for the redemption of Securities of such series in part at the option of the
Issuer. The amount of any sinking fund payments not so applied or allocated to
the redemption of Securities of such series shall be added to the next cash
sinking fund payment for such series and, together with such payment, shall be
applied in accordance with the provisions of this Section. Any and all sinking
fund moneys held on the stated maturity date of the Securities of a particular
series (or earlier,
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if such maturity is accelerated), which are not held for the payment or
redemption of particular Securities of such series, shall be applied, together
with other moneys, if necessary, sufficient for the purpose, to the payment of
the principal of and interest on the Securities of such series at maturity.
Unless otherwise provided for, on or before each sinking fund payment
date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for
the payment of all interest accrued to the date fixed for redemption on
Securities to be redeemed on such sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed Securities of any
series with sinking fund moneys or give any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of any Event of Default with respect to such series except that, if
notice of redemption of any Securities of such series shall theretofore have
been given, the Trustee shall redeem or cause to be redeemed such Securities,
provided that the Trustee or one or more paying agents shall have received from
the Issuer a sum sufficient for such redemption. Except as aforesaid, any
moneys in the sinking fund for such series at the time when any such Event of
Default shall occur, and any moneys thereafter paid into the sinking fund,
shall, during the continuance of such Event of Default, be deemed to have been
collected under Article Five and held for the payment of all Securities of such
series. In case such Event of Default shall have been waived as provided in
Section 5.10 or such Event of Default cured on or before the 60th day preceding
any sinking fund payment date, such moneys shall thereafter be applied on the
next succeeding sinking fund payment date in accordance with this Section to the
redemption of Securities of such series.
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Section 11.6 Conversion Arrangement on call for Redemption. In
connection with any redemption of Convertible Securities of any series which are
convertible into Common Stock, the Issuer may arrange for the purchase and
conversion of any such Securities called for redemption by an agreement with one
or more investment bankers or other purchasers to purchase such Securities by
paying to the Trustee in trust for the Holders of such Securities, on or before
the close of business on the redemption date, an amount in cash not less than
the redemption price, together with interest, if any, accrued to the redemption
date, of such Securities. Notwithstanding anything to the contrary contained in
this Article Eleven, the obligation of the Issuer to pay the redemption price of
such Securities, including all accrued interest, if any, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, any such Securities not duly
surrendered for conversion by the Holders thereof may, at the option of the
Issuer, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article Thirteen) surrendered by such purchasers for conversion,
all as of immediately prior to the close of business on the last day on which
Securities of such series called for redemption may be converted in accordance
with this Indenture and the terms of such Securities, subject to payment of the
above amount as aforesaid. The Trustee shall hold and pay to the Holders whose
Securities are selected for redemption any such amount paid to it in the same
manner as it would moneys deposited with it by the Issuer for the redemption of
Securities. Without the Trustee's prior written consent, no arrangement between
the Issuer and such purchasers for the purchase and conversion of any Securities
shall increase or otherwise affect any of the powers, duties, responsibilities
or obligations of the Trustee as set forth in this Indenture, and the Issuer
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Securities between the Issuer and such
purchasers, including the costs and expenses incurred by the Trustee in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE TWELVE
SUBORDINATION
Section 12.1 Applicability of Article; Securities Subordinated to
Senior Indebtedness. (a) This Article Twelve shall apply only to the
Securities of any series which, pursuant to Section 2.3, are expressly made
subject to this Article. Such Securities are referred to in this Article Twelve
as "Subordinated Securities."
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(b) The Issuer covenants and agrees, and each Holder of Subordinated
Securities by his acceptance thereof likewise covenants and agrees, that the
indebtedness represented by the Subordinated Securities and the payment of the
principal and interest, if any, on the Subordinated Securities is subordinated
and subject in right, to the extent and in the manner provided in this Article,
to the prior payment in full of all Senior Indebtedness.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on the following, whether outstanding on the date hereof or thereafter
incurred, created or assumed: (i) indebtedness of the Issuer for money borrowed
by the Issuer (including purchase money obligations) or evidenced by debentures
(other than the Subordinated Securities), notes, bankers' acceptances or other
corporate debt securities, or similar instruments issued by the Issuer; [(ii)
all capital lease obligations of CMS Energy; (iii) all obligations of CMS Energy
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of CMS Energy and all obligations of CMS Energy under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) obligations with respect to letters of
credit; (v) all indebtedness of others of the type referred to in the preceding
clauses (i) through (iv) assumed by or guaranteed in any manner by the Issuer or
in effect guaranteed by the Issuer; (vi) all obligations of the type referred to
in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of CMS Energy (whether or not such obligation is assumed by
CMS Energy), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Subordinated Notes, as the case may be,
including all other debt securities and guaranties in respect of those debt
securities, issued to any other trusts, partnerships or other entities
affiliated with CMS Energy which act as a financing vehicle of CMS Energy in
connection with the issuance of preferred securities by such entity or other
securities which rank pari passu with, or junior to, the Preferred Securities,
and (2) any indebtedness between or among CMS Energy and its affiliates and/or
(vii) renewals, extensions or refundings of any of the indebtedness referred to
in the preceding clauses unless, in the case of any particular indebtedness,
renewal, extension or refunding, under the express provisions of the instrument
creating or evidencing the same or the assumption or guarantee of the same, or
pursuant to which the same is outstanding, such indebtedness or such renewal,
extension or refunding thereof is not superior in right of payment to the
Subordinated Securities.]
This Article shall constitute a continuing obligation to all Persons
who, in reliance upon such provisions become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and they
and/or each of them may enforce such provisions.
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Section 12.2 Issuer Not to Make Payments with Respect to Subordinated
Securities in Certain Circumstances. (a) Upon the maturity of any Senior
Indebtedness by lapse of time, acceleration or otherwise, all principal thereof
and interest thereon shall first be paid in full, or such payment duly provided
for in cash in a manner satisfactory to the holders of such Senior Indebtedness,
before any payment is made on account of the principal of, or interest on,
Subordinated Securities or to acquire any Subordinated Securities or on account
of any sinking fund provisions of any Subordinated Securities (except payments
made in capital stock of the Issuer or in warrants, rights or options to
purchase or acquire capital stock of the Issuer, sinking fund payments made in
Subordinated Securities acquired by the Issuer before the maturity of such
Senior Indebtedness, and payments made through the exchange of other debt
obligations of the Issuer for such Subordinated Securities in accordance with
the terms of such Subordinated Securities, provided that such debt obligations
are subordinated to Senior Indebtedness at least to the extent that the
Subordinated Securities for which they are exchanged are so subordinated
pursuant to this Article Twelve).
(b) Upon the happening and during the continuation of any default in
payment of the principal of, or interest on, any Senior Indebtedness when the
same becomes due and payable or in the event any judicial proceeding shall be
pending with respect to any such default, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no payment shall
be made by the Issuer with respect to the principal of, or interest on,
Subordinated Securities or to acquire any Subordinated Securities or on account
of any sinking fund provisions of Subordinated Securities (except payments made
in capital stock of the Issuer or in warrants, rights, or options to purchase or
acquire capital stock of the Issuer, sinking fund payments made in Subordinated
Securities acquired by the Issuer before such default and notice thereof, and
payments made through the exchange of other debt obligations of the Issuer for
such Subordinated Securities in accordance with the terms of such Subordinated
Securities, provided that such debt obligations are subordinated to Senior
Indebtedness at least to the extent that the Subordinated Securities for which
they are exchanged are so subordinated pursuant to this Article Twelve).
(c) In the event that, notwithstanding the provisions of this Section
12.2, the Issuer shall make any payment to the Trustee on account of the
principal of or interest on Subordinated Securities, or on account of any
sinking fund provisions of such Securities, after the maturity of any Senior
Indebtedness as described in Section 12.2(a) above or after the happening of a
default in payment of the principal of or interest on any Senior Indebtedness as
described in Section 12.2(b) above, then, unless and until all Senior
Indebtedness which shall have matured, and all interest thereon, shall have
been paid in full (or the declaration of acceleration thereof shall have been
rescinded or annulled), or such default shall have been cured or waived or shall
have ceased
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to exist, such payment (subject to the provisions of Sections 12.6 and 12.7)
shall be held by the Trustee, in trust for the benefit of, and shall be paid
forthwith over and delivered to, the holders of such Senior Indebtedness (pro
rata as to each of such holders on the basis of the respective amounts of Senior
Indebtedness held by them) or their representative or the trustee under the
indenture or other agreement (if any) pursuant to which such Senior Indebtedness
may have been issued, as their respective interests may appear, for application
to the payment of all such Senior Indebtedness remaining unpaid to the extent
necessary to pay the same in full in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness. The Issuer shall give prompt written notice to the Trustee of any
default in the payment of principal of or interest on any Senior Indebtedness.
Section 12.3 Subordinated Securities Subordinated to Prior Payment of
All Senior Indebtedness on Dissolution, Liquidation or Reorganization of Issuer.
Upon any distribution of assets of the Issuer in any dissolution, winding up,
liquidation or reorganization of the Issuer (whether voluntary or involuntary,
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payments in full of the principal thereof and interest due thereon,
or provision shall be made for such payment, before the Holders of
Subordinated Securities are entitled to receive any payment on account of
the principal of or interest on such Securities;
(b) any payment or distribution of assets of the Issuer of any kind
or character, whether in cash, property or securities (other than
securities of the Issuer as reorganized or readjusted or securities of the
Issuer or any other corporation provided for by a plan or reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article Twelve with respect to Subordinated Securities, to
the payment in full without diminution or modification by such plan of all
Senior Indebtedness), to which the Holders of Subordinated Securities or
the Trustee on behalf of the Holders of Subordinated Securities would be
entitled except for the provisions of this Article Twelve shall be paid or
delivered by the liquidating trustee or agent or other person making such
payment or distribution directly to the holders of Senior Indebtedness or
their representative, or to the trustee under any indenture under which
Senior Indebtedness may have been issued (pro rata as to each such holder,
representative or trustee on the basis of the respective amounts of unpaid
Senior Indebtedness held or represented by each), to the extent necessary
to make payment in full of all Senior
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Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution or provision thereof to the holders of such Senior
Indebtedness; and
(c) in the event that notwithstanding the foregoing provisions of this
Section 12.3, any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities (other than
securities of the Issuer as reorganized or readjusted or securities of the
Issuer or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article Twelve with respect to Subordinated Securities, to
the payment in full without diminution or modification by such plan of all
Senior Indebtedness), shall be received by the Trustee or the Holders of
the Subordinated Securities on account of principal of or interest on the
Subordinated Securities before all Senior Indebtedness is paid in full, or
effective provision made for its payment, such payment or distribution
(subject to the provisions of Section 12.6 and 12.7) shall be received and
held in trust for and shall be paid over to the holders of the Senior
Indebtedness remaining unpaid or unprovided for or their representative, or
to the trustee under any indenture under which such Senior Indebtedness may
have been issued (pro rata as provided in subsection (b) above), for
application to the payment of such Senior Indebtedness until all such
Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution or provision therefor to the holders
of such Senior Indebtedness.
The Issuer shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Issuer.
The consolidation of the Issuer with, or the merger of the Issuer
into, another corporation or the liquidation or dissolution of the Issuer
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Nine hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 12.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated such in
Article Nine.
Section 12.4 Holders of Subordinated Securities to be Subrogated to
Right Holders of Senior Indebtedness. Subject to the payment in full of all
Senior Indebtedness, the Holders of Subordinated Securities shall be subrogated
[equally and ratably] to the rights of the holders of Senior Indebtedness to
receive payments or distributions of assets of the Issuer applicable to the
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Senior Indebtedness until all amounts owing on Subordinated Securities shall be
paid in full, and for the purposes of such subrogation no payments or
distributions to the holders of the Senior Indebtedness by or on behalf of the
Issuer or by or on behalf of the Holders of Subordinated Securities by virtue of
this Article Twelve which otherwise would have been made to the Holders of
Subordinated Securities shall, as between the Issuer, its creditors other than
holders of Senior Indebtedness and the Holders of Subordinated Securities, be
deemed to be payment by the Issuer to or on account of the Senior Indebtedness,
it being understood that the provisions of this Article Twelve are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Subordinated Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
Section 12.5 Obligation of the Issuer Unconditional. Nothing
contained in this Article Twelve or elsewhere in this Indenture or in any
Subordinated Security is intended to or shall impair, as among the Issuer, its
creditors other than holders of Senior Indebtedness and the Holders of
Subordinated Securities, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders of Subordinated Securities the principal
of, and interest on, Subordinated Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of Subordinated Securities and
creditors of the Issuer other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Subordinated Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of Senior Indebtedness in respect of
cash, property or securities of the Issuer received upon the exercise of any
such remedy. Upon any payment or distribution of assets of the Issuer referred
to in this Article Twelve, the Trustee and Holders of Subordinated Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or, subject to the provisions of Section
6.1 and 6.2, a certificate of the receiver, trustee in bankruptcy, liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or the Holders of Subordinated Securities, for the purposes of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Issuer, the
amount thereof or payable thereon, the amount or amounts paid or distributed
therein and all other facts pertinent thereto or to this Article Twelve.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in any Subordinated Security is intended to or shall affect the
obligation of the Issuer to make, or prevent the Issuer from making, at any time
except during the pendency of any dissolution, winding up, liquidation or
reorganization proceeding, and, except as provided in subsections (a) and (b) of
Section 12.2,
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payments at any time of the principal of, or interest on Subordinated
Securities.
Section 12.6 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice. The Issuer shall give prompt written notice to the Trustee
of any fact known to the Issuer which would prohibit the making of any payment
or distribution to or by the Trustee in respect of the Subordinated Securities.
Notwithstanding the provisions of this Article Twelve or any provision of this
Indenture, the Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment or
distribution to or by the Trustee, unless at least two Business Days prior to
the making of any such payment, the Trustee shall have received written notice
thereof from the Issuer or from one or more holders of Senior Indebtedness or
from any representative thereof or from any trustee therefor, together with
proof satisfactory to the Trustee of such holding of Senior Indebtedness or of
the authority of such representative or trustee; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 6.1
and 6.2, shall be entitled to assume conclusively that no such facts exist. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a
representative or trustee on behalf of the holder) to establish that such notice
has been given by a holder of Senior Indebtedness (or a representative of or
trustee on behalf of any such holder). In the event that the Trustee
determines, in good faith, that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payments or distribution pursuant of this Article Twelve, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness held by such Person, as to the
extent to which such Person is entitled to participate in such payment or
distribution, and as to other facts pertinent to the rights of such Person under
this Article Twelve, and if such evidence is not furnished, the Trustee may
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The Trustee, however, shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
nothing in this Article Twelve shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.6.
Section 12.7 Application by Trustee of Monies or Government
Obligations Deposited with It. Money or Government obligations deposited in
trust with the Trustee pursuant to and in accordance with Section 10.1 shall be
for the sole benefit of Securityholders and, to the extent allocated for the
payment of Subordinated Securities, shall not be subject to the subordination
provisions of this Article Twelve, if the same are deposited in trust prior to
the happening of any event specified in Section 12.2. Otherwise, any deposit of
monies or Government Obligations by the Issuer with the Trustee or any paying
agent
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(whether or not in trust) for the payment of the principal of, or interest on
any Subordinated Securities shall be subject to the provisions of Section 12.1,
12.2 and 12.3 except that, if prior to the date on which by the terms of this
Indenture any such monies may become payable for any purposes (including,
without limitation, the payment of the principal of, or the interest, if any,
on any Subordinated Security) the Trustee shall not have received with respect
to such monies the notice provided for in Section 12.6, then the Trustee or the
paying agent shall have full power and authority to receive such monies and
Government Obligations and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such date. This Section 12.7 shall be construed
solely for the benefit of the Trustee and paying agent and, as to the first
sentence hereof, the Securityholders, and shall not otherwise effect the rights
of holders of Senior Indebtedness.
Section 12.8 Subordination Rights Not Impaired by Acts or Omissions
of Issuer or Holders of Senior Indebtedness. No rights of any present or future
holders of any Senior Indebtedness to enforce subordination as provided herein
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Issuer or by any act or failure to act, in good faith, by
any such holders or by any noncompliance by the Issuer with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Issuer may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Subordinated Securities, without incurring responsibility to the Holders of the
Subordinated Securities and without impairing or releasing the subordination
provided in this Article Twelve or the obligations hereunder of the Holders of
the Subordinated Securities to the holders of such Senior Indebtedness, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, such Senior Indebtedness,
or otherwise amend or supplement in any manner such Senior Indebtedness or any
instrument evidencing the same or any agreement under which such Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing such Senior Indebtedness;
(iii) release any Person liable in any manner for the collection for such Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Issuer, as the case may be, and any other Person.
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Section 12.9 Securityholders Authorize Trustee to Effectuate
Subordination of Securities. Each Holder of Subordinated Securities by his
acceptance thereof authorizes and expressly directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Twelve and appoints the Trustee his
attorney-in-fact for such purpose, including in the event of any dissolution,
winding up, liquidation or reorganization of the Issuer (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise) the immediate filing of a claim for the unpaid balance
of his Subordinated Securities in the form required in said proceedings and
causing said claim to be approved. If the Trustee does not file a proper claim
or proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then the holders of
Senior Indebtedness have the right to file and are hereby authorized to file an
appropriate claim for and on behalf of the Holders of said Securities.
Section 12.10 Right of Trustee to Hold Senior Indebtedness. The
Trustee in its individual capacity shall be entitled to all of the rights set
forth in this Article Twelve in respect of any Senior Indebtedness at any time
held by it to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.
With respect to the holders of Senior Indebtedness of the Issuer, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Sections 12.2 and 12.3, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Holders of Subordinated Securities, the Issuer or any other Person money or
assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article Twelve or otherwise.
Section 12.11 Article Twelve Not to Prevent Events of Defaults. The
failure to make a payment on account of principal or interest by reason of any
provision in this Article Twelve shall not be construed as preventing the
occurrence of an Event of Default under Section 5.1.
ARTICLE THRITEEN
CONVERSIONS
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Section 13.1 Applicability of Article. Securities of any series
which are convertible into Common Stock at the option of the Holder shall be
convertible in accordance with their terms and (except as otherwise specified as
contemplated by Section 2.3 for Securities of the series) in accordance with
this Article. Each reference in this Article to "a Security" or "the
Securities" refers to the Securities of the particular series that is
convertible into Common Stock. If more than one series of Securities with
conversion privileges are outstanding at any time, the provisions of this
Article shall be applied separately to each such series.
Section 13.2 Conversion Privilege. A Holder of a Security of any
authorized denomination of any series may convert such Security at the principal
amount thereof, or of such portion thereof, into fully paid and non-assessable
shares of Common Stock, at any time during the period specified on the
Securities of that series, at the conversion price or conversion rate in effect
on the conversion date, except that, with respect to any Security (or portion
thereof) called for redemption, such conversion right shall (except as otherwise
provided in Section 11.6) terminate at the close of business on the fifteenth
day prior to the date fixed for redemption of such Security (or portion thereof)
(or such other day as may be specified as contemplated by Section 2.3 for
Securities of such series), unless the Issuer shall default in payment of the
amount due upon redemption thereof.
The initial conversion price or conversion rate in respect of a series
of Securities shall be as specified on the Securities of that series. The
conversion price or conversion rate will be subject to adjustment on the terms
set forth in Section 13.7 through 13.13 or such other or different terms, if
any, as may be specified as contemplated by Section 2.3 for Securities of such
series.
A Holder may convert any Security in full and may convert a portion of
a Security if the portion to be converted and the remaining portion of such
Security are in denominations issuable for that series of Securities. Provisions
of this Indenture that apply to conversion of all of a Security also apply to
conversion of a portion of it.
Section 13.3 Conversion Procedure. To convert a Security of any
series, a Holder must surrender such Security, duly endorsed or assigned to the
Issuer or in blank, at any office or agency of the Issuer maintained for that
purpose, accompanied by written notice to the Issuer at such office or agency
that the Holder elects to convert such Security or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. The date on which the Holder satisfies all those requirements is the
conversion date. As soon as practicable after the conversion date, the Issuer
shall deliver to the Holder through the Conversion Agent a certificate for the
number of shares of Common Stock issuable upon the conversion and cash or its
check in
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lieu of any fractional share. The Person in whose name the certificate is
registered becomes a stockholder of record on the conversion date and the rights
of the Holder of the Securities so converted as a Holder thereof cease as of
such date.
If the Holder converts more than one Security of any series at the
same time, the number of full shares issuable upon the conversion shall be based
on the total principal amount of the Securities of such series so converted.
Upon surrender of a Security of any series that is converted in part,
the Trustee shall authenticate for the Holder a new Security of that series
equal in principal amount to the unconverted portion of the Security
surrendered.
If the last day on which a Security may be converted is not a Business
Day in a place where a Conversion Agent is located, the Security may be
surrendered to that Conversion Agent on the next succeeding day that is a
Business Day.
The Issuer will not be required to deliver certificates for shares of
Common Stock upon conversion while its stock transfer books are closed for a
meeting of stockholders or for the payment of dividends or for any other
purpose, but certificates for shares of Common Stock shall be delivered as soon
as the stock transfer books shall again be opened.
Securities of any series surrendered for conversion during the period
from the close of business on any Record Date next preceding any Interest
Payment Date for such series to the opening of business on such Interest Payment
Date shall (except in the case of Securities or portions thereof which have been
called for redemption on a redemption date within such period) be accompanied by
payment in funds acceptable to the Issuer of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Securities
being surrendered for conversion; provided, that no such payment need be made if
there shall exist, at the time of conversion, a default in the payment of
interest on the Securities of such series. The funds so delivered to the
Conversion Agent shall be paid to the Issuer on or after such Interest Payment
Date unless the Issuer shall default on the payment of the interest due on such
Interest Payment Date, in which event such funds shall be paid to the Holder who
delivered the same. Except as provided in the preceding sentence and subject to
the last paragraph of Section 2.7, no payment or adjustment shall be made upon
any conversion on account of any interest accrued on the Securities surrendered
for conversion or on account of any dividends on the Common Stock issued upon
conversion.
Section 13.4 Fractional Shares. The Issuer will not issue a
fractional share of Common Stock upon conversion of a Security. Instead, the
Issuer will deliver cash or its check for the current market value of a
fractional share. The current market value of a fractional share is determined
as follows: Multiply the
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current market price of a full share of Common Stock on the last full trading
day prior to the conversion date by the fraction (rounded to the nearest 1/100
of a share) and round the result to the nearest whole cent.
Section 13.5 Taxes on Conversion. The Issuer shall pay any and all
documentary, stamp or similar issue or transfer taxes due on the issue or
delivery of shares of Common Stock upon the conversion of Securities pursuant
hereto. The Holder, however, shall pay any such tax which is due because the
shares of Common Stock are issued in a name other than his.
Section 13.6 Issuer to Provide Stock. The Issuer shall from time to
time as may be necessary reserve and keep available out of its authorized but
unissued Common Stock or its Common Stock held in treasury enough shares of
Common Stock to permit the conversion of all outstanding Securities.
All shares of Common Stock which may be issued or delivered upon
conversion of the Securities shall be validly issued, fully paid and
non-assessable and shall be free from any preemptive rights.
In order that the Issuer may issue shares of Common Stock upon
conversion of the Securities, the Issuer will endeavor to comply with all
applicable Federal and State securities laws and will endeavor to list such
shares on each national or regional securities exchange on which the Common
Stock is listed.
If the taking of any action would cause an adjustment to the then
prevailing conversion price or conversion rate which would result in shares of
Common Stock being issued upon conversion of the Securities at an effective
conversion price below the then par value, if any, of the Common Stock, or would
raise the par value above the effective conversion price then in effect, the
Issuer will take such corporate action as may, in the opinion of its counsel, be
necessary in order that the Issuer may validly and legally issue fully paid and
non-assessable shares of its Common Stock at such adjusted conversion price or
conversion rate or the conversion price or conversion rate then in effect, as
the case may be.
Section 13.7 Adjustment for Change in Capital Stock. If the Issuer:
(1) pays a dividend or makes a distribution in shares of its
Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
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(4) pays a dividend or makes a distribution on its Common Stock
other than in shares of its Common Stock; or
(5) issues by reclassification of its shares of Common Stock any
shares of its capital stock,
then the conversion privilege and the conversion price or conversion rate in
effect immediately prior to the opening of business on the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be adjusted so that the Holder of any Security
thereafter converted may receive the number of shares of capital stock of the
Issuer which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to such time. Such
adjustment shall be made successively whenever any event listed below shall
occur.
For a dividend or distribution, the adjustment shall become effective
immediately after the record date for the dividend or distribution. For a
subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
If after an adjustment a Holder of a Security upon conversion of it
may receive shares of two or more classes of capital stock of the Issuer, the
conversion prices of the classes of capital stock (after giving effect to such
allocation of the adjusted conversion price between or among the classes of
capital stock as the Board of Directors shall determine to be appropriate) or
the conversion rate, as the case may be, shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Indenture.
Any shares of Common Stock issuable in payment of a dividend shall be
deemed to have been issued immediately prior to the time of the record date for
such dividend for purposes of calculating the number of outstanding shares of
Common Stock under Sections 13.8 and 13.9.
Section 13.8 Adjustment for Rights Issue. If the Issuer issues any
rights or warrants to all holders of shares of its Common Stock entitling them
for a period expiring within 45 days after the record date mentioned below to
purchase shares of Common Stock (or Convertible Securities) at a price per share
(or having a conversion price per share, after adding thereto an allocable
portion of the exercise price of the right or warrant to purchase such
Convertible Securities, computed on the basis of the maximum number of shares of
Common Stock issuable upon conversion of such Convertible Securities) less than
the Average Market Price on the Determination Date, the conversion price or rate
shall be adjusted so that it shall equal the price or rate determined by
multiplying the conversion price or dividing the conversion rate, as the case
may be, in effect immediately prior to the opening of business on
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that record date by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so offered (or the aggregate conversion price of the Convertible
Securities to be so offered, after adding thereto the aggregate exercise price
of the rights or warrants to purchase such Convertible Securities) would
purchase at such Average Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription or purchase (or
into which the Convertible Securities so offered are convertible). Shares of
Common stock owned by or held for the account of the Issuer shall not be deemed
outstanding for the purpose of any such adjustment.
For purposes of this Section 13.8, the number of shares of Common
Stock outstanding on any record date shall be deemed to include the maximum
number of shares of Common Stock the issuance of which would be necessary to
effect the full exercise, exchange or conversion of all Convertible Securities
outstanding on such record date which are then exercisable, exchangeable or
convertible at a price equal to or less than the Average Market Price per share
of Common Stock, if all of such Convertible Securities were deemed to have been
exercised, exchanged or converted immediately prior to the opening of business
on such record date.
The adjustment shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately after the record
date or the determination of stockholders entitled to receive the rights or
warrants. If all of the shares of Common Stock (or all of the Convertible
Securities) subject to such rights or warrants have not been issued when such
rights or warrants expire (or, in the case of rights or warrants to purchase
Convertible Securities which have been exercised, all of the shares of Common
Stock issuable upon conversion of such Convertible Securities have not been
issued prior to the expiration of the conversion right thereof), then the
conversion price or conversion rate shall promptly be readjusted to the
conversion price or conversion rate which would then be in effect had the
adjustment upon the issuance of such rights or warrants been made on the basis
of the actual number of shares of Common Stock (or Convertible Securities)
issued upon the exercise of such rights or warrants (or the conversion of such
Convertible Securities).
No adjustment shall be made under this Section 13.8 if the adjusted
conversion price would be higher than, or the adjusted conversion rate would be
less than, the conversion price or conversion rate, as the case may be, in
effect prior to such adjustment.
Section 13.9 Adjustments for Other Distributions. If the Issuer
distributes to all holders of shares of its Common Stock any assets or debt
securities or any rights or warrants to purchase
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securities, the conversion price or conversion rate shall be adjusted by
multiplying the conversion price or dividing the conversion rate, as the case
may be, in effect immediately prior to the opening of business on the record
date mentioned below by a fraction, of which the numerator shall be the total
number of shares of Common Stock outstanding on such record date multiplied by
the Average Market Price on the Determination Date, less the fair market value
(as determined by the Board of Directors) on such record date of said assets or
debt securities or rights or warrants so distributed, and of which the
denominator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by such Average Market Price.
For purposes of this Section 13.9, the number of shares of Common
Stock outstanding on any record date shall be deemed to include the maximum
number of shares of Common Stock the issuance of which would be necessary to
effect the full exercise, exchange or conversion of all Convertible Securities
outstanding on such record date which are then exercisable, exchangeable or
convertible at a price equal to or less than the Average Market Price, if all of
such Convertible Securities were deemed to have been exercised, exchanged or
converted immediately prior to the opening of business on such record date.
The adjustment shall be made successively whenever any such
distribution is made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
Shares of Common Stock owned by or held for the account of the Issuer shall not
be deemed outstanding for the purpose of any such adjustment.
No adjustment shall be made under this Section 13.9 if the adjusted
conversion price would be higher than, or the adjusted conversion rate would be
less than, the conversion price or conversion rate, as the case may be, in
effect prior to such adjustment.
This Section does not apply to cash dividends or distributions. Also,
this Section does not apply to dividends or distributions referred to in Section
13.7 or to rights or warrants referred to in Section 13.8.
Section 13.10 Voluntary Adjustment. The Issuer at any time may
reduce the conversion price or increase the conversion rate, temporarily or
otherwise, by any amount but in no event shall such adjusted conversion price or
conversion rate result in shares of Common Stock being issuable upon conversion
of the Securities if converted at the time of such adjustment at an effective
conversion price per share less than the par value of the Common Stock at the
time such adjustment is made.
A voluntary adjustment of the conversion price or conversion rate
pursuant to this Section 13.10 does not change or adjust the conversion price or
conversion rate otherwise in effect
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for purposes of Section 13.7, 13.8 or 13.9. If an event requiring an adjustment
to the conversion price or conversion rate pursuant to Section 13.7, 13.8 or
13.9 occurs at any time that a voluntary adjustment to the conversion price or
conversion rate is in effect pursuant to this Section 13.10, then the adjustment
required by the applicable of Section 13.7, 13.8 or 13.9 shall be made to the
conversion price or conversion rate that would otherwise have been in effect as
of the relevant date specified in such Section had no voluntary adjustment
pursuant to this Section 13.10 been made, and for purposes of applying such
Section, any such voluntary adjustment shall be disregarded. If such adjustment
would result in a lower conversion price or a higher conversion rate, as the
case may be, than the conversion price or conversion rate as voluntarily
adjusted by the Issuer then such lower conversion price or higher conversion
rate shall be the conversion price or conversion rate, as the case may be.
Section 13.11 Certain Definitions. For the purposes of this Article,
the following terms have the following meanings:
"Average Market Price" of a share of Common Stock on the
Determination Date for any issuance of rights or warrants or any distribution in
respect of which the Average Market Price is being calculated means the average
of the daily current market prices of the Common Stock for the shortest of:
(i) the period of 30 consecutive trading days commencing 45 trading
days before such Determination Date,
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance of rights or warrants or the distribution in
respect of which the Average Market Price is being calculated and ending on the
last full trading day before such Determination Date, and
(iii) the period, if any, commencing on the date next succeeding the
Ex-Dividend Date with respect to the next preceding issuance of rights or
warrants or distribution for which an adjustment is required by the provisions
of Sections 13.7(4), 13.8 or 13.9, and ending on the last full trading day
before such Determination Date.
If the record date for an issuance of rights or warrants or a
distribution for which an adjustment is required by the provisions of Sections
13.7(4), 13.8 or 13.9 (the "preceding adjustment event"), precedes the record
date for the issuance or distribution in respect of which the Average Market
Price is being calculated and the Ex-Dividend Date for such preceding adjustment
event is on or after the Determination Date for the issuance or distribution in
respect of which the Average Market Price is being calculated, then the Average
Market Price shall be adjusted by deducting therefrom the fair market value (on
the record date for the issuance or distribution in respect of which the Average
Market Price is being calculated), as determined by the Board of
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Directors, of the capital stock, rights, warrants, assets or debt securities
issued or distributed in respect of each share of Common Stock in such preceding
adjustment event.
Further, in the event that the Ex-Dividend Date (or in the case of a
subdivision, combination or reclassification, the effective date with
respect thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 13.7(1), (2), (3) or (5) applied occurs
during the period applicable for calculating the Average Market Price, then
the Average Market Price shall be calculated for such period in a manner
determined by the Board of Directors to reflect the impact of such
dividend, subdivision, combination or reclassification on the current
market price of the Common Stock during such period.
"current market price" of a share of Common Stock on any day means the
last reported sale price (or, if no sale price is reported, the average of the
high and low bid prices) on such day on the National Association of Securities
Dealers, Inc. Automated Quotation System or as quoted by the National Quotation
Bureau Incorporated, or if the Common Stock is listed on an exchange, on the
principal exchange on which the Common Stock is listed. In the event that no
such quotation is available for any day, the Board of Directors shall be
entitled to determine the current market price on the basis of such quotations
as it considers appropriate.
"Determination Date" for any issuance of rights or warrants or any
distribution to which Section 13.8 or 13.9 applies means the earlier of (i) the
record date for the determination of stockholders entitled to receive the rights
or warrants or the distribution to which such Section applies and (ii) the
Ex-Dividend Date of such rights, warrants or distribution.
"Ex-Dividend Date" means the date on which "ex-dividend" trading
commences for a dividend, an issuance of rights or warrants or a distribution to
which any of Sections 13.7, 13.8 and 13.9 applies in the over-the-counter market
or on the principal exchange on which the Common Stock is then quoted or listed.
Section 13.12 When Adjustment May Be Deferred. In any case in which
this Article shall require that an adjustment shall become effective immediately
after a record date for an event, the Issuer may defer until the occurrence of
such event (i) issuing to the Holder of any Security converted after such record
date and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by such
event over and above the shares of Common Stock issuable upon such conversion
before giving effect to such adjustment and (ii) paying to such Holder cash or
its check in lieu of any fractional interest to which he is entitled pursuant to
Section 13.4; provided, however, that the Issuer shall deliver to such Holder a
due bill or other appropriate instrument evidencing such Holder's rights to
receive such additional shares of Common
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Stock, and such cash, upon the occurrence of the event requiring such
adjustment.
Section 13.13 When Adjustment Is Not Required. No adjustments in the
conversion price or conversion rate need be made unless the adjustment would
require an increase or decrease of at least one percent (1%) in the initial
conversion price or conversion rate. Any adjustment which is not made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the nearest cent
or to the nearest 1/100th of a share, as the case may be.
No adjustment in the conversion price or conversion rate shall be made
because the Issuer issues, in exchange for cash, property or services, shares of
Common Stock, or any securities convertible into or exchangeable for shares of
Common Stock, or securities carrying the right to purchase shares of Common
Stock or such convertible or exchangeable securities.
No adjustment in the conversion price or conversion rate need be made
under this Article for sales of shares of Common Stock pursuant to an Issuer
plan providing for reinvestment of dividends or interest or in the event the par
value of the Common Stock is changed.
No adjustment in the conversion price or conversion rate need be made
for a transaction referred to in Section 13.7, 13.8 or 13.9 if Securityholders
are to participate in the transaction on a basis and with notice that the Board
of Directors determines to be fair and appropriate in light of the basis and
notice on which holders of Common Stock participate in the transaction; provided
that the basis on which the Securityholders are to participate in the
transaction shall not be deemed to be fair if it would require the conversion of
Securities at any time prior to the expiration of the conversion period
specified for such Securities.
To the extent the Securities become convertible into cash, no
adjustment need be made thereafter as to such cash. Interest will not accrue on
such cash.
Section 13.14 Notice of Adjustment. Whenever the conversion price or
conversion rate is adjusted, the Issuer shall promptly mail to Securityholders a
notice of the adjustment and file with the Trustee an Officers' Certificate
briefly stating the new conversion price or conversion rate, the date it becomes
effective, the facts requiring the adjustment and the manner of computing it.
The certificate shall be conclusive evidence that the adjustment is correct.
Section 13.15 Notice of Certain Transactions. If:
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(1) the Issuer takes any action which would require an
adjustment in the conversion price or conversion rate;
(2) the Issuer consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation, and stockholders of the
Issuer must approve the transaction; or
(3) there is a voluntary or involuntary dissolution or
liquidation of the Issuer,
a Holder of a Security may elect to convert it into shares of Common
Stock prior to the record date for, or the effective date of, the transaction so
that he may receive the rights, warrants, securities or assets which a holder of
shares of Common Stock on that date may receive. Therefore, the Issuer shall
mail to the Securityholders and the Trustee, at least 20 days prior to the
applicable record or effective date hereinafter mentioned, a notice stating the
proposed record or effective date, as the case may be. Failure to mail the
notice or any defect in it shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section.
Section 13.16 Consoldiation, Merger or Sale of the Issuer. If the
Issuer is a party to a transaction described in Section 9.1 or a merger which
reclassifies or changes its Outstanding Common Stock, the successor corporation
(or corporation controlling the successor corporation or the issuer, as the case
may be) shall enter into a supplemental indenture which shall provide that the
Holder of a Security may convert it into the kind and amount of securities or
cash or other assets which he would have owned immediately after the
consolidation, merger or transfer if he had converted the Security immediately
before the effective date of such transaction, assuming (to the extent
applicable) that such Holder failed to exercise any rights of election with
respect thereto and received per share of Common Stock the kind and amount of
securities, cash or assets received per share by a plurality of the non-electing
shares. The supplemental indenture shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The successor corporation shall mail to each Securityholder a
notice describing the supplemental indenture.
If this Section applies, Sections 13.7, 13.8 and 13.9 shall not apply.
Section 13.17 Issuer Determination Final. Any determination which
the Board of Directors must make pursuant to Sections 13.7, 13.9, 13.11, 13.13
or 13.16 is conclusive and binding on the Holders of Securities.
Section 13.18 Trustee's Disclaimer. Neither the Trustee nor any
Conversion Agent has any duty to determine when an adjustment under this Article
should be made, how it should be made
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or what it should be. Neither the Trustee nor any Conversion Agent has any duty
to determine whether any provisions of a supplemental indenture under Section
13.16 are correct. Neither the Trustee nor any Conversion Agent makes any
representation as to the validity or value of any securities or assets issued
upon conversion of Securities. Neither the Trustee nor any Conversion Agent
shall be responsible for the Issuer's failure to comply with this Article.
Section 13.19 Simultaneous Adjustments. In the event that this
Article Thirteen requires adjustments to the conversion price or conversion rate
under more than one of Sections 13.7(4), 13.8 or 13.9, and the record dates for
the distributions giving rise to such adjustments shall occur on the same date,
then such adjustments shall be made by applying, first, the provisions of
Section 13.7, second, the provisions of Section 13.9 and, third, the provisions
of Section 13.8.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
Section 14.1 Incorporators, Stockholders, Officers and Directors of
Issuer Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture or in any
Security, or because of any indebtedness evidenced thereby, shall be had against
any incorporator, as such, or against any past, present or future stockholder,
officer or director, as such, of the Issuer or of any successor, either directly
or through the Issuer or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of the Securities by the Holders thereof and as
part of the consideration for the issue of the Securities by the Holders thereof
and as part of the consideration for the issue of the Securities.
Section 14.2 Provisions of Indenture for the Sole Benefit of Parties
and Holders of Securities. Nothing in this Indenture, in the Securities,
expressed or implied, shall give or be construed to give to any Person other
than the parties hereto and their successors and the Holders of the Securities,
any legal or equitable right, remedy or claim under this Indenture or under any
covenant or provision herein contained, all such covenants and provisions being
for the sole benefit of the parties hereto and their successors and of the
Holders of the Securities. Notwithstanding the foregoing, for so long as any
Trust Securities remain outstanding, the Issuer's obligations under this
Indenture will also be for the benefit of the Holders of such Trust Securities,
and the Issuer acknowledges and agrees that such holders will be entitled to
enforce certain payment obligations under the Securities directly against the
Issuer to the extent
89
<PAGE> 100
provided in Sections 5(b) and 6(c) of Annex I of the Declaration dated
June __, 1997.
Section 14.3 Successors and Assigns of Issuer Bound by Indenture.
All the covenants, stipulations, promises and agreements in this Indenture made
by or on behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
Section 14.4 Notices and Demands on Issuer, Trustee and Holders of
Securities. Any notice, direction, request or demand which by any provision of
this Indenture is required or permitted to be given or served by the Trustee or
by any Holder of Securities of any series to or upon the Issuer shall be deemed
to have been sufficiently given or served by being deposited postage prepaid in
the United States mail, first-class mail (except as otherwise specifically
provided herein), addressed (until another address of the Issuer is filed by the
Issuer with the Trustee) to CMS Energy Corporation, Fairlane Plaza South, Suite
1100, 330 Town Center Drive, Dearborn, Michigan 48126, Attention: Secretary.
Any notice, direction, request or demand by the Issuer or any Holder of
Securities of any series to or upon the Trustee shall be deemed to have been
sufficiently given or served by being deposited postage prepaid in the United
States mail, first-class mail (except as otherwise specifically provided
herein), addressed (until another address of the Trustee is filed by the Trustee
with the Issuer) to The Bank of New York, 101 Barclay Street, New York, New
York, 10286, Attn: Corporate Trust, Trustee Administration. Any notice required
or permitted to be given or served by the Issuer or by the Trustee to or upon
(i) any Holders of Registered Securities of any series or any Holders of
Unregistered Securities who have filed their names and addresses with the
Trustee pursuant to Section 4.4(c)(ii), shall be deemed to have been
sufficiently given or served by being deposited in the United States mail,
first-class mail (except as otherwise specifically provided herein), addressed
at their addresses as they shall appear on the Security Register or at the
addresses so filed, respectively, and (ii) any Holders of other Unregistered
Securities, shall be deemed to have been sufficiently given or served by
publication at least once in an Authorized Newspaper in the Borough of
Manhattan, The City of New York.
In any case where notice to the Holders of Securities is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
90
<PAGE> 101
In case, by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice when such notice is required to be given pursuant to any provision of
this Indenture, then any manner of giving such notice as shall be reasonably
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
Section 14.5 Officers' Certificates and Opinions of Counsel;
Statements to be Contained Therein. Except as otherwise expressly provided by
this Indenture, upon any application or demand by the Issuer to the Trustee to
take any action under any of the provisions of this Indenture, the Issuer shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and 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 demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (other than certificates provided pursuant to
Section 4.3(d) or Section 11.5) shall include (a) a statement that the
individual signing such certificate or opinion has read such covenant or
condition and the definitions herein relating thereto, (b) 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, (c) a
statement that, in the opinion of 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 (d) a
statement as to whether or not, in the opinion of such individual, such
condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the certificate
or opinion of or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
such certificate, statement or Opinion of Counsel may be based, insofar as it
relates to factual matters, on information with respect to which is in the
possession of the Issuer, upon the certificate, statement or opinion of or
representations by an officer or officers of the Issuer, unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate, statement or opinion may be based as
aforesaid are
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<PAGE> 102
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or
of counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain a statement
that such firm is independent.
Section 14.6 Payments Due on Saturdays, Sundays and Holidays. If the
date of maturity of interest on or principal of the Securities of any series or
the date fixed for redemption or repayment of any such Security shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Securities) payment of such interest or principal need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date of maturity or the date fixed for redemption
or repayment, and no interest shall accrue for the period from and after such
date.
Section 14.7 Conflict of any Provision of Indenture with Trust
Indenture Act of 1939. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with any provision set forth in
Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, that impose
duties on any person, such provision of the Trust Indenture Act of 1939 shall
control.
Section 14.8 Michigan Law to Govern. This Indenture and each
Security 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, provided, however, that
the rights, duties and obligations of the Trustee are governed and construed in
accordance with the laws of the State of New York.
Section 14.9 Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Section 14.10 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.
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Section 14.11 Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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<PAGE> 104
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of _______, 1997.
CMS ENERGY CORPORATION
By
-----------------------------
Alan M. Wright
Title: Senior Vice President,
Chief Financial Officer
and Treasurer
[CORPORATE SEAL]
Attest:
By
-----------------------
Title:
THE BANK OF NEW YORK, TRUSTEE
By
---------------------------
Title:
[CORPORATE SEAL]
Attest:
By
---------------------------
Title:
STATE OF MICHIGAN )
94
<PAGE> 105
)ss.
COUNTY OF WAYNE )
On the _____ day of June, 1997, before me personally came Alan M. Wright,
to me known, who, being by me duly sworn, did depose and say that he resides at
Ann Arbor, Michigan; that he is Senior Vice President, Chief Financial Officer
and Treasurer of CMS Energy Corporation, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate; that it
was so affixed by authority of the Board of Directors of said corporation; and
that he signed his name thereto by like authority.
[Notarial Seal]
- -----------------------------------------
Sherry Ann White
Notary Public, Wayne County, Michigan
My Commission Expires: March 7, 2002
95
<PAGE> 1
EXHIBIT 4(f)
====================================
FIRST SUPPLEMENTAL INDENTURE
between
CMS ENERGY CORPORATION
and
THE BANK OF NEW YORK
Dated as of June __, 1997
====================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS.................................................................... 4
SECTION 1.1. Definition of Terms........................................................ 4
-------------------
ARTICLE II. GENERAL TERMS AND CONDITIONS OF THE DEBENTURES...................................... 7
SECTION 2.1. Designation and Principal Amount........................................... 7
--------------------------------
SECTION 2.2. Maturity................................................................... 7
--------
SECTION 2.3. Form and Payment........................................................... 7
----------------
SECTION 2.4. Global Debenture........................................................... 8
----------------
SECTION 2.5. Interest................................................................... 9
--------
ARTICLE III. REDEMPTION OR EXCHANGE OF DEBENTURES............................................... 9
SECTION 3.1 Election to Redeem; Notice to Trustee...................................... 9
-------------------------------------
SECTION 3.2 Selection of Debentures to Be Redeemed..................................... 10
--------------------------------------
SECTION 3.3 Notice of Redemption....................................................... 10
--------------------
SECTION 3.4 Deposit of Redemption Price................................................ 11
---------------------------
SECTION 3.5 Debentures Payable on Redemption Date...................................... 11
-------------------------------------
SECTION 3.6 Debentures Redeemed in Part................................................ 11
---------------------------
SECTION 3.7 Mandatory Redemption....................................................... 11
--------------------
SECTION 3.8 Optional Redemption........................................................ 12
-------------------
SECTION 3.9 Exchange of Trust Securities for Debentures................................ 12
-------------------------------------------
ARTICLE IV. EXTENSION OF INTEREST PAYMENT PERIOD................................................ 13
SECTION 4.1. Deferrals of Interest Payment Dates........................................ 13
-----------------------------------
SECTION 4.2. Notice of Extension........................................................ 13
-------------------
ARTICLE V. EXPENSES............................................................................. 14
SECTION 5.1. Payment of Expenses........................................................ 14
-------------------
ARTICLE VI
CONVERSION OF DEBENTURES..................................................................... 14
SECTION 6.1 Conversion Rights.......................................................... 14
-----------------
SECTION 6.2 Expiration of Conversion Rights............................................ 15
-------------------------------
SECTION 6.3 Conversion Price Adjustments............................................... 15
-----------------------------
SECTION 6.4 Fundamental Change......................................................... 18
------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 6.5 Prior Notice of Certain Events............................................. 15
-------------------------------
ARTICLE VII.
SUBORDINATION............................................................................... 19
SECTION 7.1. Agreement to Subordinate................................................... 19
------------------------
ARTICLE VIII.
COVENANT TO LIST ON EXCHANGE................................................................ 20
SECTION 8.1. Listing on an Exchange..................................................... 20
----------------------
ARTICLE IX.
FORM OF DEBENTURES.......................................................................... 20
SECTION 9.1. Form of Debenture.......................................................... 20
-----------------
SECTION 9.2. Form of Assignment......................................................... 27
------------------
ARTICLE X.
ORIGINAL ISSUE OF DEBENTURES................................................................. 27
SECTION 10.1. Original Issue of Debentures...................................................... 27
----------------------------
ARTICLE XI.
MISCELLANEOUS................................................................................ 28
SECTION 11.1. Ratification of Indenture......................................................... 28
-------------------------
SECTION 11.2. Trustee Not Responsible for Recitals.............................................. 28
------------------------------------
SECTION 11.3. Governing Law..................................................................... 28
-------------
SECTION 11.4. Separability...................................................................... 28
------------
SECTION 11.5. Counterparts...................................................................... 28
------------
</TABLE>
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE, dated as of June __, 1997, (the "First
Supplemental Indenture"), between CMS Energy Corporation, a Michigan
Corporation (the "Issuer"), and The Bank of New York, as trustee (the
"Trustee") under the Indenture dated as of June __, 1997 between the Issuer and
the Trustee (the "Indenture").
WHEREAS, the Issuer executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Issuer's Securities to be
issued from time to time in one or more series as might be determined by the
Issuer under the Indenture, in an unlimited aggregate principal amount which
may be authenticated and delivered as provided in the Indenture;
WHEREAS, Section 2.3 of the Indenture permits the terms of any
series of Securities to be established in an indenture supplemental to the
Indenture;
WHEREAS, Section 8.1(e) of the Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Trustee
without the consent of any Holders of the Securities to establish the form and
terms of the Securities of any series.
WHEREAS, pursuant to the terms of the Indenture, the Issuer desires
to provide for the establishment of a new series of its Securities to be known
as its ___% Convertible Subordinated Debentures due 2027 (the "Debentures"),
the form and substance of such Debentures and the terms, provisions and
conditions thereof to be set forth as provided in the Indenture and this First
Supplemental Indenture;
WHEREAS, CMS Energy Trust I, a Delaware statutory business trust
(the "Trust"), has offered to the public $150,000,000 million aggregate
liquidation amount of its ____% Convertible Quarterly Income Preferred
Securities (the "Preferred Securities"), representing undivided beneficial
interests in the assets of the Trust and proposes to invest the proceeds from
such offering, together with the proceeds of the issuance and sale by the Trust
to the Issuer of $4,500,000 aggregate liquidation amount of its ___%
Convertible Quarterly Income Common Securities, in $154,500,000 aggregate
principal amount of the Debentures; and
WHEREAS, the Issuer has requested that the Trustee execute and
deliver this First Supplemental Indenture and all requirements necessary to
make this First Supplemental Indenture a valid instrument in accordance with
its terms, and to make the Debentures, when executed by the Issuer and
authenticated and delivered by the Trustee, the valid obligations of the
Issuer, have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects.
NOW THEREFORE, in consideration of the purchase and acceptance of
the Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Issuer covenants and agrees with
the Trustee as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
<PAGE> 5
(a) a term defined in the Indenture has the same meaning when used in this
First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of this
First Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Trust Agreement: (i) Clearing Agency; (ii) Delaware Trustee; (iii) Preferred
Security Certificate; (iv) Property Trustee; (v) Regular Trustees; (vi) Special
Event; (vii) Tax Event; (viii) Underwriting Agreement; (ix) Investment Company
Event; (x) Depositary; and (xi) Distribution;
(g) the following terms have the meanings given to them in this
Section 1.1(g):
"Additional Interest" means the interest, if any, that shall accrue
on any interest on the Debentures that is in arrears for more than one interest
payment period or not paid during any Extension Period, which in either case
shall accrue at the stated rate per annum specified or determined as specified
in such Debenture and compounded quarterly.
"Additional Sums" has the meaning specified in Section 2.5(c).
"Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which the Trust has become subject from time to
time as a result of a Tax Event.
"Applicable Price" means (i) in the case of a Non-Stock Fundamental
Change in which the holders of the Common Stock receive only cash, the amount
of cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the Closing Prices for the Common Stock during the ten
trading days prior to and including the record date for the determination of
the holders of Common Stock entitled to receive such securities, cash, or other
property in connection with such Non-Stock Fundamental Change or Common Stock
Fundamental Change or, if there is no such record date, the date upon which the
holders of the Common Stock shall have the right to receive such securities,
cash, or other property, in each case as adjusted in good faith by the Issuer
to appropriately reflect any of the events referred to in Section 6.3.
"Closing Price" means on any day the reported last sale price on
such day or, in case no sale takes place on such day, the average of the
reported closing bid and asked prices in each case on the NYSE Consolidated
Transactions Tape or, if the stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which such stock is
listed or admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the average of the closing bid and asked prices
as furnished by any NYSE member firm, selected by the Trustee for that purpose
2
<PAGE> 6
"Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors) of the consideration received by holders of Common Stock consists of
common stock that for each of the ten consecutive trading days prior to the
record date for the determination of the holders of Common Stock entitled to
receive such common stock or, if there is no such record date, the date on
which the holders of the Common Stock shall have the right to receive such
Common Stock, has been admitted for listing or admitted for listing subject to
notice of issuance on a national securities exchange or quoted on the Nasdaq
National Market; provided, however, that a Fundamental Change shall not be a
Common Stock Fundamental Change unless either (i) the Company continues to
exist after the occurrence of such Fundamental Change and the outstanding
Preferred Securities continue to exist as outstanding Preferred Securities or
(ii) not later than the occurrence of such Fundamental Change, the outstanding
Preferred Securities are converted into or exchanged for shares of convertible
preferred stock of an entity succeeding to the business of the Company or a
subsidiary thereof, which convertible preferred stock has powers, preferences,
and relative, participating, optional, or other rights, and qualifications,
limitations, and restrictions, substantially similar to those of the Preferred
Securities.
"Conversion Expiration Date" means, subject to Section 6.2(c) of the
Indenture, the date selected by the Issuer not less than 30 days nor more than
60 days after the date on which the Issuer issues a press release announcing
its intention to terminate the conversion rights for the Holders.
"Conversion Price" shall have the meaning set forth in Section 6.1.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Current Market Price" means, for any day the last reported sale
price, regular way, on such day of Common Stock, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on such day,
regular way, in either case as reported on the NYSE Composite Transactions
Tape, or, if the Common Stock is not listed or admitted to trading on the NYSE
on such day, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, if the Common Stock is listed on a
national securities exchange, or the Nasdaq National Market, or, if the Common
Stock is not quoted or admitted to trading on such quotation system, on the
principal quotation system on which the Common Stock may be listed or admitted
to trading or quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, the average of the closing
bid and asked prices of the Common Stock in the over-the-counter market on the
day in question as reported by the National Quotation Bureau Incorporated, or a
similar generally accepted reporting service, or, if not so available in such
manner, as furnished by any NYSE member firm selected from time to time by the
Board of Directors for that purpose or, if not so available in such manner, as
otherwise determined in good faith by the Board of Directors.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Declaration, and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.
"Expiration Time" shall have the meaning set forth in Section 6.3(e).
"Extension Period" shall have the meaning set forth in Section 4.1.
"Fundamental Change" means the occurrence of any Transaction or
event in connection with a plan pursuant to which all or substantially all of
the Common Stock shall be exchanged for, converted into, acquired
3
<PAGE> 7
for, or constitute solely the right to receive securities, cash, or
other property (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization,
or otherwise), provided, that, in the case of a plan involving more than one
such Transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change shall be deemed to have occurred when substantially all
of the Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon consideration that a holder of Common Stock
received in such Transaction or event as a result of which more than 50% of the
Common Stock shall have been exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property.
"Global Debenture" shall have the meaning set forth in Section 2.4(a).
"Interest Payment Date" shall have the meaning set forth in Section 2.5(a).
"Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.4(a).
"Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
"Predecessor Debenture" shall mean, of any particular Debenture,
every previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture, and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 2.9 of the
Indenture in lieu of a lost, destroyed or stolen Debenture shall be deemed to
evidence the same debt as the lost, destroyed or stolen Debenture.
"Purchased Shares" shall have the meaning set forth in Section
6.3(e).
"Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for the 10 consecutive trading
days prior to and including the record date for the determination of the
holders of Common Stock entitled to receive such common stock, or if there is
no such record date, the date on which the holders of Common Stock shall have
the right to receive such common stock, as adjusted in good faith by the Issuer
to appropriately reflect any of the events referred to in Section .6.3.
"Reference Date" has the meaning specified in Section 6.3(c).
"Reference Market Price" initially means $______ (which is an
amount equal to 66 2/3% of the reported last sale price for the Common Stock on
the NYSE Consolidated Transactions Tape on June ____, 1997), and in the event
of any adjustment of the Conversion Price other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the Conversion Price after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial Conversion Price of the
Debentures.
"Redemption Date" shall mean, when used with respect to any
Debenture to be redeemed, the date fixed for such redemption by or pursuant to
this Supplemental Indenture.
"Redemption Price" shall have the meaning set forth in Section 3.3.
4
<PAGE> 8
"Transaction" shall have the meaning set forth in Section 6.4.
"Trust Agreement" means the Amended and Restated Declaration of
Trust of CMS Energy Trust I , a Delaware statutory business trust, dated as of
June __, 1997.
ARTICLE II.
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized and established a series of unsecured
Securities designated the "____% Convertible Subordinated Debentures due 2027",
limited in aggregate principal amount to $154,500,000 (except as contemplated
in Section 2.3(f)(2) of the Indenture).
SECTION 2.2. Maturity.
The Maturity Date of the Debentures is _____________, 2027.
SECTION 2.3. Form and Payment.
The Debentures shall be issued in fully registered form without
interest coupons and shall be issuable in denominations of $50 and any integral
multiple thereof. Principal and interest on the Debentures issued in
certificated form will be payable, the transfer of such Debentures will be
registrable and such Debentures will be exchangeable for Debentures bearing
identical terms and provisions, at the office or agency of the Trustee in the
Borough of Manhattan, the City of New York; provided, however, that payment of
interest may be made at the option of the Issuer by check mailed to the Holder
at such address as shall appear in the Security Register or by wire transfer to
an account maintained by the Holder. Notwithstanding the foregoing, so long as
the Holder of any Debentures is the Property Trustee, the payment of the
principal of and interest (including Additional Interest and Additional Sums,
if any) on such Debentures held by the Property Trustee will be made at such
place and to such account as may be designated by the Property Trustee.
SECTION 2.4. Global Debenture.
(a) In connection with a distribution of Debentures to Holders in
connection with the involuntary or voluntary dissolution, winding up or
liquidation of the Trust,
(i) the Debentures may be presented to the Trustee by the
Property Trustee in exchange for a global Debenture in an aggregate principal
amount equal to the aggregate principal amount of all outstanding Debentures (a
"Global Debenture"), to be registered in the name of the Clearing Agency, or
its nominee, and delivered by the Trustee to the Clearing Agency for crediting
to the accounts of its participants pursuant to the procedures of the
Depositary. The Issuer upon any such presentation, shall execute a Global
Debenture in such aggregate principal amount and deliver the same to the
Trustee for authentication and delivery in accordance with the Indenture and
this First Supplemental Indenture. Payments on the Debentures issued as a
Global Debenture will be made to the Depositary; and
5
<PAGE> 9
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Debentures may be presented to the Trustee by the
Property Trustee and any Preferred Security Certificate which represents
Preferred Securities other than Preferred Securities held by the Clearing
Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed
to represent beneficial interests in Debentures presented to the Trustee by
the Property Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non Book-Entry Preferred Securities
until such Preferred Security Certificates are presented to the Security
Registrar for transfer or reissuance at which time such Preferred Security
Certificates will be canceled and a Debenture, registered in the name of the
holder of the Preferred Security Certificate or the transferee of the holder
of such Preferred Security Certificate, as the case may be, with an
aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Security Certificate canceled, will be executed by the Issuer and
delivered to the Trustee for authentication and delivery in accordance with
the Indenture and this First Supplemental Indenture. On issue of such
Debentures, Debentures with an equivalent aggregate principal amount that
were presented by the Property Trustee to the Trustee will be deemed to have
been canceled.
(b) Except as provided in (c) below, a Global Debenture may be
transferred, in whole but not in part, only to another nominee of the
Depositary, or to a successor Depositary selected or approved by the Issuer or
to a nominee of such successor Depositary.
(c) If (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a deposi tary for such Global Debenture and
no successor depositary shall have been appointed within 90 days by the
Company, (ii) the Depositary, at any time, ceases to be a clearing agency
registered under the Exchange Act at which time the Depositary is required to
be so registered to act as such depositary and no successor depositary shall
have been appointed within 90 days by the Company, (iii) the Company, in its
sole discretion, determines that such Global Debenture shall be so exchangeable
or (iv) there shall have occurred an Event of Default with respect to such
Debentures, as the case may be, the Company will execute, and, subject to
Article 2 of the Indenture, the Trustee, upon written notice from the Company
and receipt of a Company Order, will authenticate and deliver the Debentures in
definitive registered form without coupons, in authorized denominations, and in
an aggregate principal amount equal to the principal amount of the Global
Debenture in exchange for such Global Debenture. In addition, upon an Event of
Default or if the Company may at any time determine that the Debenture shall no
longer be represented by a Global Debenture, in such event the Company will
execute, and subject to Section 2.8 of the Indenture, the Trustee, upon receipt
of an Officers' Certificate evidencing such determination by the Company and a
Company Order, will authenticate and make available for delivery the Debentures
in definitive registered form without coupons, in authorized denominations, and
in an aggregate principal amount equal to the principal amount of the Global
Debenture in exchange for such Global Debenture. Upon the exchange of the
Global Debenture for such Debentures in definitive registered form without
coupons, in authorized denominations, the Global Debenture shall be canceled by
the Trustee. Such Debentures in definitive registered form issued in exchange
for the Global Debenture shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Debentures to the Depositary for delivery to the
Persons in whose names such Debentures are so registered.
SECTION 2.5. Interest.
(a) Each Debenture will bear interest at the rate of ____% per
annum (the "Coupon Rate") from the original date of issuance until the
principal thereof becomes due and payable, and on any overdue principal and (to
the extent that payment of such interest is enforceable under applicable law)
on any overdue installment of interest, at the Coupon Rate, compounded
quarterly, payable (subject to the provisions of Article IV)
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quarterly in arrears on ____________, ____________, ________________ and
____________ of each year (each, an "Interest Payment Date," commencing on
______________, 1997), to the Person in whose name such Debenture or any
predecessor Debenture is registered, at the close of business on the regular
record date for such interest installment, which, in respect of any Debentures
of which the Property Trustee is the Holder or a Global Debenture, shall be the
close of business on the Business Day next preceding that Interest Payment Date.
Notwithstanding the foregoing sentence, if the Preferred Securities are no
longer in book-entry only form or, except if the Debentures are held by the
Property Trustee, the Debentures are not represented by a Global Debenture, the
regular record date for such interest installment shall be the fifteenth day of
the month in which the applicable Interest Payment Date occurs.
(b) The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed
on the basis of the actual number of days elapsed in such a 90-day period. In
the event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. Accrued interest that is not paid on the applicable
interest payment date will bear additional interest on the amount thereof (to
the extent permitted by law) at the stated rate per annum, compounded
quarterly.
(c) In the event that (i) the Property Trustee is the Holder of
all of the Outstanding Debentures, (ii) a Tax Event in respect of the Trust
shall have occurred and be continuing and (iii) the Company shall not have (A)
redeemed the Debentures pursuant to Section 3.7 or 3.8 or (B) terminated the
Trust pursuant to Section 9.2(b) of the Trust Agreement, the Company shall pay
to the Trust (and its permitted successors or assigns under the Trust
Agreement) for so long as the Trust (or its permitted successor or assignee) is
the registered holder of the Debentures, such additional amounts as may be
necessary in order that the amount of distributions (including any Additional
Amounts as defined in the Trust Agreement) then due and payable by the Trust on
the Preferred Securities and Common Securities that at any time remain
outstanding in accord with the terms thereof shall not be reduced as a result
of any Additional Taxes (the "Additional Sums"). Whenever in this Indenture or
the Debentures there is a reference in any context to the payment of principal
of or interest on the Debentures, such mention shall be deemed to include
mention of the payments of the Additional Sums provided for in this paragraph
to the extent that, in such context, Additional Sums are, were or would be
payable in respect thereof pursuant to the provisions of this paragraph and
express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made, provided, however,
that the extension of an interest payment period pursuant to Section 4.1 or the
Debentures shall not extend the payment of any Additional Sums that may be due
and payable during such interest payment period.
ARTICLE III.
REDEMPTION OR EXCHANGE OF DEBENTURES
SECTION 3.1 Election to Redeem; Notice to Trustee. The election of the
Issuer to redeem any Debentures shall be evidenced by or pursuant to a Board
Resolution. In case of any redemption at the election of the Issuer, the
Issuer shall, not less than 45 days prior to the date fixed for redemption
(unless a shorter notice
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<PAGE> 11
shall be satisfactory to the Trustee), notify the Trustee in writing of
such date and of the principal amount of Debentures to be redeemed.
SECTION 3.2 Selection of Debentures to Be Redeemed. If less than all the
Debentures are to be redeemed, the particular Debentures to be redeemed shall
be selected not more than 45 days prior to the Redemption Date by the Trustee
from the Outstanding Debentures not previously called for redemption, by lot or
by such other method as the Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of a portion of the principal
amount of the Debentures Outstanding, provided that the unredeemed portion of
the principal amount of the Debentures be in an authorized denomination (which
shall not be less than the minimum authorized denomination) for the Debentures.
The Trustee shall promptly notify the Issuer in writing of the Debentures
selected for partial redemption and the principal amount thereof to be
redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debenture redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debenture which has been or is to be
redeemed. If the Issuer shall so direct, Debentures registered in the name of
the Issuer, any Affiliate or any Subsidiary thereof shall not be included in
the Debentures selected for redemption.
SECTION 3.3 Notice of Redemption. Notice of redemption shall be given by
first-class mail, postage prepaid, mailed not later than the thirtieth day, and
not earlier than the sixtieth day, prior to the date fixed for redemption, to
each Holder of Debentures to be redeemed, at the address of such Holder as it
appears in the Securities Register.
With respect to Debentures to be redeemed, each notice of redemption
shall state:
(a) the Redemption Date;
(b) the redemption price at which the Debentures are to be
redeemed (the "Redemption Price");
(c) if less than all Outstanding Debentures are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the particular Debentures to be redeemed (including, if
relevant, the CUSIP or ISIN number);
(d) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture or portion thereof, and that upon
deposit with the Paying Agent interest thereon, if any, shall cease to accrue
on and after the Redemption Date;
(e) the place or places where the Debentures are to be surrendered
for payment of the redemption price at which the Debentures are to be redeemed;
and
(f) that a Holder of Debentures who desires to convert Debentures
called for redemption must satisfy the requirements for conversion contained
in the Debentures, the then existing conversion price or rate, and the date
and time when the option to convert shall expire.
Notice of redemption of Debentures to be redeemed at the election of the
Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee
in the name and at the expense of the Issuer and shall be irrevocable. The
notice if mailed in the manner herein provided shall be conclusively presumed
to have been duly given, whether or not the Holder receives such notice. In
any case, a failure to give such notice by mail
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<PAGE> 12
or any defect in the notice to the Holder of any Debenture designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debenture.
SECTION 3.4 Deposit of Redemption Price. Prior to 12:00 noon, New York
City time, on the Redemption Date specified in the notice of redemption given
as provided in Section 3.3, the Issuer will deposit with the Trustee or with
one or more Paying Agents (or, if the Issuer is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 10.2 of the Indenture) an
amount of money sufficient to redeem on the Redemption Date all the Debentures
so called for redemption at the applicable Redemption Price.
If any Debenture called for redemption has been converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held
in trust for the redemption of such Debenture shall (subject to any right of
the Holder of such Debenture or any Predecessor Debenture to receive interest
as provided in the last paragraph of Section 2.7 of the Indenture) be paid to
the Issuer or, if then held by the Issuer, shall be discharged from such trust.
SECTION 3.5 Debentures Payable on Redemption Date. If notice of
redemption has been given as provided in Section 3.3, the Debentures so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, including any accrued interest (and any
Additional Interest) thereon, and from and after such date (unless the Issuer
shall default in the payment of the Redemption Price or any accrued interest on
(including any Additional Interest)) such Debentures shall cease to bear
interest. Upon surrender of any such Debenture for redemption in accordance
with said notice, such Debenture shall be paid by the Issuer at the Redemption
Price, including any accrued interest (and any Additional Interest) to the
Redemption Date.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Debenture.
SECTION 3.6 Debentures Redeemed in Part. In the event of any redemption
in part, the Issuer shall not be required to (i) issue, register the transfer
of or exchange any Debenture during a period beginning at 9:00 a.m. (New York
City time) 15 Business Days before any selection for redemption of Debentures
and ending at 5:00 p.m. (New York City time) on the earliest date in which the
relevant notice of redemption is deemed to have been given to all holders of
Debentures to be so redeemed and (ii) register the transfer of or exchange any
Debentures so selected for redemption, in whole or in part, except for the
unredeemed portion of any Debentures being redeemed in part.
Any Debenture which is to be redeemed only in part shall be surrendered
at the place of payment therefor (with, if the Issuer or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Issuer and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Issuer shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Debenture without service charge, a new Debenture or Debentures, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture so surrendered. Each Debenture shall be subject to partial
redemption only in the amount of $50 or integral multiples thereof.
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The Debentures are not entitled to the benefit of any sinking or like
fund.
SECTION 3.7 Mandatory Redemption. Upon (i) repayment at maturity or (ii)
as a result of acceleration upon the occurrence of an Event of Default, the
Issuer shall redeem all the Outstanding Debentures at a redemption price equal
to 100% of the principal amount of such Debentures plus any accrued and unpaid
interest, including any Additional Interest, to the date fixed for redemption.
SECTION 3.8 Optional Redemption. Except as set forth below, on and after
____________, ________ and subject to the next succeeding sentence, the Issuer
shall have the right, at any time and from time to time, to redeem the
Debentures, in whole or in part, upon notice given as set forth in Section 3.3
during the twelve-month periods beginning on ___________________ in each of the
following years at the indicated Redemption Price (expressed as a percentage of
the principal amount of the Debentures being redeemed), together with any
accrued but unpaid interest on the portion being redeemed:
<TABLE>
<CAPTION>
Redemption Price Redemption Price
Year (%) of principal amount) Year (% of principal amount)
- ---- ------------------------ ---- -----------------------
<S> <C> <C> <C>
2001 . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . 2006 . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . 2007 and thereafter . . . . . . . . . . . . .
2004 . . . . . . . . . . . . .
</TABLE>
The principal amount of the Debentures so redeemed may not, however,
exceed the amount of the proceeds derived, directly or indirectly, by the
Issuer or its Subsidiaries from the issuance and sale of Common Stock within
three years preceding the date fixed for redemption. The Issuer may not redeem
the Debentures in part unless all accrued and unpaid interest has been paid in
full on all outstanding Debentures for all quarterly interest periods
terminating on or prior to the giving of notice of the Redemption Date.
If at any time following the Conversion Expiration Date, less than 5%
of the original aggregate principal amount of the Debentures remains
Outstanding, such Debentures shall be redeemable at the option of the Issuer,
in whole but not in part, at a Redemption Price equal to the principal amount
thereof, plus any accrued and unpaid interest.
Upon the occurrence of a Tax Event, the Issuer shall have the right,
upon not less than 30 nor more than 60 days' notice, to redeem the Debentures
in whole or in part, for cash upon the later of (i) 90 days following the
occurrence of such Tax Event or (ii)_______________, __ _____, at a Redemption
Price equal to the principal amount of such Debentures plus any accrued and
unpaid interest, including Additional Interest, to the date fixed for such
redemption.
SECTION 3.9 Exchange of Trust Securities for Debentures.
(a) At any time, the Issuer shall have the right to
terminate the Trust and cause the Debentures to be distributed to the holders
of the Preferred Securities in liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as provided by applicable law.
(b) If a Special Event in respect of the Trust shall
occur, the Issuer shall give the Property Trustee notice of the same. If a
Special Event in respect of the Trust shall occur and be continuing, the Trust
Agreement requires the Property Trustee to direct the Conversion Agent (as
defined in the Trust Agreement)
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<PAGE> 14
to exchange all outstanding Trust Securities for the Debentures having a
principal amount equal to the aggregate liquidation amount of the Trust
Securities to be exchanged with accrued interest in an amount equal to any
unpaid distributions (including any Additional Amounts) on the Trust Securities
provided that, in the case of a Tax Event, the Issuer shall have the right to
direct the Property Trustee that less than all, or none of the Trust Securities
be so exchanged (i) if and for so long as the Issuer shall have elected to pay
any Additional Sums such that the net amounts received by holders of the Trust
Securities not so exchanged in respect of distributions are not reduced as a
result of such Tax Event, and shall not have revoked any such election or failed
to make such payments or (ii) if the Issuer shall instead elect to redeem the
Debentures, in whole or in part, in the manner set forth in Section 3.8.
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1 Deferrals of Interest Payment Dates. The Company shall have
the right, at any time during the term of the Debentures, so long as no Event
of Default has occurred and is continuing, from time to time to extend the
interest payment period for the Debentures for up to 20 consecutive quarters
with respect to each deferral period (each, an "Extension Period"), during
which period the Company shall have the right to not make payments on interest
on any interest payment date, and at the end of such Extension Period the
Company shall pay all interest then accrued and unpaid thereon (together with
Additional Interest thereon, if any, at the rate specified for the Debentures
to the extent permitted by applicable law); provided that no such Extension
Period shall exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Debentures. Upon termination of any Extension Period and upon
the payment of all accrued and unpaid interest and any Additional Interest then
due, the Company may select a new Extension Period, subject to the above
requirements. No interest including Additional Interest, if any, shall be due
and payable during an Extension Period, except at the end thereof. The Company
shall give the Trustee, the Property Trustee and the Administrative Trustees
notice of its selection of such Extension Period at least one Business Day
prior to the earlier of (i) the record date for the date the distributions on
the Preferred Securities of the Trust (or if no, Preferred Securities are
outstanding, for the date interest on the Debentures) would have been payable
except for the election to begin such Extension Period and (ii) the date the
Property Trustee (or, if no Preferred Securities are outstanding, the Trustee)
is required to give notice to New York Stock Exchange or other applicable
self-regulatory organization or to holders of such Preferred Securities (or, if
no Preferred Securities are outstanding, to the holders of such Debentures) of
such record date, but in any event not less than one Business Day prior to such
record date. Such notice shall specify the period selected.
The Trustee shall promptly give notice of the Company's selection of
such Extension Period to the Holders of the outstanding Debentures.
The limitations set forth in Section 3.5 of the Indenture shall apply
during any Extension Period.
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ARTICLE V.
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the
Debentures to the Property Trustee and in connection with the sale of the Trust
Securities by the Trust, the Issuer, in its capacity as borrower with respect
to the Debentures, shall:
(a) pay all costs and expenses relating to the offering,
sale and issuance of the Debentures, including commissions to the underwriters
payable pursuant to the Underwriting Agreement and the Pricing Agreements, and
compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.6 of the Indenture;
(b) pay all costs and expenses of the Trust (including,
but not limited to, costs and expenses relating to the organization of the
Trust, the offering, sale and issuance of the Trust Securities (including
commissions to the underwriters in connection therewith), the fees and expenses
of the Property Trustee and the Delaware Trustee, the costs and expenses
relating to the operation of the Trust, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses incurred
in connection with the acquisition, financing, and disposition of Trust
assets);
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
ARTICLE VI
CONVERSION OF DEBENTURES
SECTION 6.1 Conversion Rights. Subject to and upon compliance with the
provisions of this Article, the Debentures are convertible, at the option of
the Holder, at any time prior to the Conversion Expiration Date, into fully
paid and nonassessable shares of Common Stock of the Issuer at an initial
conversion rate of ______ shares of Common Stock for each $50 in aggregate
principal amount of Debentures (equal to a conversion price of $______ per
share of Common Stock), subject to adjustment as described in this Article 13
of the Indenture (as adjusted the "Conversion Price"). A Holder of Debentures
may convert any portion of the principal amount of the Debentures into that
number of fully paid and nonassessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing the
principal amount of the Debentures to be converted by the Conversion Price. In
case a Debenture or portion thereof is called for redemption, such conversion
right in respect of the Debenture or portion so called shall expire at the
close of business on the Business Day immediately preceding the corresponding
Redemption Date, unless the Issuer defaults in making the payment due upon
redemption.
SECTION 6.2 Expiration of Conversion Rights.
(a) On and after ________________, the Issuer may, at its
option, cause the conversion rights of Holders of Debentures to expire;
provided, however, that the Issuer may exercise this option only if for 20
trading days within any period of 30 consecutive trading days, including the
last trading day of such period,
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<PAGE> 16
the Current Market Price of Common Stock exceeds 115% of the Conversion
Price of the Debentures, subject to adjustment as described in this Section.
(b) In order to exercise its option to terminate the
conversion rights of the Debentures, the Issuer must issue a press release for
publication on the Dow Jones News Service announcing the Conversion Expiration
Date prior to the opening of business on the second trading day after any
period in which the condition in Section 6.2(a) has been met, but in no event
prior to ________________. The press release shall announce the Conversion
Expiration Date (which may not occur sooner than 30 nor more than 60 days after
the Issuer issues the press release announcing its intention to terminate the
conversion rights of the Debentures) and provide the current Conversion Price
and Current Market Price of Common Stock, in each case as of the close of
business on the trading day next preceding the date of the press release.
Conversion rights will terminate at the close of business on the Conversion
Expiration Date.
(c) In addition to issuing the press release referred to
in the preceding paragraph the Issuer or at the Issuer's request, the Property
Trustee, shall send notice of the expiration of conversion rights by
first-class mail to the Holders of the Debentures not more than four Business
Days after the Issuer issues the press release. Such mailed notice of the
expiration of the conversion rights of the Holders shall state: (i) the
Conversion Expiration Date; (ii) the Conversion Price of the Debentures and
the Current Market Price of the Common Stock, in each case as of the close of
business on the Business Day next preceding the date of the notice of
expiration of the conversion rights of the Holders; (iii) the place or places
at which Debentures may be surrendered prior to the Conversion Expiration Date
for certificates representing shares of Common Stock; and (iv) such other
information or instructions as the Issuer deems necessary or advisable to
enable a Holder to exercise its conversion right hereunder. No defect in the
notice of expiration of the conversion rights of the Holders or in the mailing
thereof with respect to any Debentures shall affect the validity of such notice
with respect to any other Debenture. As of the close of business on the
Conversion Expiration Date, the Debenture shall no longer be convertible into
Common Stock. If the Issuer does not exercise its option to terminate the
conversion rights of the Holders of the Debentures, the Conversion Expiration
Date with respect to the Debentures will be the close of business two Business
Days preceding the date set for redemption of the Debentures upon the mandatory
redemption or Maturity Date of the Debentures.
SECTION 6.3 Conversion Price Adjustments. The conversion price shall
be subject to adjustment (without duplication) from time to time as follows:
(a) In case the Issuer shall, while any of the Debentures
are outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Issuer, the conversion
privilege and the Conversion Price in effect immediately prior to such action
shall be adjusted so that the Holder of any Debentures thereafter surrendered
for conversion shall be entitled to receive the number of shares of capital
stock of the Issuer which he would have owned immediately following such action
had such Debentures been converted immediately prior thereto. An adjustment
made pursuant to this subsection (a) shall become effective immediately after
the record date in the case of a dividend or other distribution and shall
become effective immediately after the effective date in case of a subdivision,
combination or reclassification (or immediately after the record date if a
record date shall have been established for such event). If, as a result of an
adjustment made pursuant to this subsection (a), the Holder of any Debenture
thereafter surrendered for conversion shall become entitled to receive shares
of two or more classes or series of capital stock of the Issuer, the Board of
Directors (whose determination shall be conclusive and shall be
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<PAGE> 17
described in a Board Resolution filed with the Trustee) shall determine
the allocation of the adjusted Conversion Price between or among shares of such
classes or series of capital stock. In the event that such dividend,
distribution, subdivision, combination or issuance is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such record date had not been fixed.
(b) In case the Issuer shall, while any of the Debentures
are Outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a price
per share less than the Current Market Price per share of Common Stock on the
record date mentioned below, the Conversion Price for the Debentures shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered for subscription or purchase would purchase
at such Current Market Price, and of which the denominator shall be the number
of shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights or warrants. For the purposes of this subsection, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Issuer. The Issuer shall not issue any rights or warrants
in respect of shares of Common Stock held in the treasury of the Issuer. In
case any rights or warrants referred to in this subsection in respect of which
an adjustment shall have been made shall expire unexercised within 45 days
after the same shall have been distributed or issued by the Issuer, the
Conversion Price shall be readjusted at the time of such expiration to the
Conversion Price that would have been in effect if no adjustment had been made
on account of the distribution or issuance of such expired rights or warrants.
(c) Subject to the last sentence of this subparagraph, in
case the Issuer shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness, shares of any class or series
of capital stock, cash or assets (including securities, but excluding any
rights or warrants referred to in subparagraph (b), any dividend or
distribution paid exclusively in cash and any dividend or distribution referred
to in subparagraph (a) of this Section 6.3), the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph (c) by a fraction
of which the numerator shall be the Current Market Price per share of the
Common Stock on the date fixed for the payment of such distribution (the
"Reference Date") less the fair market value (as determined in good faith by
the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors), on the Reference Date, of the
portion of the evidences of indebtedness, shares of capital stock, cash and
assets so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not occurred. For purposes of this subparagraph
(c), any dividend or distribution that includes shares of Common Stock or
rights or warrants to subscribe for or purchase shares of Common Stock shall be
deemed instead to be (i) a dividend or distribution of the evidences of
indebtedness, shares of capital stock, cash or assets other than such shares of
Common Stock or such rights or warrants (making any Conversion Price reduction
required by this subparagraph (c)) immediately followed by (ii) a dividend or
distribution of such shares of Common Stock or such rights or warrants (making
any further conversion price reduction required by subparagraph (a) or (b)),
except (A) the Reference
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Date of such dividend or distribution as defined in this subparagraph
shall be substituted as (x) "the record date in the case of a dividend or other
distribution," and (y) "the record date for the determination of stockholders
entitled to receive such rights or warrants" and (z) "the date fixed for such
determination" within the meaning of subparagraphs (a) and (b) and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed outstanding for purposes of computing any adjustment of the conversion
price in subparagraph (a).
(d) In case the Issuer shall pay or make a dividend or
other distribution on its Common Stock exclusively in cash (excluding all
regular cash dividends, if the annualized amount thereof per share of Common
Stock does not exceed 12.5% of the current market price per share of the Common
Stock on the trading day immediately preceding the date of declaration of such
dividend), the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this subparagraph (d) by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on the date fixed for the payment of
such distribution less the amount of cash so distributed (excluding that
portion of such distribution that does not exceed 12.5% of the Current Market
Price per share, determined as provided above) applicable to one share of
Common Stock and the denominator shall be such Current Market Price per share
of the Common Stock, such reduction to become effective immediately prior to
the opening of business on the day following the date fixed for the payment of
such distribution; provided, however, that in the event the portion of the cash
so distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price per share of the Common Stock on the record date
mentioned above (excluding that portion of such distribution that does not
exceed 12.5% of the Current Market Price per share, determined as provided
above), in lieu of the foregoing adjustment, adequate provision shall be made
so that each Holder of shares of Debentures shall have the right to receive
upon conversion the amount of cash such Holder would have received had such
Holder converted each share of the Debentures immediately prior to the record
date for the distribution of the cash (less that portion of such distribution
that does not exceed 12.5% of the Current Market Price per share, determined as
provided above). In the event that such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be the conversion
price which would then be in effect if such record date had not been fixed.
(e) In case a tender or exchange offer (other than an
odd-lot offer) made by the Issuer or any Subsidiary of the Issuer for all or
any portion of the Common Stock shall expire and such tender or exchange offer
shall involve the payment by the Issuer or such [Restricted] Subsidiary of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) at the
last time (the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended) that exceeds 110%
of the Current Market Price per share of the Common Stock on the trading day
next succeeding [Dthe Expiration Time, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (e) by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) at the Expiration Time (including the
Purchased Shares) (as defined below) multiplied by the Current Market Price per
share of the Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged
and not withdrawn as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased Shares") (excluding
that portion of such consideration that does not exceed 110% of the Current
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<PAGE> 19
Market Price per share) and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) at the Expiration Time and
the Current Market Price per share of the Common Stock on the trading day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time. In
the event that such tender or exchange offer is not so made, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such record date had not been fixed.
(f) The Issuer shall have the right to reduce from time
to time the Conversion Price by any amount selected by the Issuer for any
period of at least 30 days, provided, that Issuer shall give at least 15 days'
notice of such reduction to the Trustee and the Property Trustee. The Issuer
may, at its option, make such reductions in the Conversion Price, in addition
to those set forth above in Section 6.3(a), as the Board of Directors deems
advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. No
adjustment of the Conversion Price will be made upon the issuance of any shares
of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Issuer and
the investment of additional optional amounts in shares of Common Stock under
any such plan, or the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any present or future employee
benefit plan or program of the Issuer or pursuant to any option, warrant,
right, or exercisable, exchangeable or convertible security which does not
constitute an issuance to all holders of Common Stock of rights or warrants
entitling holders of such rights or warrants to subscribe for or purchase
Common Stock at less than the Current Market Price. There shall also be no
adjustment of the Conversion Price in case of the issuance of any Common Stock
(or securities convertible into or exchangeable for Common Stock), except as
specifically described above.
(g) If any action would require adjustment of the
Conversion Price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the Holder of the Debentures.
SECTION 6.4 Fundamental Change. In the event that the Issuer is a party
to any transaction (including, without limitation, a merger other than a merger
that does not result in a reclassification, conversion, exchange or
cancellation of Common Stock), consolidation, sale of all or substantially all
of the assets of the Issuer, recapitalization or reclassification of Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination
of Common Stock) or any compulsory share exchange (each of the foregoing being
referred to as a "Transaction"), in each case, as a result of which shares of
Common Stock shall be converted into the right to receive, or shall be
exchanged for, (i) in the case of any Transaction other than a Transaction
involving a Common Stock Fundamental Change (and subject to funds being legally
available for such purpose under applicable law and the time of such
conversion), securities, cash or other property, each Debenture shall
thereafter be convertible into the kind and, in the case of a Transaction which
does not involve a Fundamental Change, amount of securities, cash and other
property receivable upon the consummation of such Transaction by a holder of
that number of shares of Common Stock into which a Debenture was convertible
immediately prior to such Transaction, or (ii) in the case of a Transaction
involving a Common Stock Fundamental Change, common stock, each Debenture shall
thereafter be convertible (in the manner described herein) into common stock of
the kind received by holders of Common Stock (but in each case after giving
effect to any adjustment discussed in paragraphs (b) and (c) relating to a
Fundamental Change if such Transaction constitutes a Fundamental Change). The
holders of Debentures or Preferred Securities will have no voting rights with
respect to any Transaction described in this section.
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<PAGE> 20
(a) If any Fundamental Change occurs, then the Conversion
Price in effect will be adjusted immediately after such Fundamental Change as
described in paragraph (c) below. In addition, in the event of a Common Stock
Fundamental Change, each Debenture shall be convertible solely into common
stock of the kind received by holders of Common Stock as a result of such
Common Stock Fundamental Change.
(b) The Conversion Price in the case of any Transaction
involving a Fundamental Change will be adjusted immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change, the Conversion Price
of the Debentures will thereupon become the lower of (A) the Conversion
Price in effect immediately prior to such Non-Stock Fundamental Change, but
after giving effect to any other prior adjustments, and (B) the result
obtained by multiplying the greater of the Applicable Price or the then
applicable Reference Market Price by a fraction of which the numerator will
be $50 and the denominator will be (x) the amount of the redemption price
for the Debenture if the redemption date were the date of such Non-Stock
Fundamental Change (or, for the period commencing on the first date of
original issuance of the Debentures and through_____________, 1998, and the
twelve-month periods commencing _______________, 1998, ___________, 1999,
_____________, 2000, and ____________, 2001, the product of __________,
_________, ________ and _________, respectively, multiplied by $50) plus (y)
any then-accrued and unpaid interest on the Debentures; and
(ii) in the case of a Common Stock Fundamental Change, the Conversion
Price of the Debentures in effect immediately prior to such Common Stock
Fundamental Change, but after giving effect to any other prior adjustments,
will thereupon be adjusted by multiplying such Conversion Price by a
fraction of which the numerator will be the Purchaser Stock Price and the
denominator will be the Applicable Price; provided, however, that in the
event of a Common Stock Fundamental Change in which (A) 100% of the value of
the consideration received by a holder of Common Stock is common stock of
the successor, acquirer, or other third party (and cash, if any, is paid
only with respect to any fractional interests in such common stock resulting
from such Common Stock Fundamental Change) and (B) all of the Common Stock
will have been exchanged for, converted into, or acquired for common stock
(and cash with respect to fractional interests) of the successor, acquirer,
or other third party, the Conversion Price of the Debentures in effect
immediately prior to such Common Stock Fundamental Change will thereupon be
adjusted by multiplying such Conversion Price by a fraction of which the
numerator will be one and the denominator will be the number of shares of
common stock of the successor, acquirer, or other third party received by a
holder of one share of Common Stock as a result of such Common Stock
Fundamental Change.
SECTION 6.5 Prior Notice of Certain Events. In case:
(a) the Company shall (i) declare any dividend (or any
other distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not require
an adjustment pursuant to Section 6.3(c) or (d) or (ii) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 6.3(e);
(b) the Company shall authorize the granting to all
holders of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or series or of any other rights or warrants;
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<PAGE> 21
(c) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value),
or of any consolidation or merger to which the Company is a party and for which
approval of stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall (1) if any Preferred Securities are outstanding under
the Trust Agreement, cause to be filed with the transfer agent for the
Preferred Securities, and shall cause to be mailed to the holders of record of
the Preferred Securities, at their last addresses as they shall appear upon the
stock transfer books of the Trust or (2) shall cause to be mailed to all
Holders at their last addresses as they shall appear in the Security Register,
at least 15 days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record (if any) is to be
taken for the purpose of such dividend, distribution, rights or warrants or, if
a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
ARTICLE VII.
SUBORDINATION
SECTION 7.1. Agreement to Subordinate.
The Issuer covenants and agrees, and each Holder of Debentures
issued hereunder, by such Holder's acceptance thereof likewise covenants and
agrees, that pursuant to Section 2.3(f)(9) of the Indenture all Debentures
shall be issued as Subordinated Securities subject to the provisions of Article
Twelve of the Indenture and this Article VII; and each Holder of a Debenture by
its acceptance thereof accepts and agrees to be bound by such provisions.
ARTICLE VIII.
COVENANT TO LIST ON EXCHANGE
SECTION 8.1. Listing on an Exchange.
In connection with the distribution of the Debentures to the
holders of the Preferred Securities upon a Dissolution Event, the Issuer will
use its best efforts to list such Debentures on the New York Stock Exchange or
on such other exchange as the Preferred Securities are then listed.
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<PAGE> 22
ARTICLE IX.
FORM OF DEBENTURES
SECTION 9.1. Form of Debenture.
The Debentures and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the following forms and the
Debentures shall have such additional terms as may be set forth in such form:
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURES, INSERT - This
Debenture is a Global Debenture within the meaning of the Indenture hereinafter
referred to and is registered in the name of a Depositary or a nominee of a
Depositary. This Debenture is exchangeable for Debentures registered in the
name of a person other than the Depositary or its nominee only in the limited
circumstances described in the Indenture, and no transfer of this Debenture
(other than a transfer of this Debenture as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary) may be registered except in limited
circumstances.
Unless this Debenture is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the issuer or its agent for registration of transfer, exchange or
payment, and any Debenture issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of The Depository
Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since
the registered owner hereof, Cede & Co., has an interest herein.]
No. $
CUSIP NO.
CMS ENERGY CORPORATION
___% CONVERTIBLE SUBORDINATED DEBENTURES
DUE 2027
CMS Energy Corporation, a Michigan corporation (the "Issuer",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ______________, or
registered assigns, the principal sum of _____________ Dollars ($___________)
on _________, ____, and to pay interest on said principal sum from
____________, 1997, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
___________, ________, ____________ and ____________ of each year commencing
___________ at the rate of ___% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum compounded quarterly. The amount of interest payable on
any Interest
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<PAGE> 23
Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable
on this Debenture is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture (or one or more Predecessor Securities, as defined
in said Indenture) is registered at the close of business on the regular record
date for such interest installment, which shall be the close of business on the
business day next preceding such Interest Payment Date. [IF PURSUANT TO THE
PROVISIONS OF THE INDENTURE THE DEBENTURES ARE NO LONGER REPRESENTED BY A
GLOBAL DEBENTURE -- which shall be the close of business on the 15th day of the
month in which such Interest Payment Date occurs.] Payment of the principal
of (and premium, if any) and interest on this Debenture will be made [Insert,
if a global security is issued - to the Depositary Trust Company or its
nominee] [Insert if securities in definitive form are issued - at the office or
agency of the Paying Agent maintained for that purpose in the United States],
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 may be made (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Securities Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register. If and to the
extent the Issuer shall default in the payment of the interest due on such
Interest Payment Date, interest shall be paid to the person in whose name this
Debenture is registered at the close of business on a subsequent record date
(which shall not be less than five Business Days prior to the date of payment
of such defaulted interest) established by notice given by mail by or on behalf
of the Issuer to the Holders of this Debenture not less than 15 days preceding
such subsequent Record Date. The principal of (and premium, if any) and the
interest on this Debenture shall be payable at the office or agency of the
Trustee in the Borough of Manhattan, the City of New York maintained for that
purpose in any coin or currency of the United States of America that at the
time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Issuer by check mailed to the registered Holder at such address as shall appear
in the Security Register or by wire transfer to an account maintained by the
Holder. Notwithstanding the foregoing, so long as the Holder of this Debenture
is the Property Trustee, the payment of the principal of (and premium, if any)
and interest on this Debenture will be made at such place and to such account
as may be designated by the Property Trustee.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder
of this Debenture, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination so provided and (c) appoints the Trustee his or
her attorney-in-fact for any and all such purposes. Each Holder hereof, by his
or her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed
by or on behalf of the Trustee.
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<PAGE> 24
The provisions of this Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be executed.
Dated
CMS Energy Corporation
By:
Name:
Title
Attest:
By:
Name:
Title:
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series of Securities described in the
within-mentioned Indenture.
[ ]
________________________________
as Trustee
By
Authorized Officer
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Securities of
the Issuer (herein sometimes referred to as the "Debentures"), specified in
the Indenture, all issued or to be issued in one or more series under and
pursuant to an Indenture dated as of _______, 1997, duly executed and
delivered between the Issuer and The Bank of New York, as Trustee (the
"Trustee"), as supplemented by the First Supplemented Indenture dated as of
_______, 1997, between the Issuer and the Trustee (the "First Supplemental
Indenture"; and the Indenture, as so supplemented, the "Indenture"), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the Holders of the
Debentures. By the terms of the
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<PAGE> 25
Indenture, the Debentures are issuable in series that may vary as to
amount, date of maturity, rate of interest and in other respects as provided in
the Indenture. This series of Debentures is limited in aggregate principal
amount as specified in said First Supplemental Indenture.
The Issuer shall have the right to redeem this Debenture at the
option of the Issuer, without premium or penalty, in whole or in part at any
time on or after ___________, ____ or at any time in certain circumstances upon
the occurrence of a Special Event, at a redemption price set forth in Article
III of the First Supplemental Indenture.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
If a Special Event shall occur and be continuing, this Debenture
shall be exchangeable for Preferred Securities in accordance with Section 3.9
or, in certain circumstances, redeemable by the Issuer in accordance with
Section 3.8.
Subject to the terms and conditions set forth in Article 6 of the
First Supplemental Indenture and Article 13 of the Indenture, this Debenture is
convertible, at the option of the Holder, hereof into shares of Common Stock.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures and other Indenture securities of
each series affected at the time Outstanding and affected (voting as one
class), as defined in the Indenture, to execute supplemental indentures for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that the Issuer and the Trustee may not, without the consent of the
Holder of each Debenture then Outstanding and affected thereby: (a) change the
time of payment of the principal (or any installment) of any Debenture, 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 Debenture when due or (b) reduce the
percentage in principal amount of the Debentures, the consent of whose Holders
is required for any such modification or for any waiver provided for in the
Indenture. The Indenture also contains provisions providing that prior to the
acceleration of the maturity of any Debenture or other securities outstanding
under the Indenture, the Holders of a majority in aggregate principal amount of
Debentures of and other Securities Outstanding under the Indenture with respect
to which a default or/an Event of Default shall have occurred and be continuing
(voting as one class) may on behalf of the Holders of all such affected
Securities (including the Debentures) waive any past default and its
consequences, except a default or an Event of Default in respect of a covenant
or provision of the Indenture or of any Debenture or other Security which
cannot be modified or amended without the consent of the Holder of each
Debenture or other Security affected. Any such consent or waiver by the
registered Holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Debenture and of any Debenture issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.
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<PAGE> 26
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at
the rate and in the money herein prescribed.
The Issuer shall have the right at any time during the term of this
Debenture, from time to time, to extend the interest payment period of such
Debenture for up to 20 consecutive quarters with respect to each deferral
period (each such deferral period an "Extension Period"), during which periods
the Issuer shall have the right not to make payments of interest on any
Interest Payment Date, and at the end of which the Issuer shall pay all
interest then accrued and unpaid (together with Additional Interest and
Liquidated Damages, if any, thereon to the extent permitted by applicable law).
Prior to the termination of any such Extension Period, the Issuer may further
extend the interest payment period, provided that no Extension Period shall
exceed 20 consecutive quarters or extend beyond the Stated Maturity of this
Debenture. Upon the termination of any such Extension Period and upon the
payment of all accrued and unpaid interest and any Additional Interest then
due, the Issuer may elect to begin a new Extension Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered Holder
hereof on the Security Register of the Issuer, upon surrender of this Debenture
for registration of transfer at the office or agency of the Trustee in the City
and State of New York accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer or the Trustee duly executed by the
registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Issuer, the Trustee, any paying agent and the Security Registrar
may deem and treat the registered holder hereof as the absolute owner hereof
(whether or not this Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Security
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Issuer nor the Trustee nor any paying agent nor any
Security Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Issuer or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
Debentures of this series so issued are issuable only in registered
form without coupons in denominations of $50 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations herein and
therein set forth, Debentures of this series so issued are exchangeable for a
like aggregate principal amount of Debentures of this series in authorized
denominations, as requested by the Holder surrendering the same.
23
<PAGE> 27
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
24
<PAGE> 28
NOTICE OF CONVERSION
To: CMS Energy Corporation
The undersigned owner of this Debenture hereby irrevocably exercises
the option to convert this Debenture, or the portion below designated, into
Common Stock of CMS ENERGY CORPORATION in accordance with the terms of the
Indenture referred to in this Debenture, and directs that the shares issuable
and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Date: ____________, ____
in whole __
in part ___ Portions of Debenture to be
converted ($50 or integral
multiples thereof):
$_________________
__________________________________
Signature (for conversion only)
Please Print or Typewrite
Name and Address, Including
Zip Code, and Social
Security or Other
Identifying Number
_______________________________
_______________________________
_______________________________
Signature Guarantee:1 ______________________
____________________
1 Signature must be guaranteed by an institution which is a member of one
of the following recognized Signature Guaranty Programs: (i) The Securities
Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange
Medallion Program (MSP); (iii) The Stock Exchange Medallion Program
(SEMP); or (iv) in such other guarantee programs acceptable to the
Trustee.
25
<PAGE> 29
SECTION 9.2. Form of Assignment. The form of Assignment shall be as follows:2
ASSIGNMENT FORM
To assign this Debenture, fill in the form below:
(I) or (We) assign and transfer this Security to
________________________________________________________________________________
(Inset assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________ agent to transfer this
Debenture on the books of the Issuer. The agent may substitute another to act
for him.
Your Signature:
______________________________
______________________________
(Sign exactly as your name
appears on the other side of
this Security)
Date: ____________________
Signature Guarantee:3________________________________
ARTICLE X.
ORIGINAL ISSUE OF DEBENTURES
SECTION 10.1. Original Issue of Debentures.
Debentures in the aggregate principal amount of $___________ may,
upon execution of this First Supplemental Indenture, be executed by the Issuer
and delivered to the Trustee for authentication, and the
- ---------------
(2) Or in the form provided in Section 6.14 in the event that a separate
Autheticating Agent is appointed pursuant thereto.
3Signature must be guaranteed by an institution which is a member of one of the
following recognized Signature Guaranty Programs: (i) The Securities Transfer
Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion
Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in
such other guarantee programs acceptable to the Trustee.
26
<PAGE> 30
Trustee shall thereupon authenticate and deliver said Debentures to or upon
the written order of the Issuer, in accordance with Section 2.4 of the
Indenture.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental Indenture,
is in all respects ratified and confirmed, and this First Supplemental
Indenture shall be deemed part of the Indenture in the manner and to the extent
herein and therein provided.
SECTION 11.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Issuer and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 11.3. Governing Law.
This First Supplemental Indenture and each Debenture shall be deemed
to be a contract made under the internal laws of the State of Michigan, and for
all purposes shall be construed in accordance with the laws of said State,
provided, however, that the rights, duties and obligations of the Trustee are
governed and construed in accordance with the laws of the State of New York.
SECTION 11.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this First
Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein or therein.
SECTION 11.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, on the date or dates indicated in
the acknowledgements and as of the day and year first above written.
CMS Energy Corporation
By: ____________________________________________
Name: Alan M. Wright
Title: Senior Vice President,
Chief Financial Officer
and Treasurer
[Seal]
Attest:
By:______________________
The Bank of New York as Trustee
By: ___________________________________________
Name:
Title:
Attest:
By:______________________
28
<PAGE> 32
STATE OF MICHIGAN )
)ss.
COUNTY OF WAYNE )
On the ______ day of __________, 1997, before me personally came Alan M.
Wright, to me known, who, being by me duly sworn, did depose and say that he
resides at Ann Arbor, Michigan; that he is Senior Vice President, Treasurer and
Chief Financial Officer of CMS Energy Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
[Notarial Seal]
______________________________________
Sherry Ann White
Notary Public, Wayne County, Michigan
My Commission Expires: March 7, 2002
29
<PAGE> 1
EXHIBIT 4(g)
CERTIFICATE OF TRUST
The undersigned, the trustees of CMS Energy Trust I desiring
to form a business trust pursuant to Delaware Business Trust Act, 12 Del. C.
Section 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is CMS Energy Trust I.
2. The name and business address of the trustee of the
Trust which has its principal place of business in the State of
Delaware is as follows:
The Bank of New York (Delaware),
a Delaware banking corporation
White Clay Center, Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: May 21, 1997
/s/ Alan M. Wright
--------------------------------
Alan M. Wright, as Trustee
/s/ Thomas A. McNish
--------------------------------
Thomas A. McNish, as Trustee
The Bank of New York (Delaware),
as Trustee
By: /s/ Frederick Clark
------------------------------
Name: Frederick Clark
Title: Authorized Signatory
<PAGE> 1
EXHIBIT 4(h)
CERTIFICATE OF TRUST
The undersigned, the trustees of CMS Energy Trust II desiring
to form a business trust pursuant to Delaware Business Trust Act, 12 Del. C.
Section 3810, hereby certify as follows:
1. The name of the business trust being formed hereby
(the "Trust") is CMS Energy Trust II.
2. The name and business address of the trustee of the
Trust which has its principal place of business in the State of
Delaware is as follows:
The Bank of New York (Delaware),
a Delaware banking corporation
White Clay Center, Route 273
Newark, Delaware 19711
3. This Certificate of Trust shall be effective as of
the date of filing.
Dated: May 21, 1997
/s/ Alan M. Wright
---------------------------------
Alan M. Wright, as Trustee
/s/ Thomas A. McNish
---------------------------------
Thomas A. McNish, as Trustee
The Bank of New York (Delaware),
as Trustee
By: /s/ Frederick Clark
---------------------------------
Name: Frederick Clark
Title: Authorized Signatory
<PAGE> 1
EXHIBIT 4(i)
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
CMS ENERGY CORPORATION
AS SPONSOR,
THE BANK OF NEW YORK
AS PROPERTY TRUSTEE,
THE BANK OF NEW YORK (DELAWARE)
AS DELAWARE TRUSTEE,
AND
THE REGULAR TRUSTEES NAMED HEREIN
DATED AS OF _________, 1997
CMS ENERGY TRUST I
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINED TERMS
<TABLE>
<S> <C> <C>
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
ESTABLISHMENT OF THE TRUST
SECTION 2.1. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.2. Office of the Delaware Trustee; Principal
Place of Business . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.3. Organizational Expenses . . . . . . . . . . . . . . . . . . 16
SECTION 2.4. Issuance of the Preferred Securities . . . . . . . . . . . 16
SECTION 2.5. Subscription and Purchase of Debentures; Issuance of the
Common Securities . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . . 17
SECTION 2.7. Authorization to Enter into Certain Transactions . . . . . 17
SECTION 2.8. Assets of Trust . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.9. Title to Trust Property . . . . . . . . . . . . . . . . . . 23
ARTICLE 3
PAYMENT ACCOUNT
SECTION 3.1. Payment Account . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4
DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION
SECTION 4.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.2. Redemption . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.3. Conversion . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.4. Special Event Exchange or Redemption . . . . . . . . . . . 32
SECTION 4.5. Subordination of Common Securities . . . . . . . . . . . . 35
SECTION 4.6. Payment Procedures . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.7. Tax Returns and Reports . . . . . . . . . . . . . . . . . . 36
SECTION 4.8. Payment of Taxes, Duties, Etc. of the Trust . . . . . . . . 36
SECTION 4.9. Payments under Indenture . . . . . . . . . . . . . . . . . 36
ARTICLE 5
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
i
<PAGE> 3
PAGE
SECTION 5.2. The Trust Securities Certificates . . . . . . . . . . . . 37
SECTION 5.3. Delivery of Trust Securities Certificates . . . . . . . . 37
SECTION 5.4. Registration of Transfer and Exchange of Preferred
Securities . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.6. Persons Deemed Securityholders . . . . . . . . . . . . . . 40
SECTION 5.7. Access to List of Securityholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.8. Maintenance of Office or Agency . . . . . . . . . . . . . 41
SECTION 5.9. Appointment of Paying Agent . . . . . . . . . . . . . . . 41
SECTION 5.10. Ownership of Common Securities by Sponsor . . . . . . . . 42
SECTION 5.11. Global Securities; Non-Global Securities; Common
Securities Certificate . . . . . . . . . . . . . . . . . 42
SECTION 5.12. Notices to Clearing Agency . . . . . . . . . . . . . . . . 44
SECTION 5.13. Definitive Preferred Securities Certificates . . . . . . . 44
SECTION 5.14. Rights of Securityholders . . . . . . . . . . . . . . . . 45
ARTICLE 6
ACT OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights . . . . . . . . . . . . . . . 45
SECTION 6.2. Notice of Meetings . . . . . . . . . . . . . . . . . . . 48
SECTION 6.3. Meetings of Preferred Security- holders . . . . . . . . . 48
SECTION 6.4. Voting Rights . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.5. Proxies, Etc. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.6. Securityholder Action by Written Consent . . . . . . . . . 50
SECTION 6.7. Record Date for Voting and Other Purposes . . . . . . . . 50
SECTION 6.8. Acts of Securityholders . . . . . . . . . . . . . . . . . 50
SECTION 6.9. Inspection of Records . . . . . . . . . . . . . . . . . . 52
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property
Trustee and the Delaware Trustee . . . . . . . . . . . . . 53
SECTION 7.2. Representations and Warranties of Sponsor . . . . . . . . . 54
ARTICLE 8
THE TRUSTEES
SECTION 8.1. Certain Duties and Responsibilities . . . . . . . . . . . . 55
SECTION 8.2. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.3. Certain Rights of Property Trustee . . . . . . . . . . . . . 60
ii
<PAGE> 4
PAGE
<TABLE>
<S> <C> <C>
SECTION 8.4. Not Responsible for Recitals or Issuance of
Securities . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.5. May Hold Securities . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.6. Compensation; Indemnity; Fees . . . . . . . . . . . . . . . 63
SECTION 8.7. Property Trustee Required; Eligibility of Trustees . . . . . 64
SECTION 8.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . 65
SECTION 8.9. Resignation and Removal; Appointment of Successor . . . . . 65
SECTION 8.10. Acceptance of Appointment by Successor . . . . . . . . . . . 67
SECTION 8.11. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.12. Preferential Collection of Claims Against
Sponsor or Trust . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.13. Reports by Property Trustee . . . . . . . . . . . . . . . . 69
SECTION 8.14. Reports to the Property Trustee . . . . . . . . . . . . . . 70
SECTION 8.15. Evidence of Compliance with Conditions Precedent . . . . . . 70
SECTION 8.16. Number of Trustees . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.17. Delegation of Power . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 9
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.1. Termination upon Expiration Date . . . . . . . . . . . . . 71
SECTION 9.2. Early Termination . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.3. Termination . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.4. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.5. Mergers, Consolidations, Amalgamations or
Replacements of the Trust . . . . . . . . . . . . . . . . 74
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Securityholders . . . . . . . . . . 76
SECTION 10.2. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.3. Separability . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 10.4. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 10.5. Payments Due on Non-Business Day . . . . . . . . . . . . . 78
SECTION 10.6. Successors . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.8. Reports, Notices and Demands . . . . . . . . . . . . . . . 79
SECTION 10.9. Agreement Not to Petition . . . . . . . . . . . . . . . . . 80
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act . . . 80
SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE . . . . . . . . . . . . . . . . . . 81
</TABLE>
iii
<PAGE> 5
PAGE
ARTICLE 1
DEFINED TERMS
<TABLE>
<S> <C> <C>
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
ESTABLISHMENT OF THE TRUST
SECTION 2.1. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.2. Office of the Delaware Trustee; Principal Place
of Business . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.3. Organizational Expenses . . . . . . . . . . . . . . . . . . . 17
SECTION 2.4. Issuance of the Preferred Securities . . . . . . . . . . . . 17
SECTION 2.5. Subscription and Purchase of Debentures; Issuance
of the Common Securities . . . . . . . . . . . . . . . . . . 17
SECTION 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.7. Authorization to Enter into Certain Transactions . . . . . . 18
SECTION 2.8. Assets of Trust . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.9. Title to Trust Property . . . . . . . . . . . . . . . . . . . 24
ARTICLE 3
PAYMENT ACCOUNT
SECTION 3.1. Payment Account . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4
DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION
SECTION 4.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.2. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.3. Conversion . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.4. Special Event Exchange or Redemption . . . . . . . . . . . . 33
SECTION 4.5. Subordination of Common Securities . . . . . . . . . . . . . 36
SECTION 4.6. Payment Procedures . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.7. Tax Returns and Reports . . . . . . . . . . . . . . . . . . . 37
SECTION 4.8. Payment of Taxes, Duties, Etc. of the Trust . . . . . . . . . 37
SECTION 4.9. Payments under Indenture . . . . . . . . . . . . . . . . . . 38
</TABLE>
ARTICLE 5
TRUST SECURITIES CERTIFICATES
iv
<PAGE> 6
PAGE
<TABLE>
<S> <C> <C>
SECTION 5.1. Initial Ownership . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.2. The Trust Securities Certificates . . . . . . . . . . . . . . 38
SECTION 5.3. Delivery of Trust Securities Certificates . . . . . . . . . . 39
SECTION 5.4. Registration of Transfer and Exchange of
Preferred Securities; . . . . . . . . . . . . . . . . . . . 40
SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates . . . . . . . . . . . . . . . . . . 47
SECTION 5.6. Persons Deemed Securityholders . . . . . . . . . . . . . . . 47
SECTION 5.7. Access to List of Securityholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 5.8. Maintenance of Office or Agency . . . . . . . . . . . . . . . 48
SECTION 5.9. Appointment of Paying Agent . . . . . . . . . . . . . . . . . 49
SECTION 5.10. Ownership of Common Securities by Sponsor . . . . . . . . . . 49
SECTION 5.11. Global Securities; Non-Global Securities; Common
Securities Certificate . . . . . . . . . . . . . . . . . . . 50
SECTION 5.12. Notices to Clearing Agency . . . . . . . . . . . . . . . . . 51
SECTION 5.13. Definitive Preferred Securities Certificates . . . . . . . . 52
SECTION 5.14. Rights of Securityholders . . . . . . . . . . . . . . . . . . 52
ARTICLE 6
ACT OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights . . . . . . . . . . . . . . . . 54
SECTION 6.2. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.3. Meetings of Preferred Security-holders . . . . . . . . . . . 57
SECTION 6.4. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.5. Proxies, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.6. Securityholder Action by Written Consent . . . . . . . . . . 58
SECTION 6.7. Record Date for Voting and Other Purposes . . . . . . . . . . 59
SECTION 6.8. Acts of Securityholders . . . . . . . . . . . . . . . . . . . 59
SECTION 6.9. Inspection of Records . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
v
<PAGE> 7
PAGE
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
SECTION 7.1. Representations and Warranties of the Property Trustee
and the Delaware Trustee . . . . . . . . . . . . . . . . . . 61
SECTION 7.2. Representations and Warranties of Sponsor . . . . . . . . . . 63
ARTICLE 8
THE TRUSTEES
SECTION 8.1. Certain Duties and Responsibilities . . . . . . . . . . . . . 63
SECTION 8.2. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.3. Certain Rights of Property Trustee . . . . . . . . . . . . . 69
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities . . . 71
SECTION 8.5. May Hold Securities . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.6. Compensation; Indemnity; Fees . . . . . . . . . . . . . . . . 72
SECTION 8.7. Property Trustee Required; Eligibility of Trustees . . . . . 73
SECTION 8.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.9. Resignation and Removal; Appointment of Successor . . . . . . 74
SECTION 8.10. Acceptance of Appointment by Successor . . . . . . . . . . . 76
SECTION 8.11. Merger, Conversion, Consolidation or Succession to Business . 77
SECTION 8.12. Preferential Collection of Claims Against Sponsor or Trust . 78
SECTION 8.13. Reports by Property Trustee . . . . . . . . . . . . . . . . . 78
SECTION 8.14. Reports to the Property Trustee . . . . . . . . . . . . . . . 79
SECTION 8.15. Evidence of Compliance with Conditions Precedent . . . . . . 79
SECTION 8.16. Number of Trustees . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.17. Delegation of Power . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE 9
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.1. Termination upon Expiration Date . . . . . . . . . . . . . . 80
SECTION 9.2. Early Termination . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.3. Termination . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.4. Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
vi
<PAGE> 8
PAGE
<TABLE>
<S> <C> <C>
SECTION 9.5. Mergers, Consolidations,
Amalgamations or Replacements of
the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Securityholders. . . . . . . . . . . 85
SECTION 10.2. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 10.3. Separability . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.4. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.5. Payments Due on Non-Business Day . . . . . . . . . . . . . . 87
SECTION 10.6. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 10.8. Reports, Notices and Demands . . . . . . . . . . . . . . . . 88
SECTION 10.9. Agreement Not to Petition. . . . . . . . . . . . . . . . . . 89
SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act . . . 89
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture . . . . . . . . . . . . . . . . . . 90
EXHIBIT A Certificate of Trust of CMS Energy Trust I
EXHIBIT B Form of Common Securities of CMS Energy Trust I
EXHIBIT C Form of Preferred Securities of CMS Energy Trust I
EXHIBIT D Notice of Conversion
</TABLE>
vii
<PAGE> 9
FINANCIAL TRUST*
Certain Sections of this Trust Agreement
relating to Sections 310 through 318
of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE TRUST AGREEMENT
ACT SECTION SECTION
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . 8.7
(a)(2) . . . . . . . . . . . . . . . . . . . . 8.7
(a)(4) . . . . . . . . . . . . . . . . . . . . 2.7(a)(ii)
(b) . . . . . . . . . . . . . . . . . . . . 8.8
Section 311 (a) . . . . . . . . . . . . . . . . . . . . 8.12
(b) . . . . . . . . . . . . . . . . . . . . 8.12
Section 312 (a) . . . . . . . . . . . . . . . . . . . . 5.7
(b) . . . . . . . . . . . . . . . . . . . . 5.7
(c) . . . . . . . . . . . . . . . . . . . . 5.7
Section 313 (a) . . . . . . . . . . . . . . . . . . . . 8.13(a)
(c) . . . . . . . . . . . . . . . . . . . . 10.8
(d) . . . . . . . . . . . . . . . . . . . . 8.13(c)
(a)(4) . . . . . . . . . . . . . . . . . . . . 8.13(b)
(b) . . . . . . . . . . . . . . . . . . . . 8.13(b)
Section 314 (a) . . . . . . . . . . . . . . . . . . . . 8.14
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . 8.15
(c)(2) . . . . . . . . . . . . . . . . . . . . 8.15
(c)(3) . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . 1.1, 8.15
Section 315 (a) . . . . . . . . . . . . . . . . . . . . 8.1(a), 8.3(a)
(b) . . . . . . . . . . . . . . . . . . . . 8.2, 10.8
(c) . . . . . . . . . . . . . . . . . . . . 8.1(a)
(d) . . . . . . . . . . . . . . . . . . . . 8.1, 8.3
(e) . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 316 (a) . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . 6.7
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . 5.9
Section 318 (a) . . . . . . . . . . . . . . . . . . . . 10.10
</TABLE>
- --------------------------
* Note: This reconciliation and tie sheet shall not, for any purpose,
be deemed to be a part of the Trust Agreement.
<PAGE> 10
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________,
1997 among (i) CMS Energy Corporation, a Michigan corporation (including any
successors or assigns, "the Sponsor"), (ii) The Bank of New York, a New York
banking corporation, as property trustee (in such capacity, the "Property
Trustee" and, in its personal capacity and not in its capacity as Property
Trustee, the "Bank"), (iii) The Bank of New York (Delaware), a corporation duly
organized and existing under the laws of the State of Delaware, as Delaware
trustee (in such capacity, the "Delaware Trustee"), (iv) Alan M. Wright, an
individual, and Thomas A. McNish, an individual, each of whose address is c/o
CMS Energy Corporation, Fairlane Plaza South 330 Town Center Drive, Suite 1100,
Dearborn, Michigan 48126, each, an "Regular Trustee" and, collectively, the
"Regular Trustees" and, collectively with the Property Trustee and Delaware
Trustee, the "Trustees") and (iv) the several Holders as hereinafter defined.
W I T N E S S E T H:
WHEREAS, the Sponsor and certain of the Trustees have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by the entering into of that certain Declaration of
Trust, dated as of May 22, 1997 (the "Original Trust Agreement"), and by the
execution and filing by certain of the Trustees with the Secretary of State of
the State of Delaware of the Certificate of Trust, filed on May 22, 1997,
attached as Exhibit A, for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the assets of the
Trust and investing the proceeds thereof in the Debentures (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust
have been issued; and
WHEREAS, the Sponsor and the Trustees desire to amend and
restate the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance and sale of the Common
Securities by the Trust to the Sponsor, (ii) the issuance and sale of the
Preferred Securities by the Trust pursuant to the Underwriting Agreement and
(iii) the acquisition by the Trust from the Sponsor of all of the right, title
and interest in the Debentures;
<PAGE> 11
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, each party, for the benefit of the
other party and for the benefit of the Holders of the Preferred Securities,
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows:
ARTICLE 1
DEFINED TERMS
SECTION 1.1. Definitions. For all purposes of this Trust
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the
Trust Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference
to an "Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Trust Agreement as a whole and not
to any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to the Trust
Securities, the amount of Additional Interest (as defined in the Indenture)
paid by the Sponsor on the Debentures.
"Additional Sums" means, with respect to the Trust Securities,
the amount of Additional Sums (as
2
<PAGE> 12
defined in the Indenture) paid by the Sponsor on the Debentures.
"Regular Trustee" means each of Alan M. Wright and Thomas A.
McNish, each solely in his capacity as Regular Trustee of the Trust formed and
continued hereunder and not in his individual capacity, or such Regular
Trustee's successor in interest in such capacity, or any successor in interest
in such capacity, or any successor Regular Trustee appointed as herein
provided.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, provided, however that an Affiliate
of the Sponsor shall not be deemed to include the Trust. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Certificate or beneficial interest therein, the
rules and procedures of the Clearing Agency for such security to the extent
applicable to such transaction and as in effect from time to time.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having
jurisdiction in the premises judging such Person as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjudication or composition of or in
respect of such Person under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of such Person or of any substan-
3
<PAGE> 13
tial part of its property or ordering the winding-up or liquidation of
its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law, or the consent by it
to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar
official) of such Person or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts
generally as they become due and its willingness to be adjudicated a
bankrupt, or the taking of corporate action by such Person in
furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.9.
"Board of Directors" means either the board of directors of
the Sponsor or any committee of that board duly authorized to act hereunder.
"Book-Entry Preferred Securities Certificates" means a
beneficial interest in the Preferred Securities Certificates, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 5.11.
"Business Day" means any day other than a Saturday or Sunday
or a day on which banking institutions in The City of New York are authorized
or required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Property Trustee or the corporate trust office of
the Debenture Trustee, is closed for business.
"Certificate Depository Agreement" means the agreement among
the Trust, the Sponsor and The Depository
4
<PAGE> 14
Trust Company, as the initial Clearing Agency, dated as of the Closing Date,
relating to the Trust Securities Certificates, as the same may be amended and
supplemented from time to time.
"Certificated Preferred Security" has the meaning specified in
Section 5.2.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The Depository Trust Company will be the initial Clearing
Agency.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means the first Time of Delivery (as defined in
the Underwriting Agreement), which date is also the date of execution and
delivery of this Trust Agreement.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, 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 at such
time.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit
B.
"Common Security" means an undivided beneficial interest in
the assets of the Trust, having a Liquidation Amount with respect to the assets
of the Trust of $50 and having the rights provided therefor in this Trust
Agreement, including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"Common Stock" means common stock, $.01 par value per share,
of the Sponsor.
5
<PAGE> 15
"Conversion Agent" has the meaning specified in Section 4.3.
"Conversion Date" has the meaning specified in Section 4.3.
"Conversion Expiration Date" means the date selected by the
Sponsor not less than 30 days nor more than 60 days after the date on which the
Sponsor issues a press release announcing its intention to terminate the
conversion rights of the Holders.
"Conversion Price" has the meaning specified in Section 4.3.
"Corporate Trust Office" means the principal corporate trust
office of the Property Trustee at which at any particular time its corporate
trust business shall be administered, which office at the date hereof is
located at 101 Barclay Street, Floor 21W, New York, New York 10286, Attention:
______________.
"Current Market Price", with respect to Common Stock, means
for any day the last reported sale price, regular way, on such day, or, if no
sale takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the New York
Stock Exchange Composite Transactions Tape, or, if Common Stock is not listed
or admitted to trading on the New York Stock Exchange on such day, on the
principal national securities exchange on which Common Stock is listed or
admitted to trading, if Common Stock is listed on a national securities
exchange, or the Nasdaq National Market, or, if Common Stock is not quoted or
admitted to trading on such quotation system, on the principal quotation system
on which Common Stock may be listed or admitted to trading or quoted, or, if
not listed or admitted to trading or quoted on any national securities exchange
or quotation system, the average of the closing bid and asked prices of Common
Stock in the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or, if not so available in such manner, as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors for that
6
<PAGE> 16
purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Debenture Redemption Date" means, with respect to any
Debentures to be redeemed under the Indenture, the date fixed for redemption
thereof under the Indenture.
"Debenture Trustee" means The Bank of New York, a New York
banking corporation, as trustee under the Indenture.
"Debentures" means $__________ aggregate principal amount of
the Sponsor's 6 3/4% convertible subordinated debentures issued pursuant to the
Indenture.
"Definitive Preferred Securities Certificates" means either or
both (as the context requires) of (a) Preferred Securities Certificates issued
in certificated, fully registered form as provided in Section 5.11(a) and (b)
Preferred Securities Certificates issued in certificated, fully registered form
as provided in Section 5.13.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. (Section ) 3801, et. seq., as it may be amended
from time to time.
"Delaware Trustee" means the Person identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust formed and continued hereunder and
not in its individual capacity, or its successor in interest in such capacity,
or any successor Delaware trustee appointed as herein provided.
"Sponsor" has the meaning specified in the preamble to this
Trust Agreement.
"Direct Action" has the meaning specified in Section 6.8.
"Distribution Date" has the meaning specified in Section
4.1(a).
7
<PAGE> 17
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.1.
"Early Termination Event" has the meaning specified in Section
9.2.
"Event of Default" means the occurrence of a Debenture Event
of Default, whatever the reason for such Debenture Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
"Exchange Notice" has the meaning specified in Section 4.4(b).
"Expiration Date" has the meaning specified in Section 9.1.
"Global Certificate" means a Preferred Security that is
registered in the Securities Register in the name of a Clearing Agency or a
nominee thereof.
"Guarantee" means the Guarantee Agreement executed and
delivered by the Sponsor and The Bank of New York, a New York banking
corporation, as guarantee trustee, contemporaneously with the execution and
delivery of this Trust Agreement, for the benefit of the Holders of the
Preferred Securities, as amended from time to time.
"Holder" means a Person in whose name a Trust Securities
Certificate representing a Trust Security is registered, such Person being a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Indenture" means the Indenture, dated as of _________, 1997
between the Sponsor and the Debenture Trustee as amended by the First
Supplemental Indenture, as amended or supplemented from time to time.
"Investment Company Event" means the receipt by the Property
Trustee, on behalf of the Trust, of an Opinion of Counsel, rendered by a law
firm having a national tax and securities practice (which Opinion of Counsel
shall not have been rescinded by such law firm), to the effect that, as a
result of the occurrence of a
8
<PAGE> 18
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") that there is more than an insubstantial
risk that the Trust is or will be considered an "investment company" that is
required to be registered under the 1940 Act, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage,
deed of trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
"Liquidation Amount" means an amount with respect to the
assets of the Trust equal to $50 per Trust Security.
"Liquidation Date" means each date on which Debentures or cash
are to be distributed to Holders of Trust Securities in connection with a
termination and liquidation of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in
Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as
amended.
"Notice of Conversion" means the notice given by a holder of
Preferred Securities to the Conversion Agent directing the Conversion Agent to
exchange such Preferred Security for Debentures and to convert such Debentures
into Common Stock on behalf of such holder. Such notice is substantially in
the form set forth in Exhibit D.
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board, a Vice Chairman, the President or a Vice President, and
by (ii) the Treasurer, an Assistant Treasurer, the Controller, the Secretary or
an Assistant Secretary, of the Sponsor, and delivered to the Trustee. One of
the officers signing an
9
<PAGE> 19
Officers' Certificate given pursuant to Section 8.15 shall be the principal
executive, financial or accounting officer of the Sponsor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant of condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) a statement that each officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Trust, the Property Trustee or the Sponsor, and who may
be an employee of any thereof, and who shall be acceptable to the Property
Trustee. Any Opinion of Counsel delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each individual signing the Opinion
of Counsel has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each individual in
rendering the Opinion of Counsel;
(c) a statement that each individual has made such
examination or investigation as is necessary to enable such individual
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
10
<PAGE> 20
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
"Optional Redemption Price" means, except as set forth below,
with respect to the Preferred Securities, the following percentages of the
Liquidation Amounts thereof, and accumulated and unpaid Distributions, if any,
to the date fixed for redemption if redeemed during the twelve-month period
commencing ________ in each of the following years indicated:
<TABLE>
<CAPTION>
Year Redemption Price Year Redemption Price
---- ---------------- ---- ----------------
<S> <C>
2000 2004
2001 2005
2002 2006
2003 2007 and
thereafter
</TABLE>
In the event of a redemption of Trust Securities upon the
occurrence of a Tax Event, Trust Securities shall be redeemed at the redemption
price of $50 per Trust Security and all accumulated and unpaid Distributions,
if any to the date fixed for redemption.
In the event of a redemption of Trust Securities pursuant to
Section 4.2(a)(ii), Trust Securities shall be redeemed as the redemption price
specified therein.
"Original Trust Agreement" has the meaning specified in the
recitals to this Trust Agreement.
"Outstanding", when used with respect to Trust Securities,
means, as of the date of determination, all Trust Securities theretofore
executed and delivered under this Trust Agreement, except:
(a) Trust Securities theretofore cancelled by the
Securities Registrar or delivered to the Securities Registrar for
cancellation or tendered for conversion;
11
<PAGE> 21
(b) Trust Securities for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Property Trustee or any Paying Agent for the Holders of such Trust
Securities; provided that, if such Trust Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange
for or in lieu of which other Trust Securities have been executed and
delivered pursuant to Section 5.5:
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Trust Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Trust
Securities owned by the Sponsor, any Trustee or any Affiliate of the Sponsor or
any Trustee shall be disregarded and deemed not to be Outstanding, except that
(a) in determining whether any Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Trust Securities that such Trustee knows to be so owned shall be so disregarded
and (b) the foregoing shall not apply at any time when all of the Outstanding
Trust Securities are owned by the Sponsor, one or more of the Trustees and/or
any such Affiliate. Trust Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Securities Registrar the pledgee's right so to act with
respect to such Trust Securities and that the pledgee is not the Sponsor or any
Affiliate of the Sponsor.
"Owner" means each Person who is the beneficial owner of a
Book-Entry Preferred Securities Certificate as reflected in the records of the
Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as
reflected in the records of a Person maintaining an account with such Clearing
Agency (directly or indirectly, in accordance with the rules of such Clearing
Agency).
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.9.
"Payment Account" means a segregated non-interest bearing
corporate trust account maintained by the Property Trustee with the Bank in its
trust department for the bene-
12
<PAGE> 22
fit of the Securityholders in which all amounts paid in respect of the
Debentures will be held and from which the Property Trustee shall make payments
to the Securityholders in accordance with Section 4.1.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Securities Certificate" means a certificate
evidencing ownership of Preferred Securities, substantially in the form
attached as Exhibit C.
"Preferred Security" means an undivided beneficial interest in
the assets of the Trust, having a Liquidation Amount with respect to the assets
of the Trust of $50 and having the rights provided therefor in this Trust
Agreement, including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as
herein provided.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, each Debenture Redemption Date.
"Redemption Price" means, with respect to any Trust Security,
$50 per Trust Security, plus accumulated and unpaid Distributions (including
any Additional Sums) to the date of redemption.
"Relevant Trustee" has the meaning specified in Section 8.9.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.4.
"Securityholder" or "Holder" means a Person in whose name a
Trust Security or Securities is registered in the Securities Register; any such
Person shall be deemed to
13
<PAGE> 23
be a beneficial owner within the meaning of the Delaware Business Trust Act.
"Special Event" means a Tax Event or an Investment Company
Event.
"Successor Property Trustee" has the meaning specified in
Section 8.9.
"Successor Delaware Trustee" has the meaning specified in
Section 8.9.
"Successor Securities" has the meaning specified in Section
9.5.
"Tax Event" means the receipt by the Property Trustee, on
behalf of the Trust, of an Opinion of Counsel, rendered by a law firm having a
national tax and securities practice (which Opinion of Counsel shall not have
been rescinded by such law firm), to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities under this Trust Agreement, there is
more than an insubstantial risk in each case after the date thereof that (i)
the Trust is, or will be within 90 days after the date thereof, subject to
United State Federal income tax with respect to income received or accrued on
the Debentures, (ii) interest payable by the Sponsor on the Debentures is not,
or will not be, within 90 days after the date hereof, deductible, in whole or
in part, for United States Federal income tax purposes or (iii) the Trust is,
or will be within 90 days after the date thereof, subject to more than de
minimus amount of other taxes, duties, assessments or other governmental
charges.
"Trust" means the Delaware business trust continued hereby and
identified on the cover page of this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust
Agreement, as the same may be modified, amended or
14
<PAGE> 24
supplemented in accordance with the applicable provisions hereof, including all
exhibits hereto, including, for all purposes of this Trust Agreement any such
modification, amendment or supplement, the provisions of the Trust Indenture
Act that are deemed to be a part of and govern this Trust Agreement and any
such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on
deposit in, or owing to, the Payment Account and (c) all proceeds and rights in
respect of the foregoing to be held by the Property Trustee pursuant to the
terms of this Trust Agreement for the benefit of the Securityholders.
"Trust Security" means any one of the Common Securities or
the Preferred Securities.
"Trust Securities Certificate" means any one of the Common
Securities Certificates, the Global Certificates or the Certificated Preferred
Securities.
"Trustees" means, collectively, the Property Trustee, the
Delaware Trustee and the Regular Trustees.
"Underwriting Agreement" means the Underwriting Agreement,
dated as of _________, 1997 among the Trust, the Sponsor and the Underwriter
named therein.
ARTICLE 2
ESTABLISHMENT OF THE TRUST
SECTION 2.1. Name. The Trust continued hereby shall be known
as "CMS Energy Trust I", as such name may be modified from time to time by the
Regular Trustees following written notice to the Holders of Trust Securities
and the other Trustees, in which name the Trustees may conduct the business of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued.
15
<PAGE> 25
SECTION 2.2. Office of the Delaware Trustee; Principal Place
of Business. The address of the Delaware Trustee in the State of Delaware is
White Clay Center, Route 273, Newark, Delaware 19711: Corporate Trust, or such
other address in the State of Delaware as the Delaware Trustee may designate by
written notice to the Securityholders and the Sponsor. The principal executive
office of the Trust is Fairlane Plaza South 330 Town Center Drive, Suite 1100
Dearborn, Michigan 48126.
SECTION 2.3. Organizational Expenses. The Sponsor shall pay
organizational expenses of the Trust as they arise or shall, upon request of
any Trustee, promptly reimburse such Trustee for any such expenses paid by such
Trustee. The Sponsor shall make no claim upon the Trust Property for the
payment of such expenses.
SECTION 2.4. Issuance of the Preferred Securities. On
_________, 1997 the Sponsor and a Regular Trustee on behalf of the Trust
executed and delivered the Underwriting Agreement. Contemporaneously with the
execution and delivery of this Trust Agreement, a Regular Trustee, on behalf of
the Trust, shall execute in accordance with Section 5.2 and deliver to the
Purchasers named therein Preferred Securities Certificates, in an aggregate
amount of _________ Preferred Securities having an aggregate Liquidation Amount
of $__________, against receipt of the aggregate purchase price of such
Preferred Securities of $__________, which amount the Regular Trustees shall
promptly deliver to the Property Trustee.
SECTION 2.5. Subscription and Purchase of Debentures;
Issuance of the Common Securities. Contemporaneously with the execution and
delivery of this Trust Agreement, the Regular Trustees, on behalf of the Trust,
shall subscribe to and purchase from the Sponsor Debentures, registered in the
name of the Property Trustee (in its capacity as such) and having an aggregate
principal amount equal to $__________, and, in satisfaction of the purchase
price for such Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Sponsor the sum of $__________. Contemporaneously therewith, a
Regular Trustee, on behalf of the Trust, shall execute in accordance with
Section 5.2 and deliver to the Sponsor Common Securities Certificates
registered in the name of the Sponsor, in an aggregate amount of _______ Common
Securities having an aggregate Liquidation Amount of $_________ against receipt
of the aggregate pur-
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<PAGE> 26
chase price of such Common Securities from the Sponsor of the sum of
$_________.
SECTION 2.6. Declaration of Trust. The exclusive purposes
and functions of the Trust are (a) to issue and sell Trust Securities and use
the proceeds from such sale to acquire the Debentures, (b) to distribute the
Trust's income as provided in this Trust Agreement and (c) to engage in only
those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
Federal income tax purposes as a grantor trust. The Sponsor hereby appoints
the Trustees as trustees of the Trust, to have all the rights, powers and
duties to the extent set forth herein, and the Trustees hereby accept such
appointment. The Property Trustee hereby declares that it will hold the Trust
Property in trust upon and subject to the conditions set forth herein for the
benefit of the Trust and the Securityholders. The Regular Trustees 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. The
Delaware Trustee shall not be entitled to exercise any powers, nor shall the
Delaware Trustee have any of the duties and responsibilities, of the Property
Trustee or the Regular Trustees set forth herein. The Delaware Trustee shall
be one of the Trustees of the Trust for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Delaware Business Trust Act.
SECTION 2.7. Authorization to Enter into Certain
Transactions. (a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in Section 2.6 and paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Trustees shall have the
exclusive power, duty and the authority to cause the Trust to engage in the
following activities:
(i) As among the Trustees, each Regular Trustee shall have
the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) to issue and sell the Trust Securities,
provided, however, that the Trust may issue
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<PAGE> 27
no more than one series of Preferred Securities and no more
than one series of Common Securities, and, provided, further,
that there shall be no interests in the Trust other than the
Trust Securities, and the issuance of Trust Securities shall
be limited to simultaneous issuance of both Preferred
Securities and Common Securities on the Closing Date and any
other date Preferred Securities and Common Securities are sold
pursuant to the over-allotment option granted to the initial
purchasers in the Underwriting Agreement, subject to the
issuance of Trust Securities pursuant to Section 5.5 and
Successor Securities pursuant to Section 9.5;
(B) to cause the Trust to enter into,
and to execute, deliver and perform on behalf of the Trust,
the Underwriting Agreement and the Certificate Depository
Agreement and such other agreements as may be necessary or
incidental to the purposes and function of the Trust;
(C) to assist in the registration of the
Preferred Securities under the Securities Act of 1933, as
amended, and under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture
under the Trust Indenture Act;
(D) to assist in the listing of the
Preferred Securities upon such securities exchange or
exchanges as shall be determined by the Sponsor and the
registration of the Preferred Securities under the Securities
Exchange Act of 1934, as amended, and the preparation and
filing of all periodic and other reports and other documents
pursuant to the foregoing (only to the extent that such
listing or registration is requested by the Sponsor);
(E) to appoint a Paying Agent, a
Securities Registrar and an authenticating agent in accordance
with this Trust Agreement;
(F) to the extent provided in this Trust
Agreement, to wind up the affairs of and liquidate the Trust
and prepare, execute and file
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<PAGE> 28
the certificate of cancellation with the Secretary of State of
the State of Delaware;
(G) unless otherwise determined by the
Sponsor, the Property Trustee or the Regular Trustees, or as
otherwise required by the Delaware Business Trust Act or the
Trust Indenture Act, to execute on behalf of the Trust (either
acting alone or together with any other Regular Trustees) any
documents that the Regular Trustees have the power to execute
pursuant to this Trust Agreement; and
(H) to take any action incidental to the
foregoing as the Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this
Trust Agreement including, but not limited to:
(i) causing the Trust not to be deemed to be
an Investment Company required to be registered under
the 1940 Act;
(ii) causing the Trust to be classified for
United States Federal income tax purposes as a
grantor trust; and
(iii) cooperating with the Sponsor to ensure
that the Debentures will be treated as indebtedness
of the Sponsor for United States Federal income tax
purposes;
provided that such action does not adversely affect in any
material respect the interests of Securityholders except as
otherwise provided in Section 10.2(a).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment
Account;
(B) the receipt of and taking title to the
Debentures;
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<PAGE> 29
(C) the collection of interest,
principal and any other payments made in respect of the
Debentures in the Payment Account;
(D) the distribution from the Trust
Property of amounts owed to the Securityholders in respect of
the Trust Securities;
(E) the exercise of all of the rights,
powers and privileges of a holder of the Debentures;
(F) the sending of notices of default,
other notices and other information regarding the Trust
Securities and the Debentures to the Securityholders in
accordance with this Trust Agreement;
(G) the distribution of the Trust Property
in accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust
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;
(I) after an Event of Default, the
taking of any action incidental to the foregoing as the
Property Trustee may from time to time determine is necessary
or advisable to give effect to the terms of this Trust
Agreement and protect and conserve the Trust Property for the
benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholder);
(J) subject to this Section 2.7(a)(ii),
the Property Trustee shall have none of the duties,
liabilities, powers or the authority of the Regular Trustees
set forth in Section 2.7(a)(i); and
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(K) to act as Paying Agent and/or
Securities Registrar to the extent appointed as such hereunder.
(b) So long as this Trust Agreement remains in effect,
the Trust (or the Trustees 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 Trust shall not, and the Trustees
shall not and shall cause the Trust not to (i) invest any proceeds received by
the Trust from holding the Debentures (rather, the Trustees shall distribute
all such proceeds to the Securityholders pursuant to the terms of this Trust
Agreement and the Trust Securities), acquire any investments or engage in any
activities not authorized by this Trust Agreement, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust
Property or interests therein, including to Securityholders, except as
expressly provided herein, (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United States Federal income
tax purposes, (iv) make any loans or incur any indebtedness for borrowed money
or issue any other debt, (v) take or consent to any action that would result in
the placement of a Lien on any of the Trust Property, (vi) possess any power or
otherwise act in such a way as to vary the Trust assets or the terms of the
Trust Securities in any way whatsoever except as permitted by the terms of this
Trust Agreement, or (vii) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Trust
Securities. The Regular Trustees shall defend all claims and demands of all
Persons at any time claiming any Lien on any of the Trust Property adverse to
the interest of the Trust or the Securityholders in their capacity as
Securityholders.
(c) In connection with the issue and sale of the
Preferred Securities, the Sponsor shall have the right and responsibility to
assist the Trust with respect to, or effect on behalf of the Trust, with the
following actions (and any actions taken by the Sponsor in furtherance of the
following prior to the date of this Trust Agreement are hereby ratified and
confirmed in all respects):
(i) to file by the Trust with the Commission and to execute
on behalf of the Trust a registration state-
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ment on the appropriate form in relation to the Preferred Securities,
including any amendments thereto;
(ii) to determine the States in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which
must be taken by or on behalf of the Trust, and advise the Trustees of
actions they must take on behalf of the Trust, and prepare for
execution and filing any documents to be executed and filed by the
Trust or on behalf of the Trust, as the Sponsor deems necessary or
advisable in order to comply with the applicable laws of any such
States;
(iii) to the extent necessary, to prepare for filing by the
Trust with the Commission and to execute on behalf of the Trust a
registration statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, including any amendments thereto;
(iv) any other actions necessary or incidental to carry out
any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Regular Trustees are 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" required to be registered under the 1940 Act, or taxed as
a corporation for United States Federal income tax purposes and so that the
Debentures will be treated as indebtedness of the Sponsor for United States
Federal income tax purposes. In this connection, the Sponsor and the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the Certificate of Trust or this Trust Agreement, that each of the Sponsor
and the Regular Trustees determines in their discretion to be necessary or
desirable for such purposes, so long as such action does not adversely affect
in any material respect the interests of the Holders of the Preferred
Securities except as otherwise provided in Section 10.2(a).
SECTION 2.8. Assets of Trust. The assets of the Trust shall
consist of only the Trust Property.
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SECTION 2.9. Title to Trust Property. Legal title to all
Trust Property shall be vested at all times in the Property Trustee (in its
capacity as such) and shall be held and administered by the Property Trustee
for the benefit of the Trust and the Securityholders in accordance with this
Trust Agreement. The Securityholder shall not have legal title to any part of
the assets of the Trust, but shall have an undivided beneficial interest in the
assets of the Trust.
ARTICLE 3
PAYMENT ACCOUNT
SECTION 3.1. Payment Account. (a) On or prior to the
Closing Date, the Property Trustee shall establish the Payment Account. The
Property Trustee and any agent of the Property Trustee shall have exclusive
control and sole right of withdrawal with respect to the Payment Account for
the purpose of making deposits in and withdrawals from the Payment Account in
accordance with this Trust Agreement. All monies and other property deposited
or held from time to time in the Payment Account shall be held by the Property
Trustee in the Payment Account for the exclusive benefit of the Securityholders
and for distribution as herein provided, including (and subject to) any
priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment
Account, promptly upon receipt, all payments of principal of or interest on,
and any other payments or proceeds with respect to, the Debentures. Amounts
held in the Payment Account shall not be invested by the Property Trustee
pending distribution thereof.
ARTICLE 4
DISTRIBUTIONS; REDEMPTION; EXCHANGE; CONVERSION
SECTION 4.1. Distributions. (a) Distributions on the Trust
Securities shall be cumulative, and shall accrue from the date of original
issuance, or the most recent Distribution Date (as defined herein) and, except
in the event that the Sponsor exercises its right to defer the payment of
interest on the Debentures pursuant to the Indenture, shall be payable
quarterly in arrears on ________, ________, ________ and ________ of each year,
commencing on
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________, 1997 (which dates correspond to the interest payment dates on the
Debentures), when, as and if available for payment by the Property Trustee, as
further described in paragraph (c) of this Section 4.1. If any date on which
Distributions are otherwise payable on the Trust Securities is not a Business
Day, then the payment of such Distributions shall be made on the next
succeeding day which is a Business Day (and no interest shall accrue for the
period from and after such date until the next succeeding Business Day) with
the same force and effect as if made on such date (each date on which
Distributions are payable in accordance with this Section 4.1(a), a
"Distribution Date").
(b) The Trust Securities represent undivided beneficial
interests in the Trust Property, and the Distributions on the Trust Securities
shall be payable at a rate of 6 3/4% per annum of the Liquidation Amount of the
Trust Securities, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. The amount of Distributions
payable for any period shall be computed on the basis of a 360-day year of
twelve 30-day months. For periods less than a full quarter, Distributions
shall reflect interest on Debentures computed on the basis of the actual number
of elapsed days for any period based on a 360-day year of 12 30-day months.
The amount of Distributions payable for any period shall include the Additional
Amounts, if any.
(c) Distributions on the Trust Securities shall be made by
the Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
available in the Payment Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be the date which is the fifteenth day (whether or not a Business Day)
next preceding such Distribution Date.
SECTION 4.2. Redemption. (a) (i) Upon an optional
redemption (as set forth in the Indenture) of Debentures, the proceeds from
such redemption shall be applied to redeem Trust Securities having an aggregate
Liquidation Amount equal to the aggregate principal amount
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<PAGE> 34
of the Debentures so redeemed by the Sponsor, including pursuant to Section
4.4, at the Optional Redemption Price, and upon a mandatory redemption (as set
forth in the Indenture) of Debentures, the proceeds from such redemption shall
be applied to redeem Trust Securities, having an aggregate Liquidation Amount
equal to the aggregate principal amount of the Debentures so redeemed by the
Sponsor, at the Redemption Price.
(ii) If at any time following the Conversion
Expiration Date, less than five percent (5%) in principal
amount of the Debentures originally issued by the Sponsor
remain outstanding, such Debentures are redeemable, at the
option of the Sponsor, in whole but not in part, at a
redemption price equal to the aggregate principal amount
thereof, and all accrued and unpaid interest; in such event,
the proceeds from such redemption shall be applied to redeem
the Outstanding Trust Securities.
(b) Notice of redemption (which notice will be irrevocable)
shall be given by the Property Trustee by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date to
the Sponsor and each Holder of Trust Securities to be redeemed, at such
Holder's address as it appears in the Securities Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or the Optional Redemption
Price, as the case may be;
(iii) the CUSIP number;
(iv) if less than all of the Outstanding Trust
Securities are to be redeemed, the identification and the
aggregate Liquidation Amount of the particular Trust
Securities to be redeemed;
(v) If the Preferred Securities are convertible, (A)
that a Holder of Preferred Securities who desires to convert
such Preferred Securities called for redemption must satisfy
the requirements for conversion contained in Section 4.3
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<PAGE> 35
below, (B) the Conversion Price and (C), if previously
determined, the Conversion Expiration Date;
(vi) that on the Redemption Date the Redemption
Price or the Optional Redemption Price, as the case may be,
will become due and payable upon each such Trust Security to
be redeemed and that Distributions thereon will cease to
accrue on and after said date; and
(vii) the place or places where such Trust
Securities are to be surrendered for payment of the Redemption
Price or the Optional Redemption Price, as the case may be.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price or the Optional Redemption Price, as
the case may be, with the proceeds from the contemporaneous redemption of
Debentures. Redemptions of the Trust Securities shall be made and the
Redemption Price or the Optional Redemption Price, as the case may be, shall be
payable on each Redemption Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of such
Redemption Price or the Optional Redemption Price, as the case may be.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York City time,
on the Redemption Date, subject to Section 4.2(c), the Property Trustee will,
so long as and to the extent the Preferred Securities are in book-entry-only
form, irrevocably deposit with the Clearing Agency for the Preferred Securities
funds sufficient to pay the applicable Redemption Price. If the Preferred
Securities are no longer in book-entry only form, the Property Trustee, subject
to Section 4.2(c), will irrevocably deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price or Optional Redemption Price,
as the case may be, on such Preferred Securities held in certificated form and
will give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price or the Optional Redemption Price, as the case may be, to the
Holders thereof upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust
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Securities as they appear on the Securities Register for the Trust Securities
on the relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then, upon
the date of such deposit, all rights of Securityholders holding Trust
Securities so called for redemption will cease, except the right of such
Securityholders to receive the Redemption Price or the Optional Redemption
Price, as the case may be, but without interest, and such Trust Securities will
cease to be Outstanding. In the event that any date on which any Redemption
Price or the Optional Redemption Price, as the case may be, is payable is not a
Business Day, then payment of the Redemption Price or the Optional Redemption
Price, as the case may be, payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if
made on such date.
(e) If less than all the Outstanding Trust Securities are to
be redeemed on a Redemption Date, then the aggregate Liquidation Amount of
Trust Securities to be redeemed shall be allocated on a pro rata basis (based
on Liquidation Amounts) among the Common Securities and the Preferred
Securities that are to be redeemed. The particular Preferred Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Property Trustee from the Outstanding Preferred Securities not
previously called for redemption, by lot or by such other method as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $50 or an integral multiple of
$50 in excess thereof) of the liquidation amount of the Preferred Securities.
The Property Trustee shall promptly notify the Securities Registrar and the
Conversion Agent in writing of the Preferred Securities selected for redemption
and, in the case of any Preferred Securities selected for partial redemption,
the Liquidation Amount thereof to be redeemed; it being understood that, in the
case of Preferred Securities registered in the name of and held of record by
the Clearing Agency (or any successor) or any nominee, the distribution of the
proceeds of such redemption will be made in accordance with the procedures of
the Clearing Agency or its nominee. For all purposes of this Trust Agreement,
unless the context otherwise requires, all provisions relating to the
redemption of Preferred Securities shall relate, in the case of any Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
Liquidation
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Amount of Preferred Securities which has been or is to be redeemed. In the
event of any redemption in part, the Trust shall not be required to (i) issue,
register the transfer of or exchange of any Preferred Security during a period
beginning at the opening of business 15 days before any selection for
redemption of Preferred Securities and ending at the close of business on the
earliest date in which the relevant notice of redemption is deemed to have been
given to all holders of Preferred Securities to be so redeemed or (ii) register
the transfer of or exchange of any Preferred Securities so selected for
redemption, in whole or in part, except for the unredeemed portion of any
Preferred Securities being redeemed in part.
SECTION 4.3. Conversion. The Holders of Trust Securities,
subject to the limitations set forth in this Section, shall have the right at
any time prior to the Conversion Expiration Date, at their option, to cause the
Conversion Agent to convert Trust Securities, on behalf of the converting
Holders, into shares of Common Stock in the manner described herein on and
subject to the following terms and conditions:
(i) The Trust Securities will be convertible into
fully paid and nonassessable shares of Common Stock pursuant
to the Holder's direction to the Conversion Agent to exchange
such Trust Securities for a portion of the Debentures, and
immediately convert such amount of Debentures into fully paid
and nonassessable shares of Common Stock at an initial rate of
_________ shares of Common Stock for each Trust Security
(which is equivalent to a conversion price of $________ per
$50 principal amount of Debentures), subject to certain
adjustments set forth in the Indenture (as so adjusted,
"Conversion Price").
(ii) In order to convert Trust Securities into
Common Stock, the Holder of such Trust Securities shall submit
to the Conversion Agent an irrevocable Notice of Conversion to
convert Trust Securities on behalf of such Holder, together,
if the Trust Securities are in certificated form, with such
certificates. The Notice of Conversion shall (i) set forth
the number of Trust Securities to be converted and the name or
names, if other than the Holder, in which the shares of Common
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Stock should be issued and (ii) direct the Conversion Agent (a) to
exchange such Trust Securities for a portion of the Debentures held by
the Property Trustee (at the rate of exchange specified in the
preceding paragraph) and (b) to immediately convert such Debentures,
on behalf of such Holder, into Common Stock (at the conversion rate
specified in the preceding paragraph). The Conversion Agent shall
notify the Property Trustee of the Holder's election to exchange Trust
Securities for a portion of the Debentures held by the Property
Trustee and the Property Trustee shall, upon receipt of such notice,
deliver to the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section. The
Conversion Agent shall thereupon notify the Sponsor of the Holder's
election to convert such Debentures into shares of Common Stock.
Holders of Trust Securities at the close of business on a Dis-
tribution payment record date will be entitled to receive the
Distribution paid on such Trust Securities on the corresponding
Distribution Date notwithstanding the conversion of such Trust
Securities following such record date but prior to such Distribution
Date. Except as provided above, neither the Trust nor the Sponsor
will make, or be required to make, any payment, allowance or
adjustment upon any conversion on account of any accumulated and
unpaid Distributions whether or not in arrears accrued on the Trust
Securities surrendered for conversion, or on account of any
accumulated and unpaid dividends on the shares of Common Stock issued
upon such conversion. Trust Securities shall be deemed to have been
converted immediately prior to the close of business on the day on
which an irrevocable Notice of Conversion relating to such Trust
Securities is received by the Conversion Agent in accordance with the
foregoing provision (the "Conversion Date"). The Person or Persons
entitled to receive the Common Stock issuable upon conversion of the
Debentures shall be treated for all purposes as the record holder or
holders of such Common Stock on the date of conversion. As promptly
as practicable on or after the Conversion Date, the Sponsor shall
issue and deliver at the office of the Conversion Agent a certificate
or certificates for the number of
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full shares of Common Stock issuable upon such conversion,
together with the cash payment, if any, in lieu of any fraction
of any share to the Person or Persons entitled to receive the
same, unless otherwise directed by the Holder in the notice of
conversion and the Conversion Agent shall distribute such
certificate or certificates to such Person or Persons.
(iii) On and after _________, ____, the Sponsor may,
at its option, cause the conversion rights of holders of the
Debentures (and the corresponding conversion rights of Holders
of Trust Securities) to expire; provided, however, that the
Sponsor may exercise this option only if for 20 trading days
within any period of 30 consecutive trading days, including
the last trading day of such period, the Current Market Price
of Common Stock exceeds 120% of the Conversion Price.
In order to exercise its option to terminate the
conversion rights of the Debentures, the Sponsor must issue a
press release for publication on the Dow Jones News Service
announcing the Conversion Expiration Date prior to the opening
of business on the second trading day after any period in
which the condition in the preceding sentence has been met,
but in no event prior to __________, ____. The press release
shall announce the Conversion Expiration Date (which may not
occur sooner than 30 nor more than 60 days after the Sponsor
issues the press release announcing its intention to terminate
the conversion rights of the Debentures) and provide the
current Conversion Price and Current Market Price of Common
Stock, in each case as of the close of business on the trading
day next preceding the date of the press release. Conversion
rights will terminate at the close of business on the
Conversion Expiration Date.
The Sponsor, or at the request of the Sponsor, the
Property Trustee shall send notice of the expiration of
conversion rights by first-class mail to the Holders of the
Trust Securities and the holders of the Debentures not more
than four Business Days after the Sponsor issues the press
release or, if the Property Trustee is requested
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to send such notice, which shall be on the date of such press
release, after the Sponsor delivers written instructions to the
Property Trustee containing the information required by the
next sentence to be in the notice. Such mailed notice of the
expiration of the conversion rights of the Holders shall
state: (A) the Conversion Expiration Date; (B) the Conversion
Price of the Trust Securities and the Current Market Price of
the Common Stock, in each case as of the close of business on
the Business Day next preceding the date of the notice of
expiration of the conversion rights of the Holders; (C) the
place or places at which Trust Securities may be surrendered
prior to the Conversion Expiration Date for certificates
representing shares of Common Stock; and (D) such other
information or instructions as the Sponsor deems necessary or
advisable to enable a Holder to exercise its conversion right
hereunder. No defect in the notice of expiration of the
conversion rights of the Holders or in the mailing thereof with
respect to any Trust Security shall affect the validity of such
notice with respect to any other Trust Security. As of the
close of business on the Conversion Expiration Date, the
Debentures (and correspondingly, the Trust Securities) shall no
longer be convertible into Common Stock. In the event that the
Sponsor does not exercise its option to terminate the
conversion rights of the Debentures, the Conversion Expiration
Date with respect to the Trust Securities will be the close of
business two Business Days preceding the date set for
redemption of the Trust Securities upon the mandatory or
optional redemption of the Debentures.
(iv) Each Holder of a Trust Security by its
acceptance thereof initially appoints The Bank of New York not
in its individual capacity but solely as conversion agent (the
"Conversion Agent") for the purpose of effecting the
conversion of Trust Securities in accordance with this
Section. In effecting the conversion and transactions
described in this Section, the Conversion Agent shall be
acting as agent of the Holders of Trust Securities directing
it to effect such conversion transactions. The Conversion
Agent is hereby au-
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thorized (i) to exchange Trust Securities from time to time for
Debentures held by the Trust in connection with the conversion
of such Trust Securities in accordance with this Section and
(ii) to convert all or a portion of the Debentures into Common
Stock and thereupon to deliver such shares of Common Stock in
accordance with the provisions of this Section and to deliver
to the Property Trustee any new Debenture or Debentures for any
resulting unconverted principal amount delivered to the
Conversion Agent by the Debenture Trustee.
(v) No fractional shares of Common Stock will be
issued as a result of conversion, but, in lieu thereof, such
fractional interest will be paid in cash by the Sponsor to the
Conversion Agent in an amount equal to the Current Market
Price of the fractional share of the Common Stock, and the
Conversion Agent will in turn make such payment to the Holder
or Holders of Trust Securities so converted.
(vi) Nothing in this Section 4.3 shall limit the
requirement of the Trust to withhold taxes pursuant to the
terms of the Trust Securities or as set forth in this
Agreement or otherwise required of the Property Trustee or the
Trust to pay any amounts on account of such withholdings.
SECTION 4.4. Special Event Exchange or Redemption. (a) If a
Special Event shall occur and be continuing, the Property Trustee shall direct
the Conversion Agent to exchange all Outstanding Trust Securities for
Debentures having a principal amount equal to the aggregate Liquidation Amount
of the Trust Securities to be exchanged and with accrued interest in an amount
equal to any unpaid Distribution (including any Additional Amounts) on the
Trust Securities; provided, however, that, in the case of a Tax Event, the
Sponsor shall have the right to (i) direct that less than all, or none, as
appropriate, of the Trust Securities be so exchanged if and for so long as the
Sponsor shall have elected to pay any Additional Sums (as defined in the
Indenture) such that the amount received by Holders of Trust Securities not so
exchanged in respect of Distributions and other distributions are not reduced
as a result of such Tax Event, and shall not have revoked any such election or
failed to make such payments or (ii) cause the Trust Securi-
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ties to be redeemed in the manner set forth below. If a Tax Event shall occur
or be continuing, the Sponsor shall have the right, upon not less than 30 nor
more than 60 days' notice, to redeem the Debentures, in whole or in part, for
cash upon the later of (i) 90 days following the occurrence of such Tax Event
or (ii) _________, ____. Promptly following such redemption, Trust Securities
with an aggregate liquidation amount equal to the aggregate principal amount of
the Debentures so redeemed will be redeemed by the Trust at the Optional
Redemption Price on a pro rata basis.
(b) Notice of any exchange pursuant to this Section 4.4 (an
"Exchange Notice") of the Trust Securities, which Exchange Notice shall be
irrevocable, will be given by the Property Trustee by first-class mail to the
Sponsor and to each record Holder of Trust Securities to be exchanged not fewer
than 30 nor more than 60 days prior to the date fixed for exchange thereof.
For purposes of the calculation of the date of exchange and the dates on which
notices are given pursuant to this paragraph (b), an Exchange Notice shall be
deemed to be given on the day such notice is first mailed by first-class mail,
postage prepaid, to each Holder. Each Exchange Notice shall be addressed to
each Holder of Trust Securities at the address of such Holder appearing in the
books and records of the Trust. Each Exchange Notice shall state: (A) the
exchange date; (B) the aggregate Liquidation Amount and any unpaid
Distributions (including any Additional Amounts) on the Trust Securities to be
exchanged and the aggregate principal amount and any accrued interest on the
Debentures to be exchanged therefor; (C) that on the exchange date the Trust
Securities to be so exchanged shall be exchanged for Debentures and that
Distributions on the Trust Securities so exchanged will cease to accumulate on
and after said date; and (D) the identity of the Conversion Agent, if any, and
the place or places where each Trust Certificate to be exchanged is to be
surrendered in exchange for Debentures. No defect in the Exchange Notice or in
the mailing thereof with respect to any Trust Security shall affect the
validity of the exchange proceedings for any other Trust Security.
(c) In the event that fewer than all the Outstanding
Preferred Securities are to be exchanged, then, on the exchange date, (i) if
all of the Outstanding Preferred Securities are represented by Definitive
Preferred Securities Certificates, the particular Preferred Securities to be
exchanged will be selected by the Property Trustee from the
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Outstanding Preferred Securities not previously called for redemption or
exchange on a pro rata basis, (ii) if all of the Outstanding Preferred
Securities are represented by Book-Entry Preferred Securities Certificates, the
Property Trustee shall provide for the selection for exchange of a portion of
the Global Certificate representing the Book-Entry Preferred Securities
Certificates on a pro rata basis and (iii) if Outstanding Trust Securities are
represented by both Definitive Preferred Securities Certificates and Book-Entry
Preferred Securities Certificates, the Property Trustee shall select the
portion of the Global Certificate representing the Book-Entry Preferred
Securities Certificates and the particular Outstanding Preferred Securities
represented by Definitive Preferred Securities Certificates to be exchanged on
a pro rata basis. In the case of clause (ii) or (iii) above, the particular
Book-Entry Preferred Securities Certificates to be exchanged shall be selected
in accordance with the applicable rules and procedures for the Clearing Agency
in whose name, or whose nominee's name, such global certificate is then held.
Any Preferred Securities Certificate that is to be exchanged only in part shall
be surrendered with due endorsement or by a written instrument of transfer
fully executed by the Holder thereof (or its attorney duly authorized in
writing) and the Trust shall prepare and deliver to such Holder, without
service charge, a new Preferred Securities Certificate or Certificates in
aggregate stated Liquidation Amount equal to, and in exchange for, the
unredeemed portion of the Preferred Securities Certificate so surrendered. The
Common Securities shall be exchanged in a similar manner.
(d) In the event of an exchange pursuant to this Section 4.4,
on the date fixed for any such exchange, (i) if the Preferred Securities are
represented by Book-Entry Preferred Securities Certificates, the Clearing
Agency of its nominee, as the record Holder of the Preferred Securities, will
exchange through the Conversion Agent the Global Certificate representing the
Preferred Securities to be exchanged for a registered Global Certificate or
certificates representing the Debentures to be delivered upon such exchange,
(ii) if the Preferred Securities are represented by Definitive Preferred
Securities Certificates, the certificates representing the Preferred Securities
to be so exchanged will be deemed to represent Debentures having a principal
amount equal to the aggregate stated Liquidation Amount of such Preferred
Securities until such certificates are presented to the Conversion Agent for
exchange for
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definitive certificates representing Debentures and (iii) all rights of the
Holders of the Preferred Securities so exchanged will cease, except for the
right of such Holders to receive Debentures. The Common Securities shall be
exchanged in a similar manner
(e) Each Holder, by becoming a party to this Agreement
pursuant to Section 10.11 of this Agreement, will be deemed to have agreed to
be bound by these exchange provisions in regard to the exchange of Trust
Securities for Debentures pursuant to the terms described above.
(f) Nothing in this Section 4.4 shall limit the requirement
of the Trust to withhold taxes pursuant to the terms of the Trust Securities or
as set forth in this Agreement or otherwise require the Property Trustee or the
Trust to pay any amounts on account of such withholdings.
SECTION 4.5. Subordination of Common Securities. Payment of
Distributions (including Additional Amounts, if applicable) on, and the
Redemption Price of, the Trust Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of the Trust Securities; provided,
however, that if on any Distribution Date or Redemption Date an Event of
Default shall have occurred and be continuing, no payment of any Distribution
(including Additional Amounts, if applicable) on, or the Redemption Price of,
any Common Security, and no other payment on account of the redemption,
liquidation or other acquisition of Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions (including
Additional Amounts, if applicable) on all Outstanding Preferred Securities for
all Distribution periods terminating on or prior thereto, or in the case of
payment of the Redemption Price the full amount of such Redemption Price on all
Outstanding Preferred Securities, shall have been made or provided for, and all
funds immediately available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions (including Additional Amounts,
if applicable) on, or the Redemption Price of, Preferred Securities then due
and payable.
SECTION 4.6. Payment Procedures. Payments in respect of the
Preferred Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Preferred Securities are held by a Clearing Agency, such
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Distributions shall be made to the Clearing Agency in immediately available
funds, in accordance with the Certificate Depositary Agreement on the
applicable Distribution Dates. Payments in respect of the Common Securities
shall be made in such manner as shall be mutually agreed between the Property
Trustee and the Holder of the Common Securities.
SECTION 4.7. Tax Returns and Reports. The Regular Trustees
shall prepare (or cause to be prepared), at the Sponsor's expense, and file all
United States Federal, State and local tax and information returns and reports
required to be filed by or in respect of the Trust. In this regard, the
Regular Trustees shall (a) prepare and file (or cause to be prepared or filed)
Form 1041 or the appropriate Internal Revenue Service form required to be filed
in respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder a Form
1099 or the appropriate Internal Revenue Service form required to be furnished
to such Securityholder or the information required to be provided on such form.
The Regular Trustees shall provide the Sponsor and the Property Trustee with a
copy of all such returns, reports and schedules promptly after such filing or
furnishing. The Trustees shall comply with United States Federal withholding
and backup withholding tax laws and information reporting requirements with
respect to any payments to Securityholders under the Trust Securities.
SECTION 4.8. Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the Debentures of Additional Sums, the Property Trustee,
upon receipt of written notice from the Sponsor or the Regular Trustees, shall
promptly pay from such Additional Sums any taxes, duties or governmental
charges of whatsoever nature (other than withholding taxes) imposed on the
Trust by the United States or any other taxing authority.
SECTION 4.9. Payments under Indenture. Any amount payable
hereunder to any Holder of Preferred Securities (and any Owner with respect
thereto) shall be reduced by the amount of any corresponding payment such
Holder (or Owner) has directly received pursuant to Section 5.7 of the
Indenture in accordance with the terms of Section 6.8 hereof.
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ARTICLE 5
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership. Upon the formation of the
Trust and until the issuance of the Trust Securities, and at any time during
which no Trust Securities are Outstanding, the Sponsor shall be the sole
beneficial owner of the Trust.
SECTION 5.2. The Trust Securities Certificates. The
Preferred Securities Certificates shall be issued in minimum denominations of
$50 Liquidation Amount and integral multiples of $50 in excess thereof, and the
Common Securities Certificates shall be issued in denominations of $50
Liquidation Amount and integral multiples thereof. The consideration received
by the Trust for the issuance of the Trust Securities shall constitute a
contribution to the capital of the Trust and shall not constitute a loan to the
Trust. Initially the Preferred Securities will be represented by one or more
certificates in registered, global form (the "Global Certificate"). The Trust
Securities Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of at least one Regular Trustee and authenti- cated by the
Property Trustee. Trust Securities Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefit of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Section 5.4.
SECTION 5.3. Delivery of Trust Securities Certificates. On
the Closing Date, the Regular Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4
and 2.5, to be executed on behalf of the Trust and delivered to or upon the
written order of the Sponsor, signed by its Chairman of the Board, any Vice
Chairman, its President, any Senior Vice President or any Vice President,
Treasurer or Assistant
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Treasurer or Controller without further corporate action by the Sponsor, in
authorized denominations.
A Trust Security Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the
Property Trustee. The signature shall be conclusive evidence that the Trust
Security Certificate has been authenticated under this Trust Agreement. Upon a
written order of the Trust signed by one Regular Trustee, the Property Trustee
shall authenticate the Trust Security Certificates for original issue.
The Property Trustee may appoint an authenticating agent
acceptable to the Regular Trustees to authenticate Trust Security Certificates.
An authenticating agent may authenticate Trust Security Certificates whenever
the Property Trustee may do so. Each reference in this Trust Agreement to
authentication by the Property Trustee includes authentication by such agent.
An authenticating agent has the same rights as the Property Trustee to deal
with the Sponsor or an Affiliate with respect to the authentication of Trust
Securities.
SECTION 5.4. Registration of Transfer and Exchange of
Preferred Securities. The Securities Registrar shall keep or cause to be kept,
at the office or agency maintained pursuant to Section 5.8, a Securities
Register in which, subject to such reasonable regulations as it may prescribe,
the Securities Registrar shall provide for the registration of Preferred
Securities Certificates and Common Securities Certificates (subject to Section
5.10 in the case of the Common Securities Certificates) and registration of
transfers and exchanges of Preferred Securities Certificates as herein
provided. The Property Trustee shall be the initial Securities Registrar.
Upon surrender for registration of transfer of any Preferred
Security at an office or agency of the Sponsor designated pursuant to Section
5.8 for such purpose, the Sponsor shall execute, and the Property Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Preferred Securities of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Trust Agreement.
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At the option of the Holder, and subject to the other
provisions of this Section 5.4, Preferred Securities may be exchanged for other
Preferred Securities of any authorized denomination and of a like Liquidation
Amount, upon surrender of the Preferred Securities to be exchanged at any such
office or agency. Whenever any Preferred Securities are so surrendered for
exchange, the Sponsor shall execute, and the Property Trustee shall
authenticate and deliver, the Preferred Securities which the Holder making the
exchange is entitled to receive.
All Preferred Securities issued upon any registration of
transfer or exchange of Preferred Securities shall be the valid obligations of
the Sponsor, evidencing the same debt, and entitled to the same benefits under
this Trust Agreement, as the Securities surrendered upon such registration of
transfer or exchange.
Every Preferred Security presented or surrendered for
registration of transfer or for exchange shall (if so requested by the Sponsor
or the Securities Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Sponsor and the Securities
Registrar duly executed, by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of
transfer or exchange of Preferred Securities Certificates, but the Securities
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Preferred Securities Certificates.
SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates. If (a) any mutilated Trust Securities Certificate
shall be surrendered to the Securities Registrar, or if the Securities
Registrar shall receive evidence to its satisfaction of the destruction, loss
or theft of any Trust Securities Certificate and (b) there shall be delivered
to the Securities Registrar and the Regular Trustees such security or indemnity
as may be required by them to save each of them harmless, then in the absence
of notice that such Trust Securities Certificate shall have been acquired by a
bona fide purchaser, the Regular Trustees, or any one of them, on behalf of the
Trust shall execute and make available for authentication and delivery, in
exchange for or in lieu of any such mutilated,
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destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities
Certificate of like denomination. In connection with the issuance of any new
Trust Securities Certificate under this Section, the Securities Registrar may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicative Trust
Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an undivided beneficial interest in the assets of the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Securities Certificate shall be found at any time.
SECTION 5.6. Persons Deemed Securityholders. The Property
Trustee and the Securities Registrar shall treat the Person in whose name any
Trust Securities Certificate shall be registered in the Securities Register as
the owner of such Trust Securities Certificate for the purpose of receiving
Distributions and for all other purposes whatsoever, and neither the Property
Trustee nor the Securities Registrar shall be bound by any notice to the
contrary.
SECTION 5.7. Access to List of Securityholders' Names and
Addresses. The Regular Trustees or the Sponsor shall furnish or cause to be
furnished (unless the Property Trustee is acting as Securities Registrar with
respect to the Trust Securities under the Trust Agreement) a list, in such form
as the Property Trustee may reasonably require, of the names and addresses of
the Securityholders as of the most recent record date (a) to the Property
Trustee, quarterly at least 5 Business Days before each Distribution Date, and
(b) to the Property Trustee, promptly after receipt by the Sponsor of a request
therefor from the Property Trustee in order to enable the Property Trustee to
discharge its obligations under this Trust Agreement, in each case to the
extent such information is in the possession or control of the Regular Trustees
or the Sponsor and is not identical to a previously supplied list or has not
otherwise been received by the Property Trustee in its capacity as Securities
Registrar. The rights of Securityholders to communicate with other
Securityholders with respect to their rights under this Trust Agreement or
under the Trust Securities, and the corresponding rights of the Trustee shall
be as provided in the Trust Indenture Act, except to the extent Section 3819 of
the Delaware Business Trust Act would require greater access to such
information, in which case the latter shall apply. Each Holder, by receiving
and holding a
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Trust Securities Certificate, and each Owner shall be deemed to have agreed not
to hold the Sponsor, the Property Trustee or the Regular Trustees accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 5.8. Maintenance of Office or Agency. The Securities
Registrar shall maintain in The City of New York an office or offices or agency
or agencies where Preferred Securities Certificates may be surrendered for
registration of transfer, exchange or conversion and where notices and demands
to or upon the Trustees in respect of the Trust Securities Certificates may be
served. The Securities Registrar initially designates 101 Barclay Street,
Floor 21W, New York, New York 10286, Attention: _______________, as its
principal corporate trust office for such purposes. The Securities Registrar
shall give prompt written notice to the Sponsor and to the Securityholders of
any change in the location of the Securities Register or any such office or
agency.
SECTION 5.9. Appointment of Paying Agent. In the event that
the Preferred Securities are not in book-entry form only, the Trust shall
maintain in the Borough of Manhattan, City of New York, an office or agency
(the "Paying Agent") where the Preferred Securities may be presented for
payment. The Paying Agent shall make Distributions to Securityholders from the
Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Regular Trustees. Any Paying Agent shall have the
revocable power to withdraw funds from the Payment Account for the purpose of
making the Distributions referred to above. The Regular Trustees may revoke
such power and remove the Paying Agent if such Trustees determine in their sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Trust Agreement in any material respect. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee and acceptable to the Regular Trustees and the Sponsor. Any
Person acting as Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Property Trustee and the Sponsor. In the event
that the Property Trustee shall no longer be the Paying Agent or a successor
Paying Agent shall resign or its authority to act be revoked, the Regular
Trustees shall appoint a successor that is acceptable to the Property Trustee
and the Sponsor to act as Paying Agent (which shall
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be a bank or trust company). Each successor Paying Agent or any additional
Paying Agent shall agree with the Trustees that, as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to each
Securityholder. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to the Property Trustee. The
provisions of Sections 8.1, 8.3 and 8.6 shall apply to the Property Trustee
also in its role as Paying Agent, for so long as the Property Trustee shall act
as Paying Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
SECTION 5.10. Ownership of Common Securities by Sponsor. On
the Closing Date provided for in Section 2.5, the Sponsor shall acquire and
retain beneficial and record ownership of the Common Securities. To the
fullest extent permitted by law, any attempted transfer of the Common
Securities shall be void. The Regular Trustees shall cause each Common
Securities Certificate issued to the Sponsor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE".
SECTION 5.11. Global Securities; Non-Global Securities;
Common Securities Certificate. (a) Each Global Certificate authenticated
under this Trust Agreement shall be registered in the name of the Clearing
Agency designated by the Sponsor for such Global Certificate or a nominee
thereof and delivered to such Clearing Agency or a nominee thereof or custodian
therefor, and each such Global Certificate shall constitute a Preferred
Security for all purposes of this Trust Agreement.
(b) If a Global Certificate is to be exchanged for
Certificated Preferred Securities or canceled in whole, it shall be surrendered
by or on behalf of the Clearing Agency, its nominee or custodian to the
Property Trustee, as Securities Registrar, for exchange or cancellation as
provided in this Article 5. If any Global Certificate is to be exchanged for
Certificated Preferred Securities or cancelled in part, or if another Preferred
Security is to be exchanged in whole or in part for a beneficial interest in
any Global
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Certificate, in each case, as provided in Section 5.4, then either (i) such
Global Certificate shall be so surrendered for exchange or cancellation as
provided in this Article 5 or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or cancelled, or equal to the principal amount of such Certificated
Preferred Security to be so exchanged for a beneficial interest therein, as the
case may be, by means of an appropriate adjustment made on the records of the
Property Trustee, as Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency
or its authorized representative to make a corresponding adjustment to its
records. Upon any such surrender or adjustment of a Global Certificate, the
Property Trustee shall, subject to Section 5.4 and as otherwise provided in
this Article 5, authenticate and deliver any Preferred Securities issuable in
exchange for such Global Certificate (or any portion thereof) to or upon the
order of, and registered in such names as may be directed by, the Clearing
Agency or its authorized representative. Upon the request of the Property
Trustee in connection with the occurrence of any of the events specified in the
preceding paragraph, the Sponsor shall promptly make available to the Property
Trustee a reasonable supply of Preferred Securities that are not in the form of
Global Certificates. The Property Trustee shall be entitled to rely upon any
order, direction or request of the Clearing Agency or its authorized
representative which is given or made pursuant to this Article 5 if such order,
direction or request is given or made in accordance with the Applicable
Procedures.
(c) Every Preferred Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Certificate or any portion thereof, whether pursuant to this Article 5 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Certificate, unless such Preferred Security is registered in the name of
a Person other than the Clearing Agency for such Global Certificate or a
nominee thereof.
(d) The Clearing Agency or its nominee, as registered owner
of a Global Certificate, shall be the holder of such Global Certificate for all
purposes under the Trust Agreement and the Preferred Securities, and owners of
beneficial interests in a Global Certificate shall hold such
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interests pursuant to the Applicable Procedures. Accordingly, any such Owner's
beneficial interest in a Global Certificate will be shown only on, and the
transfer of such interest shall be effected only through, records maintained by
the Clearing Agency or its nominee or its participants and such owners of
beneficial interests in a Global Certificate will not be considered the owners
or holders of such Global Certificate for any purpose of this Trust Agreement
or the Preferred Securities.
(e) A single Common Securities Certificate representing the
Common Securities shall be issued to the Sponsor in the form of a definitive
Common Securities Certificate.
SECTION 5.12. Notices to Clearing Agency. To the extent that
a notice or other communication to the Owners is required under this Trust
Agreement, unless and until Definitive Preferred Securities Certificates shall
have been issued to Owners pursuant to Section 5.13, the Trustees shall give
all such notices and communications specified herein to be given to Owners to
the Clearing Agency, and shall have no obligations to provide notices directly
to the Owners.
SECTION 5.13. Definitive Preferred Securities Certificates.
Notwithstanding any other provision in this Trust Agreement other than as
provided for in Section 5.4(b)(vi), no Global Certificate may be exchanged in
whole or in part for Preferred Securities registered, and no transfer of a
Global Certificate in whole or in part may be registered, in the name of any
Person other than the Clearing Agency for such Global Certificate or a nominee
thereof unless (i) such Clearing Agency (A) has notified the Sponsor that it is
unwilling or unable to continue as Clearing Agency for such Global Certificate
or (B) has ceased to be a clearing agency registered as such under the
Securities Exchange Act of 1934, as amended, and in either case the Trust and
the Sponsor thereupon fails to appoint a successor Clearing Agency, (ii) the
Trust and the Sponsor, at their option, notify the Property Trustee in writing
that it elects to cause the issuance of the Preferred Securities in
certificated form or (iii) there shall have occurred and be continuing an Event
of Default or any event which after notice or lapse of time or both would be an
Event of Default. In all cases, Certificated Preferred Securities delivered in
exchange for any Global Certificate or beneficial interests therein will be
registered in the names, and
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issued in any approved denominations, requested by or on behalf of the Clearing
Agency (in accordance with its customary procedures).
SECTION 5.14. Rights of Securityholders. The legal title to
the Trust Property is vested exclusively in the Property Trustee (in its
capacity as such) in accordance with Section 2.9, and the Securityholders shall
not have any right or title therein other than the undivided beneficial
interest in the assets of the Trust conferred by their Trust Securities and
they shall have no right to call for any partition or division of property,
profits or rights of the Trust except as described below. The Trust Securities
shall be personal property giving only the rights specifically set forth
therein and in this Trust Agreement. The Trust Securities shall have no
preemptive or similar rights and, when issued and delivered to Securityholders
against payment of the purchase price therefor, will be fully paid and
nonassessable by the Trust. The Holders of the Trust Securities, in their
capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
ARTICLE 6
ACT OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights. (a) Except as
provided in this Section, in Section 8.9 and 10.2 and in the Indenture and as
otherwise required by law, no Holder of Preferred Securities shall have any
right to vote or in any manner otherwise control the administration, operation
and management of the Trust or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Trust Securities
Certificates, be construed so as to constitute the Securityholders from time to
time as partners or members of an association.
(b) Subject to Section 8.2 hereof, if an Event of Default
with respect to the Preferred Securities has occurred and been subsequently
cured, waived or otherwise eliminated, the provisions of Section 6.1(b)(ii)
hereof shall apply. During (x) the period commencing on the date of the
occurrence of an Event of Default with respect to the Preferred Securities and
ending on the date when such Event of Default is cured, waived or otherwise
eliminated, or (y)
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any period not described in either the preceding sentence or the preceding
clause (x), the provisions of Section 6.1(b)(i) shall apply.
(i) The holders of a majority in aggregate
liquidation amount of the Preferred Securities will have the right to
direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee or to exercise any trust or
power conferred upon the Property Trustee under the Trust Agreement,
including the right to direct the Property Trustee to exercise the
remedies available to it as a holder of the Debentures but excluding
the right to direct the Property Trustee to consent to an amendment,
modification or termination of the Indenture (which shall be as
provided below). So long as any Debentures are held by the Property
Trustee, the Trustees shall not (A) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Debenture
Trustee with respect to such Debentures, (B) waive any past default
which is waivable under Section 5.10 of the Indenture, (C) exercise
any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (D) consent to any
amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the Holders of a majority in
aggregate Liquidation Amount of all Outstanding Preferred Securities
(except in the case of clause (D), which consent, in the event that no
Event of Default shall occur and be continuing, shall be of the
Holders of all Trust Securities, voting together as a single class);
provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior
written consent of each Holder of Preferred Securities. The Trustees
shall not revoke any action previously authorized or approved by a
vote of the Holders of the Preferred Securities, except by a
subsequent vote of the Holders of the Preferred Securities. The
Property Trustee shall notify all Holders of record of the Preferred
Securities of any notice of default received from the Debenture
Trustee with respect to the Debentures. In addition to obtaining the
foregoing approv-
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als of the Holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Trustees shall, at the expense of the
Sponsor, obtain an Opinion of Counsel experienced in such matters to
the effect that the Trust will not be classified as an association
taxable as a corporation or partnership for United States Federal
income tax purposes on account of such action.
(ii) Subject to Section 8.2 of this Trust Agreement
and only after the Event of Default with respect to the Preferred
Securities has been cured, waived, or otherwise eliminated the holders
of a majority in aggregate liquidation amount of the Common Securities
will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee or to
exercise any trust or power conferred upon the Property Trustee under
the Trust Agreement, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the
Debentures but excluding the right to direct the Property Trustee to
consent to an amendment, modification or termination of the Indenture
(which shall be as provided below). So long as any Debentures are
held by the Property Trustee, the Trustees shall not (A) direct the
time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee, or executing any trust or power
conferred on the Debenture Trustee with respect to such Debentures,
(B) waive any past default which is waivable under Section 5.10 of the
Indenture, (C) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable or
(D) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the Holders of
a majority in aggregate Liquidation Amount of all Common Securities
(except in the case of clause (D), which consent, in the event that no
Event of Default shall occur and be continuing, shall be of the
Holders of all Trust Securities, voting together as a single class);
provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior
written consent of each Holder of Common Securi-
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ties. The Trustees shall not revoke any action previously authorized
or approved by a vote of the Holders of the Common Securities, except
by a subsequent vote of the Holders of the Common Securities. The
Property Trustee shall notify all Holders of record of the Common
Securities of any notice of default received from the Debenture Trustee
with respect to the Debentures. In addition to obtaining the foregoing
approvals of the Holders of the Common Securities, prior to taking any
of the foregoing actions, the Trustees shall, at the expense of the
Sponsor, obtain an Opinion of Counsel experienced in such matters to
the effect that the Trust will not be classified as an association
taxable as a corporation or partnership for United States Federal
income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides
for, or the Trustees otherwise propose to effect the dissolution, winding-up or
termination of the Trust, other than pursuant to the terms of this Trust
Agreement, then the Holders of Outstanding Preferred Securities as a class will
be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of the Holders of a
majority in aggregate Liquidation Amount of the Outstanding Preferred
Securities.
SECTION 6.2. Notice of Meetings. Notice of all meetings of
the Holders of the Preferred Securities, stating the time, place and purpose of
the meeting, shall be given by the Property Trustee pursuant to Section 10.8 to
each Preferred Securityholder of record, at its registered address, at least 15
days and not more than 90 days before the meeting. At any such meeting, any
business properly before the meeting may be so considered whether or not stated
in the notice of the meeting. Any adjourned meeting may be held as adjourned
without further notice.
SECTION 6.3. Meetings of Preferred Securityholders. No
annual meeting of Securityholders is required to be held. The Regular
Trustees, however, shall call a meeting of Securityholders to vote on any
matter upon the written request of the Preferred Securityholders of record of
25% of the Preferred Securities (based upon their Liquidation Amount) and the
Regular Trustees or the Property Trustee may, at any time in their discretion,
call a meeting
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of the Holders of Preferred Securities to vote on any matters as to which such
Holders are entitled to vote.
Holders of record of 50% of the Preferred Securities (based
upon their Liquidation Amount), present in person or by proxy, shall constitute
a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by
the Holders of record of Preferred Securities present, in person or by proxy,
holding more than a majority of the Preferred Securities (based upon their
Liquidation Amount) held by Holders of record of Preferred Securities present,
either in person or by proxy, at such meeting shall constitute the action of
the Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
SECTION 6.4. Voting Rights. Securityholders shall be
entitled to one vote for each $50 of Liquidation Amount represented by their
Trust Securities in respect of any matter as to which such Securityholders are
entitled to vote. Notwithstanding that holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned at such time by the Sponsor, the
Trustees or any affiliate of any Trustee shall, for purposes of such vote or
consent, be treated as if such Preferred Securities were not outstanding.
SECTION 6.5. Proxies, Etc. At any meeting of
Securityholders, any Securityholders entitled to vote thereat may vote by
proxy, provided that no proxy shall be voted at any meeting unless it shall
have been placed on file with the Regular Trustees, or with such other officer
or agent of the Trust as the Regular Trustees may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to a resolution
of the Property Trustee, proxies may be solicited in the name of the Property
Trustee or one or more officers of the Property Trustee. Only Securityholders
of record shall be entitled to vote. When Trust Securities are held jointly by
several Persons, any one of them may vote at any meeting in person or
represented by proxy in respect of such Trust Securities, but if more than one
of them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such
vote shall not
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be received in respect of such Trust Securities. A proxy purporting to be
executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 6.6. Securityholder Action by Written Consent. Any
action which may be taken by Securityholders at a meeting may be taken without
a meeting if Securityholders holding more than a majority of all Outstanding
Trust Securities (based upon their Liquidation Amount) entitled to vote in
respect of such action (or such larger proportion thereof as shall be required
by any express provision of this Trust Agreement) shall consent to the action
in writing.
SECTION 6.7. Record Date for Voting and Other Purposes. For
the purposes of determining the Securityholders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
Distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Property Trustee may from time to time fix a date, not more than 90
days prior to the date of any meeting of Securityholders or the payment of
Distributions or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
SECTION 6.8. Acts of Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
or Owners may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders or Owners in person
or by an agent duly appointed in writing; and, except as otherwise expressly
provided herein, such action shall become effective when such instrument or
instruments are delivered to a Regular Trustee. Such instrument or instruments
(and the action embodied therein and evidence thereby) are herein sometimes
referred to as the "Act" of the Securityholders or Owners signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Trust Agreement and (subject to Section 8.1) conclusive in favor
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of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, 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 manner which any Trustee receiving the same deems sufficient.
The ownership of Preferred Securities shall be proved by the
Securities Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustees or the Trust in reliance
thereon, whether or not notation of such action is made upon such Trust
Security.
Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Amount of
such Trust Security or by one or more duly appointed agents each of which may
do so pursuant to such appointment with regard to all or any part of such
Liquidation Amount.
If any dispute shall arise between the Securityholders and the
Regular Trustees or among such Securityholders or Trustees with respect to the
authenticity, validity or binding nature of any request, demand, authorization,
direction, consent, waiver or other Act of such Securityholder or Trustee under
this Article 6, then
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the determination of such matter by the Property Trustee shall be conclusive
with respect to such matter.
Upon the occurrence and continuation of an Event of Default,
the holders of Preferred Securities shall rely on the enforcement by the
Property Trustee of its rights as holder of the Debentures against the Sponsor.
If the Property Trustee fails to enforce its rights as holder of the Debentures
after a request therefor by a holder of Preferred Securities, such holder may
proceed to enforce such rights directly against the Sponsor. Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing and such
event is attributable to the failure of the Sponsor to pay interest or
principal on the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the Redemption Date), then a holder
of Preferred Securities shall have the right to institute a proceeding directly
against the Sponsor, for enforcement of payment to such holder of the principal
amount of or interest on Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of such holder after
the respective due date specified in the Debentures (a "Direct Action"). In
connection with any such Direct Action, the rights of the Sponsor will be
subrogated to the rights of any holder of the Preferred Securities to the
extent of any payment made by the Sponsor to such holder of Preferred
Securities as a result of such Direct Action.
A Securityholder may institute a legal proceeding directly
against the Sponsor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee (as defined in the Guarantee), the Trust or any Person or entity.
SECTION 6.9. Inspection of Records. Upon reasonable
notice to the Regular Trustees and the Property Trustee, the records of the
Trust shall be open to inspection by Securityholders during normal business
hours for any purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property
Trustee and the Delaware Trustee. The Property Trustee and the Delaware
Trustee, each severally on behalf of and as to itself, hereby represents and
warrants for the benefit of the Sponsor and the Securityholders that (each such
representation and warranty made by the Property Trustee and the Delaware
Trustee being made only with respect to itself):
(a) the Property Trustee is a banking corporation duly
organized, validly existing and in good standing under the laws of the State of
New York;
(b) the Delaware Trustee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(c) each of the Property Trustee and the Delaware Trustee has
full corporate power, authority and legal right to execute, deliver and perform
its obligations under this Trust Agreement and has taken all necessary action
to authorize the execution, delivery and performance by it of this Trust
Agreement;
(d) this Trust Agreement has been duly authorized, executed
and delivered by each of the Property Trustee and the Delaware Trustee and
constitutes the valid and legally binding agreement of the Property Trustee and
the Delaware Trustee enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(e) the execution, delivery and performance by each of the
Property Trustee and the Delaware Trustee of this Trust Agreement have been
duly authorized by all necessary corporate or other action on the part of the
Property Trustee and the Delaware Trustee and does not require any approval of
stockholders of the Property Trustee or the Delaware Trustee and such
execution, delivery and performance will not (i) violate either of the Property
Trustee's or the Delaware Trustee's charter or by-laws, (ii) violate any
provision of, or constitute, with or without notice or
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lapse of time, a default under, or result in the creation or imposition of any
Lien on any properties included in the Trust Property pursuant to the
provisions of, any indenture, mortgage, credit agreement, license or other
agreement or instrument to which the Property Trustee or the Delaware Trustee
is a party or by which it is bound, or (iii) violate any law, governmental rule
or regulation of the United States or the State of Delaware, as the case may
be, governing the banking, corporate, or trust powers of the Property Trustee
or the Delaware Trustee (as appropriate in context) or any order, judgment or
decree applicable to the Property Trustee or the Delaware Trustee;
(f) neither the authorization, execution or delivery by the
Property Trustee or the Delaware Trustee of this Trust Agreement nor the
consummation of any of the transactions by the Property Trustee or the Delaware
Trustee (as appropriate in context) contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to, any governmental authority or
agency under any existing Federal law governing the banking, corporate or trust
powers of the Property Trustee or the Delaware Trustee, as the case may be,
under the laws of the United States or the State of Delaware;
(g) there are no proceedings pending or, to the best of each
of the Property Trustee's and the Delaware Trustee's knowledge, threatened
against or affecting the Property Trustee or the Delaware Trustee in any court
or before any governmental authority, agency or arbitration board or tribunal
which, individually or in the aggregate, would materially and adversely affect
the Trust or would question the right, power and authority of the Property
Trustee or the Delaware Trustee, as the case may be, to enter into or perform
its obligations as one of the Trustees under this Trust Agreement.
SECTION 7.2. Representations and Warranties of Sponsor. The
Sponsor hereby represents and warrants for the benefit of the Securityholders
that:
(a) the Trust Securities Certificates issued on the Closing
Date on behalf of the Trust have been duly authorized and will have been duly
and validly executed, issued and delivered by the Trustees pursuant to the
terms and provisions of, and in accordance with the requirements
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of, this Trust Agreement and the Securityholders will be, as of such date,
entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Trust (or the Trustees on behalf of the Trust) under the laws of
the State of Delaware or any political subdivision thereof in connection with
the execution, delivery and performance by the Property Trustee or the Delaware
Trustee, as the case may be, of this Trust Agreement.
ARTICLE 8
THE TRUSTEES
SECTION 8.1. Certain Duties and Responsibilities. (a) The
duties and responsibilities of the Trustees shall be as provided by this Trust
Agreement and, in the case of the Property Trustee, by the Trust Indenture Act.
The Property Trustee, before the occurrence of any Event of Default and after
the curing or waiving of all Events of Default that may have occurred, shall
undertake to perform only such duties and obligations as are specifically set
forth in this Trust Agreement and the Trust Indenture Act and no implied
covenants shall be read into this Trust Agreement against the Property Trustee.
In case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 8.2) of which a responsible officer of the Property Trustee
has actual knowledge, the Property Trustee shall exercise such rights and
powers vested in it by this Trust Agreement and the Trust Indenture Act, and
use the same degree of care and skill in its exercise, as a prudent individual
would exercise or use under the circumstances in the conduct of his or her own
affairs. Notwithstanding the foregoing, no provision of this Trust Agreement
shall require the Trustees to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder, or
in the exercise of any of their rights or powers, if they shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this Trust Agreement relating
to the conduct or affecting the liability of or affording protection to the
Trustees shall be subject to the provisions of this Section. Nothing in this
Trust Agreement
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shall be construed to release the Regular Trustees from liability for their own
grossly negligent action, their own grossly negligent failure to act, or their
own willful misconduct. To the extent that, at law or in equity, a Regular
Trustee has duties (including fiduciary duties) and liabilities relating
thereto to the Trust or to the Securityholders, such Regular Trustee shall not
be liable to the Trust or to any Securityholder for such Regular Trustee's good
faith reliance on the provisions of this Trust Agreement. The provisions of
this Trust Agreement, to the extent that they restrict the duties and
liabilities of the Regular Trustees otherwise existing at law or in equity, are
agreed by the Sponsor and the Securityholders to replace such other duties and
liabilities of the Regular Trustees.
(b) All payments made by the Property Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from the revenue
and proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in
respect of any Trust Security or for any other liability in respect of any
Trust Security. This Section 8.1(b) does not limit the liability of the
Trustees expressly set forth elsewhere in this Trust Agreement or, in the case
of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed
to relieve the Property Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property 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
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the Holders of a majority Liquidation Amount of the Trust Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this Trust
Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such property as fiduciary
assets, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) The Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Sponsor and money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Payment Account maintained by the Property Trustee pursuant to Section
3.1 and except to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Trust Agreement, nor shall the
Property Trustee be liable for the default or misconduct of the
Regular Trustees or the Sponsor.
SECTION 8.2. Notice of Defaults. (a) Within ten days after
the occurrence of any Event of Default actually known to the Property Trustee,
the Property Trustee shall transmit, in the manner and to the extent provided
in Section 10.8, notice of such Event of Default to the holders of Preferred
Securities, the Regular Trustees and the Sponsor, unless such Event of Default
shall have been cured or waived, provided that, except for a default in the
payment of principal of (or premium, if any) or interest on any of the
Debentures, the Property 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 Property Trustee in
good faith determines that the withholding of such notice is in the interests
of the Holders of the Preferred Securities.
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(b) Within ten days after the receipt of notice of the
Sponsor's exercise of its right to extend the interest payment period for the
Debentures pursuant to the Indenture, the Property Trustee shall transmit, in
the manner and to the extent provided in Section 10.8, notice of such exercise
to the Securityholders, unless such exercise shall have been revoked.
(c) The Holders of a majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Debenture Event of Default:
(i) is not waivable under the Indenture, the
Event of Default under the Trust Agreement shall also not be waivable;
or
(ii) requires the consent or vote of greater than
a majority in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the Event of
Default under the Trust Agreement may only be waived by the vote of
the Holders of the same proportion in liquidation amount of the
Preferred Securities that the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding.
The provisions of Section 6.1(b) and this Section 8.2(c) shall
be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Trust Agreement and the Preferred Securities, as permitted by the Trust
Indenture Act. Upon such waiver, any such default shall cease to exist, and
any Event of Default with respect to the Preferred Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Trust Agreement,
but no such waiver shall extend to any subsequent or other default or an Event
of Default with respect to the Preferred Securities or impair any right
consequent thereon. Any waiver by the Holders of the Preferred Securities of
an Event of Default with respect to the Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common Securities for all purposes of
this
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Trust Agreement without any further act, vote, or consent of the Holders of the
Common Securities.
(d) The Holders of a majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Debenture
Event of Default:
(i) is not waivable under the Indenture, except
where the Holders of the Common Securities are deemed to have waived
such Event of Default under the Trust Agreement as provided below in
this Section 8.2(d), the Event of Default under the Trust Agreement
shall also not be waivable; or
(ii) requires the consent or vote of a Super
Majority to be waived, except where the Holders of the Common
Securities are deemed to have waived such Event of Default under the
Trust Agreement as provided below in this Section 8.2(d), the Event of
Default under the Trust Agreement may only be waived by the vote of
the Holders of the same proportion in liquidation amount of the Common
Securities that the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated,
and until such Events of Default have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf
of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The provisions of Section 6.1(b)
and this Section 8.2(d) shall be in lieu of Section 316(a)(1)(B) of the Trust
Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is
hereby expressly excluded from this Trust Agreement and the Preferred
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 8.2(d), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the
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Common Securities arising therefrom shall be deemed to have been cured for
every purpose of this Trust Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(e) A waiver of an Event of Default under the Indenture by
the Property Trustee at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of Default under
this Trust Agreement. The foregoing provisions of this Section 8.2(e) shall be
in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Trust Agreement and the Preferred Securities, as permitted by the Trust
Indenture Act.
SECTION 8.3. Certain Rights of Property Trustee. Subject to
the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness 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) if no Event of Default has occurred and is continuing
and, (i) in performing its duties under this Trust Agreement the Property
Trustee is required to decide between alternative courses of action or (ii) in
construing any of the provisions in this Trust Agreement the Property Trustee
finds the same ambiguous or inconsistent with any other provisions contained
herein or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which
the Holders of Preferred Securities are entitled to vote under the terms of
this Trust Agreement, the Property Trustee shall deliver a notice to the
Sponsor requesting written instructions of the Sponsor as to the course of
action to be taken and the Property Trustee shall take such action, or refrain
from taking such action, as the Property Trustee shall be instructed in writing
to take, or to refrain from taking, by the Sponsor; provided, however, that
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if the Property Trustee does not receive such instructions of the Sponsor
within ten Business Days after it has delivered such notice, or such reasonably
shorter period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but shall be
under no duty to, take or refrain from taking such action not inconsistent with
this Trust Agreement as it shall deem advisable and in the best interests of
the Securityholders, in which event the Property Trustee shall have no
liability except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement,
the Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officers'
Certificate and an Opinion of Counsel which, upon receipt of such request,
shall be promptly delivered by the Sponsor or the Regular Trustees;
(e) the Property Trustee shall have no duty to accomplish any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel (which
counsel may be counsel to the Sponsor or any of its Affiliates, and may include
any of its employees) 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 and in accordance with such advice; and the Property Trustee shall have
the right at any time to seek instructions concerning the administration of
this Trust Agreement from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust Agreement at
the request or direction of any
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of the Securityholders pursuant to this Trust Agreement, unless such
Securityholders shall have offered to the Property Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolutions, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other
paper or document, unless requested in writing to do so by Holders of record of
25% or more of the Preferred Securities (based upon their Liquidation Amount),
but the Property Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys or an Affiliate, provided that the Property
Trustee shall be responsible for its own negligence or recklessness with
respect to selection of any agent or attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement
the Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder,
the Property Trustee (i) may request instructions from the Holders of the Trust
Securities, which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be entitled
to direct the Property Trustee under the terms of the Trust Securities in
respect of such remedy, right or action, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with such
instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Trust Agreement.
No provision of this Trust Agreement shall be deemed to impose
any duty or obligation on the Property
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Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which it shall be
illegal, or in which the Property Trustee shall be unqualified or incompetent
in accordance with applicable law, to perform any such act or acts, or to
exercise any such right, power, duty or obligation. No permissive power or
authority available to the Property Trustee shall be construed to be a duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Trust Securities
Certificates shall not be taken as the statements of the Trustees, and the
Trustees do not assume any responsibility for their correctness. The Trustees
shall not be accountable for the use or application by the Sponsor of the
proceeds of the Debentures.
SECTION 8.5. May Hold Securities. Except as provided in the
definition of the term "Outstanding" in Article 1, any Trustee or any other
agent of any Trustee or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, subject to Section 8.8 and
8.12, may otherwise deal with the Trust with the same rights it would have if
it were not a Trustee or such other agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Sponsor agrees:
(a) to pay the Trustees from time to time such compensation
as the parties shall agree in writing from time to time for all services
rendered by them hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses, disbursements
and advances incurred or made by the Trustees in accordance with any provision
of this Trust 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 or bad faith;
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(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Trustee, (ii) any Affiliate of any
Trustee, (iii) any officer, director, shareholder, employee, representative or
agent of any Trustee, and (iv) any employee or agent of the Trust or its
Affiliates (referred to herein as an "Indemnified Person") from and against any
loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust Agreement, except
that no Indemnified Person shall be entitled to be indemnified in respect of
any loss, damage or claim incurred by such Indemnified Person by reason of
negligence or willful misconduct with respect to such acts or omissions; and
(d) no Trustee may claim any lien or charge on any Trust
Property as a result of any amount due pursuant to this Section 8.6.
SECTION 8.7. Property Trustee Required; Eligibility of
Trustees. (a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that
is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Property Trustee with
respect to the Trust Securities shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
(b) There shall at all times be one or more Regular Trustees
hereunder with respect to the Trust Securities. Each Regular Trustee shall be
either a natural person who is at least 21 years of age or a legal entity that
shall
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act through one or more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be (i) a
natural person who is at least 21 years of age and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware and that otherwise meets the requirements of applicable
Delaware law that shall act through one or more persons authorized to bind such
entity.
SECTION 8.8. Conflicting Interests. If the Property Trustee
has or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Trust Agreement.
SECTION 8.9. Resignation and Removal; Appointment of
Successor. (a) Subject to Sections 8.9(b) and 8.9(c), Trustees (the "Relevant
Trustee") may be appointed or removed without cause at any time:
(i) until the issuance of any Trust Securities,
by written instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote
of the Holders of a majority in liquidation amount of the Common
Securities voting as a class.
(b) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 8.9(a) until a successor possessing the
qualifications to act as a Property Trustee under Section 8.7 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
instrument executed by such Successor Property Trustee and delivered to the
Trust, the Sponsor and the removed Property Trustee.
(c) The Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 8.9(a) until a successor possessing the
qualifications to act as Delaware Trustee under Section 8.7 (a "Successor
Delaware Trustee") has been appointed and has accepted such appointment by
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instrument executed by such Successor Delaware Trustee and delivered to the
Trust, the Sponsor and the removed Delaware Trustee.
(d) A Trustee appointed to office shall hold office until
his, her or its successor shall have been appointed or until his, her or its
death, removal, resignation, dissolution or liquidation. Any Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing signed by the Trustee and delivered to the Sponsor and
the Trust, which resignation shall take effect upon such delivery or upon such
later date as is specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts
as the Property Trustee shall be effective:
(1) until a Successor Property Trustee
has been appointed and has accepted such appointment
by instrument executed by such Successor Property
Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(2) until the assets of the Trust have
been completely liquidated and the proceeds thereof
distributed to the holders of the Securities; and
(ii) no such resignation of the Trustee that acts
as the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by
instrument executed by such Successor Delaware Trustee and delivered
to the Trust, the Sponsor and the resigning Delaware Trustee.
(e) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be, if the Property Trustee or the Delaware Trustee
delivers an instrument of resignation in accordance with Section 8.9(d).
(f) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 8.9 within 60 days after delivery pursuant to this Section 8.9 of an
instrument
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of resignation or removal, the Property Trustee or Delaware Trustee resigning
or being removed, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(h) The Property Trustee shall give notice of each
resignation and each removal of a Trustee and each appointment of a successor
Trustee to all Securityholders in the manner provided in Section 10.8 and shall
give notice to the Sponsor. Each notice shall include the name of the
successor Relevant Trustee and the address of its Corporate Trust Office if it
is the Property Trustee.
(i) Notwithstanding the foregoing or any other provision of
this Trust Agreement, in the event any Regular Trustee or a Delaware Trustee
who is a natural person dies or becomes, in the opinion of the Sponsor,
incompetent or incapacitated, the vacancy created by such death, incompetence
or incapacity may be filled by (a) the unanimous act of the remaining Regular
Trustees if there are at least two of them or (b) otherwise by the Sponsor
(with the successor in each case being a Person who satisfies the eligibility
requirement for Regular Trustees or the Delaware Trustee, as the case may be,
set forth in Section 8.7).
(j) The indemnity provided to a Trustee under Section 8.6
shall survive any Trustee's resignation or removal.
SECTION 8.10. Acceptance of Appointment by Successor. In
case of the appointment hereunder of a successor Trustee, such successor
Trustee so appointed shall execute, acknowledge and deliver to the Trust and to
the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee; but, on the request of the
Sponsor or the successor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
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with all the rights, powers, trusts and duties of the retiring Trustee; but, on
the request of the Sponsor or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and if the Property Trustee is the resigning Trustee shall
duly assign, transfer and deliver to the successor Trustee all property and
money held by such retiring Property Trustee hereunder.
In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee
shall execute and deliver an amendment hereto wherein each successor Relevant
Trustee shall accept such appointment and which (a) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and
to vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee and (b) shall add to or change any of
the provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Relevant
Trustee, it being understood that nothing herein or in such amendment shall
constitute such Relevant Trustees co-trustees and upon the execution and
delivery of such amendment the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee; but, on request of the Trust or any successor Relevant
Trustee, such retiring Relevant Trustee shall duly assign, transfer and deliver
to such successor Relevant Trustee all Trust Property, all proceeds thereof and
money held by such retiring Relevant Trustee hereunder.
Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article.
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SECTION 8.11. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Property Trustee, the Delaware
Trustee or any Regular Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Relevant Trustee
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 8.12. Preferential Collection of Claims Against
Sponsor or Trust. If and when the Property Trustee shall be or become a
creditor of the Sponsor or the Trust (or any other obligor upon the Debentures
or the Trust Securities), the Property Trustee shall be subject to and shall
take all actions necessary in order to comply with the provisions of the Trust
Indenture Act regarding the collection of claims against the Sponsor or Trust
(or any such other obligor).
SECTION 8.13. Reports by Property Trustee. (a) To the
extent required by the Trust Indenture Act, within 60 days after December 31 of
each year commencing with __________, 1997 the Property Trustee shall transmit
to all Securityholders in accordance with Section 10.8 and to the Sponsor, a
brief report dated as of such December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if
to the best of its knowledge it has continued to be eligible under
said Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with
all of its obligations under this Trust Agreement during the
twelve-month period (or, in the case of the initial report, the period
since the Closing Date) ending with such December 31 or, if the
Property Trustee has not complied in any material respects with such
obligations, a description of such noncompliance; and
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(iii) any change in the property and funds in its possession
as Property Trustee since the date of its last report and any action
taken by the Property Trustee in the performance of its duties
hereunder which it has not previously reported and which in its
opinion materially affects the Trust Securities.
(b) In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of such report shall, at the time of such
transmissions to Holders, be filed by the Property Trustee with each national
securities exchange or self-regulatory organization upon which the Trust
Securities are listed, with the Commission and with the Sponsor.
SECTION 8.14. Reports to the Property Trustee. The Sponsor
and the Regular Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 8.15. Evidence of Compliance with Conditions
Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.16. Number of Trustees. (a) The number of Trustees
shall be four, provided that the Holder of all of the Common Securities by
written instrument may increase or decrease the number of Regular Trustees.
The Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Regular Trustees is not reduced
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pursuant to Section 8.16(a), or if the number of Trustees is increased pursuant
to Section 8.16(a), a vacancy shall occur.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall
occur, until such vacancy is filled by the appointment of a Regular Trustee in
accordance with Section 8.9, the Regular Trustees in office, regardless of
their number (and notwithstanding any other provision of this Agreement), shall
have all the powers granted to the Regular Trustees and shall discharge all the
duties imposed upon the Regular Trustees by this Trust Agreement.
SECTION 8.17. Delegation of Power. (a) Any Regular Trustee
may, by power of attorney consistent with applicable law, delegate to any other
natural person over the age of 21 his or her power for the purpose of executing
any documents contemplated in Section 2.7(a), including any registration
statement or amendment thereof filed with the Commission, or making any other
governmental filing.
(b) The Regular Trustees shall have power to delegate from
time to time to such of their number or to the Sponsor the doing of such things
and the execution of such instruments either in the name of the Trust or the
names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
ARTICLE 9
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.1. Termination upon Expiration Date. Unless
earlier terminated, the Trust shall automatically terminate on _________, ____
(the "Expiration Date"), following the distribution of the Trust Property in
accordance with Section 9.4.
SECTION 9.2. Early Termination. The first to occur of any of
the following events is an "Early Termination Event":
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(a) the occurrence of a Bankruptcy Event in respect of, or
the dissolution or liquidation of, the Sponsor;
(b) the occurrence of a Special Event except in the case of a
Tax Event following which the Sponsor has elected (i) to pay any Additional
Sums (in accordance with Section 4.4) such that the net amount received by
Holders of Preferred Securities in respect of Distributions are not reduced as
a result of such Tax Event and the Sponsor has not revoked any such election or
failed to make such payments or (ii) to redeem all or some of the Debentures
pursuant to Section 4.4(a);
(c) the redemption, conversion or exchange of all of the
Trust Securities;
(d) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction and
(e) receipt by the Property Trustee of written notice from
the Sponsor at any time (which direction is optional and wholly within the
discretion of the Sponsor) of its intention to terminate the Trust and
distribute the Debentures in exchange for the Preferred Securities.
SECTION 9.3. Termination. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the
distribution by the Property Trustee to Securityholders upon the liquidation of
the Trust pursuant to Section 9.4, or upon the redemption of all of the Trust
Securities pursuant to Section 4.2, of all amounts required to be distributed
hereunder upon the final payment of the Trust Securities; (b) the payment of
all expenses owed by the Trust; and (c) the discharge of all administrative
duties of the Regular Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
SECTION 9.4. Liquidation. (a) If an Early Termination Event
specified in clause (a), (b), (d) or (e) of Section 9.2 occurs or upon the
Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously
as the Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to each
Securityholder an aggregate principal amount of Debentures equal to the
aggregate
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Liquidation Amount of Trust Securities held by such Holder, subject to Section
9.4(d). Notice of liquidation shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not later than 30 nor more than 60
days prior to the Liquidation Date to each Holder of Trust Securities at such
Holder's address as it appears in the Securities Register. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that, from and after the Liquidation Date, the
Trust Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange will be
deemed to represent an aggregate principal amount of Debentures equal
to the aggregate Liquidation Amount of Preferred Securities held by
such Holder; and
(iii) provide such information with respect to the mechanics
by which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 9.4(d) applies, receive a Liquidation
Distribution, as the Regular Trustees or the Property Trustee shall
deem appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order
to effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) the Clearing Agency or its nominee, as the record holder of
such Trust Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such distribution
and (iii) any Trust Securities Certificates not held by the Clearing Agency
will be deemed to represent an aggregate principal amount of Debentures equal
to the aggregate Liquidation Amount of Preferred Securities held by such
Holders, and bearing accrued and
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unpaid interest in an amount equal to the accrued and unpaid Distributions on
such Trust Securities until such certificates are presented to the Property
Trustee for transfer or reissuance.
(d) In the event that, notwithstanding the other provisions
of this Section 9.4, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Debentures in
the manner provided herein is determined by the Property Trustee not to be
practicable, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as
the Property Trustee determines. In such event, on the date of the
dissolution, winding up or other termination of the Trust, Securityholders will
be entitled to receive out of the assets of the Trust available for
distribution to Securityho- lders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
Liquidation Amount per Trust Security plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding-up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts
payable by the Trust on the Trust Securities shall be paid on a pro rata basis
(based upon Liquidation Amounts). The Holder of the Common Securities will be
entitled to receive Liquidation Distributions upon any such dissolution,
winding-up or termination pro rata (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities.
SECTION 9.5. Mergers, Consolidations, Amalgamations or
Replacements of the Trust. The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other body, except
pursuant to this Section 9.5. At the request of the Sponsor, with the consent
of the Regular Trustees and without the consent of the Property Trustee, the
Delaware Trustee or the Holders of the Preferred Securities, the Trust may
merge with or into, consolidate, amalgamate, be replaced by or convey, transfer
or lease its properties
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and assets substantially as an entirety to a trust organized as such under the
laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to Distributions and
payments upon liquidation, redemption and otherwise, (ii) the Sponsor expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, if any, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease the
Sponsor has received an Opinion of Counsel to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the Holders of
the Preferred Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the Holder's interest in
the new entity), (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease neither the Trust nor such successor
entity will be required to register as an investment company under the 1940
Act, and (c) following such merger, consolidation, amalgamation or replacement,
the Trust or such successor entity will be treated as a grantor trust for
United States Federal income tax purposes and (viii) the Sponsor or any
permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the
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Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the
consent of Holders of 100% in aggregate Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge with or into, be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause
the Trust or the successor entity to be classified as other than a grantor
trust for United States Federal income tax purposes.
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Securityholders. The
death or incapacity of any person having an interest, beneficial or otherwise,
in Trust Securities shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives or heirs of such person or any Securityholder
for such person to claim an accounting, take any action or bring any proceeding
in any court for a partition or winding-up of the arrangements contemplated
hereby, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
SECTION 10.2. Amendment. (a) This Trust Agreement may be
amended from time to time by the Trustees and the Sponsor, without the consent
of any Securityholders, (i) to cure any ambiguity, correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Trust Agreement, which shall not be inconsistent with the other provisions
of this Trust Agreement, (ii) to modify, eliminate or add to any provisions of
this Trust Agreement to such extent as shall be necessary to ensure that the
Trust will be classified for United States Federal income tax purposes as a
grantor trust at all times that any Trust Securities are Outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the 1940 Act, or be classified as other than a grantor trust for
United States Federal income tax purposes, or (iii) to comply with the
requirements of the Commission in order to maintain the qualification of this
Trust Agreement under the Trust Inden-
76
<PAGE> 86
ture Act; provided, however, that in the case of clause (i), such action shall
not adversely affect in any material respect the interests of any
Securityholder, and any amendments of this Trust Agreement shall become
effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.2(c) hereof, any
provision of this Trust Agreement may be amended by the Trustees and the
Sponsor with (i) the consent of Holders representing not less than a majority
(based upon Liquidation Amounts) of the Trust Securities then Outstanding,
acting as a single class, and (ii) receipt by the Trustees of an Opinion of
Counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect the Trustee's
status as a grantor trust for United States Federal income tax purposes or the
Trust's exemption from the status of an "investment company" under the 1940
Act, provided, however, if any amendment or proposal that would adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment or otherwise, would adversely affect only the
Preferred Securities or only the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Trust Securities.
(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.3 or 6.6 hereof), this
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount
of any Distribution required to be made in respect of the Trust Securities as
of a specified date or (ii) restrict the right of a Securityholder to institute
suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of
the Securityholders (such consent being obtained in accordance with Section 6.3
or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Trustee shall enter into or consent to any amendment to this
Trust Agreement which would cause the
77
<PAGE> 87
Trust to fail or cease to qualify for the exemption from the status of an
"investment company" under the 1940 Act or be classified as other than a
grantor trust for United States Federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Sponsor, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on the Sponsor.
(f) In the event that any amendment to this Trust Agreement
is made, the Regular Trustees shall promptly provide to the Sponsor a copy of
such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee
shall be required to enter into any amendment to this Trust Agreement which
affects its own rights, duties or immunities under this Trust Agreement. The
Property Trustee shall be entitled to receive an Opinion of Counsel and an
Officers' Certificate stating that any amendment to this Trust Agreement is in
compliance with this Trust Agreement.
SECTION 10.3. Separability. In case any provision in this
Trust Agreement or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.4. GOVERNING LAW. THIS TRUST AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND TRUSTEES
WITH RESPECT TO THIS TRUST AGREEMENT IN THE TRUST SECURITIES SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO ITS CONFLICT OF LAWS PRINCIPLES AND EXCLUDING SECTIONS 3540 AND 3561
OF TITLE 12 THEREOF.
SECTION 10.5. Payments Due on Non-Business Day. If the date
fixed for any payment on any Trust Security shall be a day which is not a
Business Day, then such payment need not be made on such date but may be made
on the next succeeding day which is a Business Day except as otherwise provided
in Section 4.1(a) and Section 4.2(d)), with the same force and effect as though
made on the date fixed for such payment, and no interest shall accrue thereon
for the period after such date.
78
<PAGE> 88
SECTION 10.6. Successors. This Trust Agreement shall be
binding upon and shall inure to the benefit of any successor to the Sponsor,
the Trust or the Relevant Trustee, including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving the Sponsor
that is permitted under Article 9 of the Indenture and pursuant to which the
assignee agrees in writing to perform the Sponsor's obligations hereunder, the
Sponsor shall not assign its obligations hereunder.
SECTION 10.7. Headings. The Article and Section headings are
for convenience only and shall not affect the construction of this Trust
Agreement.
SECTION 10.8. Reports, Notices and Demands. Any report,
notice, demand or other communications which by any provision of this Trust
Agreement is required or permitted to be given or served to or upon any
Securityholder or the Sponsor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a Holder
of Preferred Securities, to such Holder as such Holder's name and address may
appear on the Securities Register; and (b) in the case of the Holder of the
Common Securities.
Any notice to Preferred Securityholders shall also be given to
such Owners as have, within two years preceding the giving of such notice,
filed their names and addresses with the Property Trustee for that purpose.
Such notice, demand or other communication to or upon a Securityholder shall be
deemed to have been sufficiently given, or made, for all purposes, upon hand
delivery, mailing or transmission.
Any notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or
served to or upon the Trust, the Property Trustee, the Delaware Trustee or the
Regular Trustees shall be given in writing addressed (until another address is
published by the Trust) as follows: (a) with respect to the Property Trustee,
to The Bank of New York, 101 Barclay Street, Floor 21W, New York, New York
10286, Attention: ______________, (b) with respect to the Delaware Trustee, to
The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
19711, with a copy of any such notice to the Property Trustee at its address
above, and (c) with
79
<PAGE> 89
respect to the Regular Trustees, to them at the address for notices to the
Sponsor, marked "Attention: Secretary". Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by
the Trust or the Property Trustee.
SECTION 10.9. Agreement Not to Petition. Each of the
Trustees and the Sponsor agrees for the benefit of the Securityholders that,
until at least one year and one day after the Trust has been terminated in
accordance with Article 9, it shall not file, or join in the filing of, a
petition against the Trust under any bankruptcy, insolvency, reorganization or
other similar law (including, without limitation, the United States Bankruptcy
Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement
of any proceeding against the Trust under any Bankruptcy Law. In the event the
Sponsor takes action in violation of this Section 10.9, the Property Trustee
agrees, for the benefit of Securityholders, that, at the expense of the
Sponsor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Sponsor against the Trust
or the commencement of such action and raise the defense that the Sponsor has
agreed in writing not to take such action and should be stopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.9 shall survive the
termination of this Trust Agreement.
SECTION 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act. (a) This Trust Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Trust Agreement and
shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is
the trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall
80
<PAGE> 90
be deemed to apply to this Trust Agreement as so modified or to be excluded, as
the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY
INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR BENEFICIAL OWNER,
WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO SUBORDINATION PROVISIONS AND OTHER TERMS
OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE
TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS.
SECTION 10.12. Counterparts. This Trust Agreement may
contain more than one counterpart of the signature page and this Trust
Agreement may be executed by the affixing of the signature of each of the
Trustees to one of such counterpart signature pages. All of such counterpart
signature pages shall be read as though one, and they shall have the same force
and effect as though all of the signers had signed a single signature page.
81
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
CMS ENERGY CORPORATION,
as Sponsor
By:
------------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:
------------------------------------------
Name:
Title:
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:
------------------------------------------
Name:
Title:
------------------------------------------
Alan M. Wright,
as Regular Trustee
------------------------------------------
Thomas A. McNish,
as Regular Trustee
82
<PAGE> 92
EXHIBIT A
CERTIFICATE OF TRUST
OF
CMS ENERGY TRUST I
A-1
<PAGE> 93
EXHIBIT B
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
CMS Energy Trust I
Common Securities
(liquidation amount $50 per Common Security)
CMS Energy Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that CMS
Energy Corporation (the "Holder") is the registered owner of ______________
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust (the "Common Securities"). In accordance with Section
5.10 of the Trust Agreement (as defined below) the Common Securities are not
transferable and any attempted transfer hereof shall be void. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities are set forth in, and this certificate and
the Common Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated Trust
Agreement of the Trust dated as of _________, 1997, as the same may be amended
from time to time (the "Trust Agreement") including the designation of the
terms of the Common Securities as set forth therein. The Holder is entitled to
the benefits of the Common Securities Guarantee Agreement entered into by CMS
Energy Corporation, a Delaware corporation, and The Bank of New York, as
Guarantee Trustee, dated as of _________, 1997 (the "Guarantee"), to the extent
provided therein. The Trust will furnish a copy of the Trust Agreement and the
Guarantee to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
B-1
<PAGE> 94
IN WITNESS WHEREOF, one of the Regular Trustees of the Trust has executed this
certificate this _____ day of June 1997.
CMS ENERGY TRUST I
By:_________________________________
Name:
As Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Common Securities referred to in the
within-mentioned Trust Agreement.
Dated:
THE BANK OF NEW YORK,
as Property Trustee
By:_________________________________
Authorized Signatory
B-2
<PAGE> 95
EXHIBIT C
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE,
INSERT - This Preferred Security is a Book-Entry Preferred Securities
Certificate within the meaning of the Trust Agreement hereinafter referred to
and is registered in the name of The Depository Trust Company ("DTC") or a
nominee of DTC. This Preferred Security is exchangeable for Preferred
Securities registered in the name of a person other than DTC or its nominee
only in the limited circumstances described in the Trust Agreement and no
transfer of this Preferred Security (other than a transfer of this Preferred
Security as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC) may be registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of DTC (55 Water Street, New York), to CMS Energy Trust I or its
agent for registration of transfer, exchange or payment, and any Preferred
Security issued is registered in the name of Cede & Co. or such other name as
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 A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede
& Co., has an interest herein.]
Certificate Number Number of Preferred Securities
--- CUSIP NO.
Certificate Evidencing Preferred Securities
of
CMS Energy Trust I
% Convertible Preferred Securities
(liquidation amount $50 per Preferred Security)
CMS Energy Trust I, a statutory business trust formed under the
laws of the State of Delaware (the
C-1
<PAGE> 96
"Trust"), hereby certifies that __________________ (the "Holder") is the
registered owner of _______ preferred securities of the Trust representing an
undivided beneficial interest in the assets of the Trust and designated the CMS
Energy Trust I % Convertible Preferred Securities (liquidation amount $50 per
Preferred Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in Section 5.4 of the Trust Agreement (as
defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Trust Agreement of the Trust dated as of _________,
1997 as the same may be amended from time to time (the "Trust Agreement")
including the designation of the terms of Preferred Securities as set forth
therein. The Holder is entitled to the benefits of the Guarantee Agreement
entered into by CMS Energy Corporation, a Delaware corporation, and The Bank of
New York, as Guarantee Trustee, dated as of _________, 1997 (the "Guarantee"),
to the extent provided therein. The Trust will furnish a copy of the Trust
Agreement and the Guarantee to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
C-2
<PAGE> 97
IN WITNESS WHEREOF, one of the Regular Trustees of the Trust
has executed this certificate this _____day of June 1997.
CMS ENERGY TRUST I
By:_________________________________
Name:
A Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Trust Agreement.
Dated:
THE BANK OF NEW YORK,
as Property Trustee
By:_________________________________
Authorized Signatory
C-3
<PAGE> 98
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
(Insert assignee's social security or tax identification
number)
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------
- --------------------------------------------------------
- --------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------
Signature:
-----------------------
(Sign exactly as our name appears on the other side of this Preferred Security
Certificate)
1
<PAGE> 99
EXHIBIT D
NOTICE OF CONVERSION
To: The Bank of New York
as Property Trustee of
CMS Energy Trust I
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Preferred Securities, or the
portion below designated, into Common Stock, $.01 par value, of CMS ENERGY
CORPORATION (the "CMS Energy Common Stock") in accordance with the terms of the
Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of
_________, 1997, by Alan M. Wright and Thomas A. McNish, as Regular Trustees,
The Bank of New York (Delaware), as Delaware Trustee, The Bank of New York, as
Property Trustee, CMS Energy Corporation, as Depositor, and by the Holders,
from time to time, of individual beneficial interests in the Trust to be issued
pursuant to the Trust Agreement. Pursuant to the aforementioned exercise of
the option to convert these Preferred Securities, the undersigned hereby
directs the Conversion Agent (as that term is defined in the Trust Agreement)
to (i) exchange such Preferred Securities for a portion of the Debentures (as
that term is defined in the Trust Agreement) held by the Trust (at the rate of
exchange specified in the terms of the Preferred Securities set forth in the
Trust Agreement) and (ii) immediately convert such Debentures on behalf of the
undersigned, into CMS Energy Common Stock (at the conversion rate specified in
the terms of the Preferred Securities set forth in the Trust Agreement).
The undersigned does also hereby direct the Conversion Agent
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Any holder, upon the exercise of its conversion rights in
accordance with the terms of the Trust Agreement
D-1
<PAGE> 100
and the Preferred Securities, agrees to be bound by the terms of the
Registration Rights Agreement relating to the
D-2
<PAGE> 101
CMS Energy Common Stock issuable upon conversion of the Preferred Securities.
Date: ____________, ____
in whole __ in part __
Number of Preferred
Securities to be converted:
___________________
If a name or names other than
the undersigned, please
indicate in the spaces below
the name or names in which the
shares of CMS Energy Common
Stock are to be issued, along
with the address or addresses
of such person or persons
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
Signature (for conversion only)
Please Print or Typewrite
Name and Address, Including
Zip Code, and Social Security
or Other Identifying Number
____________________________________
____________________________________
____________________________________
Signature Guarantee:* ______________
__________________________________
* (Signature must be guaranteed by an institution which is a member of
the following recognized Signature Guaranty Programs: (i) The
Securities Transfer Agent Medallion Program (STAMP); (ii) The New York
Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange
Medallion Program (SEMP); or (iv) in such other guarantee programs
acceptable to the Trustee.)
D-3
<PAGE> 1
EXHIBIT 4(n)
_________________________________________________________
GUARANTEE AGREEMENT
CMS Energy Corporation
and
The Bank of New York
Relating to the Preferred Securities of
CMS Energy Trust I
Dated as of ________, 1997
_________________________________________________________
<PAGE> 2
CROSS REFERENCE TABLE*
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(c), 2.8
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.5, 3.2
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1, 2.6, 5.4
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
318(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
- ----------------------------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1 ----
DEFINITIONS
<S> <C> <C>
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.2. List of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3. Reports by the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.4. Periodic Reports to Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.5. Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.6. Events of Default; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.7. Event of Default; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.8. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.2. Certain Rights of Guarantee Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee Trustee . . . . . . . . . . . . . . . . 14
ARTICLE 5
GUARANTEE
SECTION 5.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 5.2. Waiver of Notice and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.3. Obligations Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.4. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.5. Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.7. Independent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.2. Certain Covenants of the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 7
TERMINATION
SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.4. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.5. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ii
<PAGE> 5
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of ________, 1997, is
executed and delivered by CMS Energy Corporation, a Michigan
corporation (the "Guarantor") and The Bank of New York, a New York banking
corporation, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of CMS Energy Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement
(the "Trust Agreement"), dated as of ________, 1997 among the Trustees named
therein, the Guarantor, as Sponsor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing _______ (________ if the over-allotment option is exercised in full) of
its ___% Convertible Quarterly Income Preferred Securities (liquidation
preference $50 per preferred security) (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Issuer and having
the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the
Issuer and the proceeds thereof, together with the proceeds from the issuance
of the Issuer's Common Securities (as defined below), will be used to
purchase the Debentures (as defined in the Trust Agreement) of the Guarantor
which will be deposited with The Bank of New York, as Property Trustee under
the Trust Agreement, as trust assets;
WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments
on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Guarantee for the benefit of the holders of the Common
Securities (as defined herein), except that if an
<PAGE> 6
event of default (as defined in the Indenture (as defined herein)), has
occurred and is continuing, the rights of holders of the Common Securities to
receive Guarantee Payments (as defined in the Common Securities Guarantee)
under the Common Securities Guarantee shall be subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments (as defined
herein) under this Guarantee;
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. As used in this
Guarantee Agreement, the terms set forth below shall, unless the context
otherwise requires, have the following meanings. Capitalized or otherwise
defined terms used but not otherwise defined herein shall have the meanings
assigned to such terms in the Trust Agreement as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct common
control with such specified Person, provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled' have meanings
correlative to the foregoing.
"Common Securities" means the securities representing
common beneficial interests in the assets of the Issuer.
"Common Stock" shall mean the common stock, par value $.01,
per share, of the Guarantor.
2
<PAGE> 7
"Event of Default" means a default by the Guarantor on any
of its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payments, the Guarantor shall have received written notice of default and shall
not have cured such default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Trust Agreement) required to be paid
on the Preferred Securities, to the extent the Issuer shall have funds on hand
available therefor at such time, (ii) the redemption price, including all
accrued and unpaid Distributions to the date of redemption (the "Redemption
Price"), with respect to the Preferred Securities called for redemption by the
Issuer to the extent the Issuer shall have funds on hand available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of
the Issuer, unless Debentures are distributed to the Holders, the lesser of (a)
the aggregate of the liquidation preference of $50 per Preferred Security plus
accrued and unpaid Distributions on the Preferred Securities to the date of
payment to the extent the Issuer shall have funds on hand available to make such
payment and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, until a
Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement and thereafter
means each such Successor Guarantee Trustee.
"Holder" means any holder, as registered on the books and
records of the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the
Guarantor or the Guarantee Trustee.
3
<PAGE> 8
"Indenture" means the Indenture dated as of ________, 1997,
as supplemented and amended between the Guarantor and The Bank of New York, as
trustee.
"List of Holders" has the meaning specified in Section 2.2
(a).
"Majority in Liquidation Preference of the Securities"
means, except as provided by the Trust Indenture Act, a vote by the Holder(s),
voting separately as a class, of more than 50% of the liquidation preference
of all the outstanding Preferred Securities issued by the Issuer.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by (i) the Chairman, Chief Executive Officer, President or
a Vice President, and by (ii) the Treasurer, an Assistant Treasurer, the
Controller, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
4
<PAGE> 9
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Guarantee
Trustee, any Executive Vice President, Senior Vice President, any First Vice
President, any Vice President, any Assistant Vice President, the Secretary, any
Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer
or Assistant Trust Officer or any other officer of the Corporate Trust Services
Division of the Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under
Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application. (a) This
Guarantee Agreement is subject to the provisions of the Trust Indenture Act
that are required to be part of this Guarantee Agreement and shall, to the
extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this
Guarantee Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2. List of Holders. (a) The Guarantor shall
furnish or cause to be furnished to the Guarantee Trustee (unless the
Guarantee Trustee is acting as Securities Registrar with respect to the
Debentures under the Indenture) (i) semi-annually, on or before January 15 and
July 15 of each year, a list, in such form as the Guarantee Trustee may
reasonably re-
5
<PAGE> 10
quire, of the names and addresses of the Holders ("List of Holders") as of a
date not more than 15 days prior to the delivery thereof, and (ii) at such
other times as the Guarantee Trustee may request in writing, within 30 days
after the receipt by the Guarantor of any such request, a List of Holders as of
a date not more than 15 days prior to the time such list is furnished, in each
case to the extent such information is in the possession or control of the
Guarantor and is not identical to a previously supplied list of Holders or has
not otherwise been received by the Guarantee Trustee. Notwithstanding the
foregoing, the Guarantor shall not be obligated to provide such List of Holders
at any time the Preferred Securities are represented by one or more Global
Certificates (as defined in the Indenture). The Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its
obligations under Section 311(a), Section 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
On or before July 15, of each calendar year, the Guarantee Trustee shall
provide to the Holders such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to Guarantee
Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with
Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee
such evidence of compliance with such conditions precedent, if any, provided
for in this Guarantee Agreement that relate to any of the matters set forth in
Section 314(c) of the Trust Indenture Act. Any
6
<PAGE> 11
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver. The
Holders of a Majority in Liquidation Preference of the Securities may, by vote,
on behalf of the Holders, waive any past Event of Default and its consequences.
Upon such waiver, any such Event of Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
therefrom.
SECTION 2.7. Event of Default; Notice. (a) The
Guarantee Trustee shall, within 90 days after the occurrence of an Event of
Default, transmit by mail, first class postage prepaid, to the Holders, notices
of all Events of Default known to the Guarantee Trustee, unless such defaults
have been cured before the giving of such notice, provided, that, except in the
case of a default in the payment of a Guarantee Payment, the Guarantee 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 Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Guarantee Trustee shall have
received written notice, or a Responsible Officer charged with the
administration of the Trust Agreement shall have obtained written notice, of
such Event of Default.
SECTION 2.8. Conflicting Interests. The Trust
Agreement and the Indenture shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
7
<PAGE> 12
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee
Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not transfer
this Guarantee Agreement to any Person except a Holder exercising his or her
rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to the
Responsible Officer of the Guarantee Trustee has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee Agreement, and no implied covenants shall be read
into this Guarantee Agreement against the Guarantee Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to Section
2.6) and is actually known to the Responsible Officer of the Guarantee Trustee,
the Guarantee Trustee shall exercise such of the rights and powers vested in it
by this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement
shall be construed to relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
8
<PAGE> 13
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of
Default that may have occurred;
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express
provisions of this Guarantee Agreement, and the
Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Guarantee Agreement;
and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished
to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the
case of any such certificates or opinions that by any
provision hereof or of the Trust Indenture Act are
specifically required to be furnished to the
Guarantee Trustee, the Guarantee Trustee shall be
under a duty to examine the same to determine whether
or not they conform to the requirements of this
Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a
Responsible Officer of the Guarantee Trustee, unless
it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon
which such judgment was made;
(iii) the Guarantee 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 Holders of not less than a Majority in
Liquidation Preference of the Securities relating to
the time, method and place of con-
9
<PAGE> 14
ducting any proceeding for any remedy available to
the Guarantee Trustee, or exercising any trust or
power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial
liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if
the Guarantee Trustee shall have reasonable grounds
for believing that the repayment of such funds or
liability is not reasonably assured to it under the
terms of this Guarantee Agreement or adequate
indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee
Trustee. (a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be
fully protected in acting or refraining from acting
upon any resolution, certificate, statement, proxy,
instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or
document believed by it to be genuine and to have
been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be
sufficiently evidenced by an Officers' Certificate
unless otherwise prescribed herein.
(iii) Whenever, in the administration of this
Guarantee Agreement, the Guarantee Trustee shall deem
it desirable that a matter be proved or established
before
10
<PAGE> 15
taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other
evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee,
shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with
legal counsel, and the advice or opinion of such
legal counsel with respect to legal matters shall be
full and complete authorization and protection in
respect of any action taken, suffered or omitted to
be taken by it hereunder in good faith and in
accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any
of its Affiliates and may be one of its employees.
The Guarantee Trustee shall have the right at any
time to seek instructions concerning the
administration of this Guarantee Agreement from any
court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers
vested in it by this Guarantee Agreement at the
request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee
such adequate security and indemnity as would satisfy
a reasonable person in the position of the Guarantee
Trustee, against the costs, expenses (including
attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such
request or direction, including such reasonable
advances as may be requested by the Guarantee
Trustee; provided that, nothing contained in this
Section 3.2(a)(v) shall be taken to relieve the
Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and
11
<PAGE> 16
powers vested in it by this Guarantee Agreement and
use the same degree of care and skill in the exercise
thereof as a prudent person would exercise or use
under the circumstances in the conduct of his or her
own affairs.
(vi) The Guarantee 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, note,
other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or
investigation into such facts or matters as it may
see fit.
(vii) The Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties
hereunder either directly or by or through its agents
or attorneys or any Affiliate, and the Guarantee
Trustee shall not be responsible for any misconduct
or negligence on the part of any such agent or
attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this
Guarantee Agreement the Guarantee Trustee shall deem
it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other
action hereunder, the Guarantee Trustee (A) may
request instructions from the Holders of a Majority
in Liquidation Preference of the Securi- ties, (B)
may refrain from enforcing such remedy or right or
taking such other action until such instructions are
received, and (C) shall be protected in acting in
accordance with such instructions.
(b) No provision of this Guarantee Agreement
shall be deemed to impose any duty or obligation on the Guarantee Trustee to
perform any act or acts
12
<PAGE> 17
or exercise any right, power, duty or obligation conferred or imposed on it in
any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee
Trustee shall be construed to be a duty to act in accordance with such power
and authority.
SECTION 3.3. Indemnity. The Guarantor agrees to
indemnify the Guarantee Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on the part of
the Guarantee Trustee, arising out of or in connection with the acceptance or
administration of this Guarantee Agreement, including the reasonable costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. The
Guarantee Trustee will not claim or exact any lien or charge on any Guarantee
Payment as a result of any amount due to it under this Guarantee Agreement.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility. (a)
There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to
the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000,
and shall be a corporation meeting the requirements
of Section 310(a) of the Trust Indenture Act. If
such corporation publishes reports of condition at
least annually, pursuant to law or to the
requirements of the supervising or examining
authority, then, for the purposes of this Section and
to the extent permitted by the Trust Indenture
13
<PAGE> 18
Act, 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 condition so published.
(b) If at any time the Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and
Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b) the
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor.
(b) The Guarantee Trustee shall not be removed
until a Successor Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Guarantee Trustee
and delivered to the Guarantor.
(c) The Guarantee Trustee appointed hereunder
shall hold office until a Successor Guarantee Trustee shall have been appointed
or until its removal or resignation. The Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by an instrument in writing
executed by such Successor Guarantee Trustee and delivered to the Guarantor and
the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery to the Guarantor of an instrument of resignation, the
14
<PAGE> 19
resigning Guarantee Trustee may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as
it may deem proper, appoint a Successor Guarantee Trustee.
ARTICLE 5
GUARANTEE
SECTION 5.1. Guarantee. The Guarantor
irrevocably and unconditionally agrees to pay in full to the Holders the
Guarantee Payments (without duplication of amounts theretofore paid by or on
behalf of the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert other than the
defense of payment. The Guarantor's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand. The
Guarantor hereby waives notice of acceptance of the Guarantee Agreement and of
any liability to which it applies or may apply, presentment, demand for
payment, any right to require a proceeding first against the Guarantee Trustee,
Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3. Obligations Not Affected. The
obligations, covenants, agreements and duties of the Guarantor under this
Guarantee Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the
Issuer of all or any portion of the Dis-
15
<PAGE> 20
tributions (other than an extension of time for payment of Distributions that
results from the extension of any interest payment period on the Debentures as
so provided in the Indenture), Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the terms of
the Preferred Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency
in, the Preferred Securities;
(f) the settlement or compromise of any
obligation guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or
the Guarantee Trustee to give notice to, or obtain the consent of, the
Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. Rights of Holders. The Guarantor
expressly acknowledges that: (i) this Guarantee Agreement will be deposited
with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the
Guarantee Trustee has the right to enforce this Guarantee
16
<PAGE> 21
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Preference of the Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; (iv) any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee Agreement,
without first instituting a legal proceeding against the Guarantee Trustee, the
Issuer or any other Person; and (v) if an Event of Default with respect to the
Debentures constituting the failure to pay interest or principal on the
Debentures on the date such interest or principal is otherwise payable has
occurred and is continuing, then any Holder shall have the right, which is
absolute and unconditional, to proceed directly against the Guarantor to obtain
Guarantee Payments without first waiting to determine if the Guarantee Trustee
has enforced this Guarantee Agreement or instituting a legal proceeding against
the Issuer, the Guarantee Trustee or any other Person.
SECTION 5.5. Guarantee of Payment. This
Guarantee Agreement creates a guarantee of payment and not of collection. This
Guarantee Agreement will not be discharged except by payment of the Guarantee
Payments in full (without duplication of amounts theretofore paid by the
Issuer) or upon distribution of Debentures to Holders as provided in the Trust
Agreement.
SECTION 5.6. Subrogation. The Guarantor shall
be subrogated to all (if any) rights of the Holders against the Issuer in
respect of any amounts paid to the Holders by the Guarantor under this
Guarantee Agreement and shall have the right to waive payment by the Issuer
pursuant to Section 5.1; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of subrogation or
any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Guarantee Agreement, if, at the time of any such payment,
any amounts are due and unpaid under this Guarantee Agreement. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
17
<PAGE> 22
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.7. Independent Obligations. The
Guarantor acknowledges that its obligations hereunder are independent of the
obligations of the Issuer with respect to the Preferred Securities and that the
Guarantor shall be liable as principal and as debt or hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.
ARTICLE 6
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination. The Guarantee
Agreement will constitute an unsecured obligation of the Guarantor and will
rank subordinate and junior in right of payment to all liabilities of the
Guarantor and pari passu with any guarantee now or hereafter entered into by
the Guarantor in respect of the Common Securities or of any preferred or
preference stock of any affiliate of the Guarantor.
SECTION 6.2. Certain Covenants of the Guarantor.
(a) Guarantor covenants and agrees that if and so long as (i) the Issuer is
the holder of all the Debentures, (ii) a Tax Event (as defined in the Trust
Agreement) in respect of the Issuer has occurred and is continuing and (iii)
the Guarantor has elected, and has not revoked such election, to pay Additional
Sums (as defined in the Trust Agreement) in respect of the Preferred Securities
and Common Securities, the Guarantor will pay to the Issuer such Additional
Sums.
(b) The Guarantor covenants and agrees that it
will not, and will not permit any subsidiary of the Guarantor to, (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire, or make
a liquidation payment with respect to, any of the Guarantor's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities (including guarantees of indebtedness
for money borrowed) of the Guarantor that rank pari passu with or junior to the
18
<PAGE> 23
Debentures (other than (a) any dividend, redemption, liquidation, interest,
principal or guarantee payment by Guarantor where the payment is made by way of
securities (including capital stock) that rank pari passu with or junior to the
securities on which such dividend, redemption, interest, principal or guarantee
payment is being made, (b) payments under this Agreement, (c) purchases of
Common Stock related to the issuance of Common Stock under any of the
Guarantor's benefit plans for its directors, officers or employees, (d) as a
result of a reclassification of the Guarantor's capital stock or the exchange
or conversion of one series or class of the Guarantor's capital stock for
another series or class of the Guarantor's capital stock and (e) the purchase
of fractional interests in shares of the Guarantor's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged) if at such time (i) there shall have occurred any
event of which the Guarantor has actual knowledge that (a) with the giving of
notice or the lapse of time, or both, would constitute an "Event of Default"
under the Indenture with respect to the Debentures and (b) in respect of which
the Guarantor shall not have taken reasonable steps to cure, (ii) the Guarantor
shall be in default with respect to its payment of any obligations under the
Guarantee or (iii) the Guarantor shall have given notice of its selection of an
Extension Period (as defined in the Indenture) with respect to the Debentures
and shall not have rescinded such notice, or such Extension Period, or any
extension thereof, shall be continuing.
(c) The Guarantor covenants and agrees (i) to
maintain directly or indirectly 100% ownership of the Common Securities,
provided that certain successors which are permitted by the Indenture may
succeed to the Guarantor's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate the Issuer, except (a) in
connection with a distribution of the Debentures to the holders of the
Preferred Securities in liquidation of the Issuer or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the Trust
Agreement, (iii) to use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement, to cause the Issuer to remain classified as
a grantor trust and not as an association taxable as a corporation for United
States Federal income tax purpos-
19
<PAGE> 24
es, (iv) for so long as Preferred Securities are outstanding, not to convert
Debentures except pursuant to a notice of conversion delivered to the
Conversion Agent (as defined in the Trust Agreement) by a Holder, (v) to
maintain the reservation for issuance of the number of shares of Common Stock
that would be required from time to time upon the conversion of all the
Debentures then outstanding, (vi) to deliver shares of Common Stock upon an
election by the Holders to convert such Preferred Securities into Common Stock
and (vii) to honor all obligations relating to the conversion or exchange of
the Preferred Securities into or for Common Stock or Debentures.
ARTICLE 7
TERMINATION
SECTION 7.1. Termination. This Guarantee
Agreement shall terminate and be of no further force and effect upon (i) full
payment of the Redemption Price of all Preferred Securities, (ii) the
distribution of Debentures to the Holders in exchange for all of the Preferred
Securities, (iii) full payment of the amounts payable in accordance with the
Trust Agreement upon liquidation of the Issuer or (iv) upon the distribution,
if any, of Common Stock the holders of the Preferred Securities in respect of
the conversion of all such holders' Preferred Securities into Common Stock.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Successors and Assigns. All
guarantees and agreements contained in this Guarantee Agreement shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Preferred Securities then
outstanding. Except in connection with a consolidation, merger or sale
involving the Guarantor that is permitted under Article Nine of the Indenture
and
20
<PAGE> 25
pursuant to which the assignee agrees in writing to perform the Guarantor's
obligations hereunder, the Guarantor shall not assign its obligations
hereunder.
SECTION 8.2. Amendments. Except with respect to
any changes which do not adversely affect the rights of the Holders in any
material respect (in which case no consent of the Holders will be required),
this Guarantee Agreement may only be amended with the prior approval of the
Holders of not less than a Majority in Liquidation Preference of the
Securities. The provisions of Article 6 of the Trust Agreement concerning
meetings of the Holders shall apply to the giving of such approval. The
Guarantor shall furnish the Guarantee Trustee with an Officers' Certificate and
an Opinion of Counsel to the effect that any amendment of this Agreement is
authorized and permitted.
SECTION 8.3. Notices. Any notice, request or
other communication required or permitted to be given hereunder shall be in
writing, duly signed by the party giving such notice, and delivered, telecopied
or mailed by first class mail as follows: (a) if given to the Guarantor, to
the address set forth below or such other address as the Guarantor may give
notice of to the Holders:
CMS Energy Corporation
Fairlane Plaza South
330 Town Center Drive, Suite 1100
Dearborn, MI 48126
Phone No.: (313) 436-9200
Facsimile No.: (313) 436-9225
Attention: General Counsel
(b) if given to the Issuer, in care of the
Guarantee Trustee, at the Issuer's (and the Guarantee Trustee's) address set
forth below or such other address as the Guarantee Trustee on behalf of the
Issuer may give notice of to the Holders:
CMS Energy Financial Trust I
c/o CMS Energy Corporation
Fairlane Plaza South
330 Town Center Drive, Suite 1100
Dearborn, MI 48126
Phone No.: (313) 436-9200
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<PAGE> 26
Facsimile No.: (313) 436-9225
Attention: General Counsel
with a copy to:
The Bank of New York
101 Barclay Street
Floor 21W
New York, New York 10286
Phone No.: [To Come]
Facsimile No.: [To Come]
Attention: [To Come]
(c) if given to any Holder, at the address set
forth on the books and records of the Issuer.
All notices hereunder shall be deemed to have
been given when received in person, telecopied with receipt confirmed, or
mailed by first class mail, postage prepaid, except that if a notice or other
document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 8.4. Benefit. This Guarantee Agreement
is solely for the benefit of the Holders and is not separately transferable
from the Preferred Securities.
SECTION 8.5. Interpretation. In this Guarantee
Agreement, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee
Agreement but not defined in the preamble hereto have the respective meanings
assigned to them in Section 1.1;
(b) a term defined anywhere in this Guarantee
Agreement has the same meaning throughout;
(c) all references to "the Guarantee Agreement" or
"this Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
22
<PAGE> 27
(d) all references in this Guarantee Agreement to
Articles and Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has
the same meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural
and vice versa; and
(g) the masculine, feminine or neuter genders used
herein shall include the masculine, feminine and neuter genders.
23
<PAGE> 28
SECTION 8.6. Governing Law. THIS GUARANTEE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MICHIGAN WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
This instrument 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.
THIS GUARANTEE AGREEMENT is executed as of the
day and year first above written.
CMS ENERGY CORPORATION
By: ____________________________
Name:
Title:
THE BANK OF NEW YORK, as Guaran-
tee Trustee
By: ____________________________
Name:
Title:
24
<PAGE> 1
EXHIBIT 4(o)
=====================================================
CMS ENERGY CORPORATION
AND
AS PURCHASE CONTRACT AGENT
---------------------
PURCHASE CONTRACT AGREEMENT
---------------------
DATED AS OF __________, 199
=====================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
RECITALS ............................................................... 1
ARTICLE I
Definitions and Other Provisions ....................................... 1
Section 1.1. Definitions. .............................................. 1
Act ................................................................ 2
Affiliate .......................................................... 2
Agent .............................................................. 2
Agreement .......................................................... 2
Applicable Market Value ............................................ 2
Bankruptcy Code .................................................... 2
Board of Directors ................................................. 2
Board Resolution ................................................... 2
Business Day ....................................................... 2
Closing Price ...................................................... 3
Collateral Agent ................................................... 3
Common Stock ....................................................... 3
Company ............................................................ 3
Corporate Trust Office ............................................. 3
Current Market Price ............................................... 3
Depositary ......................................................... 3
Deferred Yield Enhancement Payments ................................ 3
Early Settlement ................................................... 3
Early Settlement Amount ............................................ 4
Early Settlement Date .............................................. 4
Early Settlement Rate .............................................. 4
Exchange Act ....................................................... 4
Excess Treasury Notes .............................................. 4
Expiration Date .................................................... 4
Expiration Time .................................................... 4
Final Settlement Date .............................................. 4
Final Settlement Fund .............................................. 4
Global Security Certificate ........................................ 4
Holder ............................................................. 4
Issuer Order ....................................................... 4
Issuer Request ..................................................... 4
NYSE ............................................................... 5
Officers' Certificate .............................................. 5
i
<PAGE> 3
PAGE
Opinion of Counsel .................................................. 5
Outstanding Securities .............................................. 5
Outstanding Security Certificates ................................... 6
Payment Date ........................................................ 6
Person .............................................................. 6
Pledge .............................................................. 6
Pledge Agreement .................................................... 6
Predecessor Security Certificate .................................... 6
Purchase Contract ................................................... 7
Purchased Shares .................................................... 7
Record Date ......................................................... 7
Reorganization Event ................................................ 7
Responsible Officer ................................................. 7
Security ............................................................ 7
Security Certificate ................................................ 7
Security Register ................................................... 7
Security Registrar .................................................. 7
Settlement Rate ..................................................... 7
Stated Amount ....................................................... 7
Termination Date .................................................... 7
Termination Event ................................................... 8
Threshold Appreciation Price ........................................ 8
TIA ................................................................. 8
Trading Day ......................................................... 8
Treasury Notes ...................................................... 9
Underwriting Agreement .............................................. 9
Vice President ...................................................... 9
Yield Enhancement Payment ........................................... 9
Section 1.2. Compliance Certificates and
Opinions. ...................................................... 9
Section 1.3. Form of Documents Delivered to
Agent. ......................................................... 10
Section 1.4. Acts of Holders; Record Dates. ........................... 11
Section 1.5. Notices, etc., to Agent and the
Company. ....................................................... 13
Section 1.6. Notice to Holders; Waiver. .............................. 13
Section 1.7. Effect of Headings and Table
of Contents. ................................................... 14
ii
<PAGE> 4
PAGE
Section 1.8. Successors and Assigns. .................................. 14
Section 1.9. Separability Clause. ...................................... 14
Section 1.10. Benefits of Agreement. .................................... 14
Section 1.11. Governing Law. ............................................ 15
Section 1.12. Legal Holidays. ........................................... 15
Section 1.13. Counterparts. ............................................. 15
Section 1.14. Inspection of Agreement. ................................. 15
ARTICLE II
Security Certificate Forms ................................................ 16
Section 2.1. Forms of Security Certificates Generally................... 16
Section 2.2. Form of Agent's Certificate of Authentication.............. 16
ARTICLE III
The Securities ........................................................... 17
Section 3.1. Title and Terms; Denominations. ........................... 17
Section 3.2. Rights and Obligations Evidenced by the Security
Certificates. ................................................... 17
Section 3.3. Execution, Authentication, Delivery and Dating. ........... 18
Section 3.4. Temporary Security Certificates. ......................... 19
Section 3.5. Registration; Registration of Transfer
and Exchange. .................................................. 20
Section 3.6. Mutilated, Destroyed, Lost and Stolen
Security Certificates. ......................................... 22
Section 3.7. Persons Deemed Owners. ................................... 24
iii
<PAGE> 5
PAGE
Section 3.8. Cancellation. ............................................ 25
Section 3.9. Securities Not Separable. ................................ 25
Section 3.10 No Consent to Assumption ................................. 26
ARTICLE IV
The Treasury Notes ....................................................... 26
Section 4.1. Payment of Interest; Interest Rights
Preserved. ..................................................... 26
Section 4.2. Transfer of Treasury Notes Upon Occurrence
of Termination Event. ........................................... 27
ARTICLE V
The Purchase Contracts ................................................... 28
Section 5.1. Purchase of Shares of Common Stock. ...................... 28
Section 5.2. Yield Enhancement Payments. .............................. 30
Section 5.3. Deferral of Payment Dates For Yield
Enhancement Payment. ........................................... 31
Section 5.4. Payment of Purchase Price. ................................ 32
Section 5.5. Issuance of Shares of Common Stock. ...................... 33
Section 5.6. Adjustment of Settlement Rate. ........................... 34
Section 5.7. Notice of Adjustments and Certain Other Events. .......... 41
Section 5.8. Termination Event; Notice. ............................... 42
Section 5.9. Early Settlement. ........................................ 42
Section 5.10. No Fractional Shares. ..................................... 44
Section 5.11. Charges and Taxes. ....................................... 45
ARTICLE VI
iv
<PAGE> 6
PAGE
Remedies .................................................................. 46
Section 6.1. Unconditional Right of Holders to
Receive Yield Enhancement Payment................................ 46
Section 6.2. Restoration of Rights and Remedies. ....................... 46
Section 6.3. Rights and Remedies Cumulative. ........................... 46
Section 6.4. Delay or Omission Not Waiver. ............................ 47
Section 6.5. Undertaking for Costs. ................................... 47
Section 6.6. Waiver of Stay or Extension Laws. ........................ 47
ARTICLE VII
The Agent ................................................................ 48
Section 7.1. Certain Duties and Responsibilities. ...................... 48
Section 7.2. Notice of Default. ....................................... 49
Section 7.3. Certain Rights of Agent. ................................. 49
Section 7.4. Not Responsible for Recitals or Issuance
of Securities. ................................................. 50
Section 7.5. May Hold Securities. ..................................... 51
Section 7.6. Money Held in Trust. ..................................... 51
Section 7.7. Compensation and Reimbursement. ........................... 51
Section 7.8. Corporate Agent Required; Eligibility. .................... 52
Section 7.9. Resignation and Removal; Appointment
of Successor. ................................................... 52
Section 7.10. Acceptance of Appointment by Successor. ................... 54
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business. ...................................................... 54
v
<PAGE> 7
PAGE
Section 7.12. Preservation of Information;
Communications to Holders. ...................................... 55
Section 7.13. No Obligations of Agent. .................................. 56
Section 7.14. Tax Compliance. .......................................... 56
ARTICLE VIII
Supplemental Agreements ................................................. 57
Section 8.1. Supplemental Agreements Without Consent of
Holders. ....................................................... 57
Section 8.2. Supplemental Agreements with Consent of
Holders. ....................................................... 57
Section 8.3. Execution of Supplemental Agreements. .................... 59
Section 8.4. Effect of Supplemental Agreements. ....................... 59
Section 8.5. Reference to Supplemental Agreements. .................... 59
ARTICLE IX
Consolidation, Merger, Sale or Conveyance.................................. 60
Section 9.1. Covenant Not to Merge, Consolidate, Sell
or Convey Property Except Under Certain
Conditions. .................................................... 60
Section 9.2. Rights and Duties of Successor
Corporation. .................................................... 60
Section 9.3. Opinion of Counsel to Agent. ............................. 61
ARTICLE X
Covenants ................................................................. 61
Section 10.1. Performance Under Purchase Contracts ...................... 61
Section 10.2. Maintenance of Office or Agency. .......................... 62
vi
<PAGE> 8
PAGE
Section 10.3. Company to Reserve Common Stock. ......................... 62
Section 10.4. Covenants as to Common Stock. ............................. 63
Section 10.5. Statements of Officers of the Company
as to Default. ................................................. 63
EXHIBIT A
vii
<PAGE> 9
PURCHASE CONTRACT AGREEMENT, dated as of __________, 1997, between CMS
Energy Corporation, a Michigan corporation (the "Company"), and ___________,
acting as purchase contract agent for the Holders of Securities from time to
time (the "Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Security Certificates evidencing the Securities.
All things necessary to make the Company's obligations under the
Securities, when the Security Certificates are executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Agent, as
in this Agreement provided, the valid obligations of the Company, and to
constitute these presents a valid agreement of the Company, in accordance with
its terms, have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed as follows:
Definitions and Other Provisions
of General Application
Section 1.1. Definitions.
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular; and
(2) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as
1
<PAGE> 10
a whole and not to any particular Article, Section or other subdivision.
"Act" when used with respect to any Holder, has the meaning specified in
Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means the Person named as the "Agent" in the first paragraph of
this instrument until a successor Agent shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter "Agent" shall mean the
Person who is then the Agent hereunder.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Market Value" has the meaning specified in Section 5.1.
"Bankruptcy Code" means title 11 of the United States Code, or any other
law of the United States that from time to time provides a uniform system of
bankruptcy laws.
"Board Resolution" means the board of directors of the Company or a duly
authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification
and delivered to the Agent.
2
<PAGE> 11
"Business Day" means any day that is not a Saturday, Sunday or a day on
which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to be closed.
"Closing Price" has the meaning specified in Section 5.1.
"Collateral Agent" means , as Collateral Agent under the
Pledge Agreement until a successor Collateral Agent shall have become
such pursuant to the applicable provisions of the Pledge Agreement, and
thereafter "Collateral Agent" shall mean the Person who is then the Collateral
Agent thereunder.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor shall have become such pursuant to the
applicable provision of this Agreement, and thereafter "Company" shall
mean such successor.
"Corporate Trust Office" means the principal corporate trust office of the
Agent at which, at any particular time, its corporate trust business shall be
administered, which office at the date hereof is located at ,
except that for purposes of Section 10.2, such term shall mean the office or
agency of the Agent in the Borough of Manhattan, the City of
New York, which office at the date hereof is located at
"Current Market Price" has the meaning specified in Section 5.6(a)(8).
"Deferred Yield Enhancement Payments" has the meaning specified in Section
5.3.
"Depositary" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for the Securities as contemplated by
Section 3.5.
3
<PAGE> 12
"Early Settlement" has the meaning specified in Section 5.9(a).
"Early Settlement Amount" has the meaning specified in Section 5.9(a).
"Early Settlement Date" has the meaning specified in Section 5.9(a).
"Early Settlement Rate" has the meaning specified in Section 5.9(b).
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time, and the
rules and regulations promulgated thereunder.
"Excess Treasury Notes" has the meaning specified in Section 4.2.
"Expiration Date" has the meaning specified in Section 1.4.
"Expiration Time" has the meaning specified in Section 5.6(a)(6).
"Final Settlement Date" means __________, 1999.
"Final Settlement Fund" has the meaning specified in Section 5.5.
"Global Security Certificate" means a Security Certificate that evidences
all or part of the Securities and is registered in the name of a Depositary or
a nominee thereof.
"Holder," when used with respect to a Security Certificate (or a
Security), means a Person in whose name the Security evidenced by such
Security Certificate (or the Security Certificate evidencing such Security) is
registered in the Security Register, subject to Section 3.7.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Company by its Chairman of the Board, any Vice
Chairman, its President or a Vice President and by its Treasurer, an Assistant
4
<PAGE> 13
Treasurer, its Secretary or an Assistant Secretary, and delivered to the Agent.
"NYSE" has the meaning specified in Section 5.1.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, any Vice Chairman of the Board, the President or any Vice President and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Agent.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
who may be an employee of or counsel to the Company and who shall be reasonably
acceptable to the Agent.
"Outstanding Securities" means, as of the date of determination, all
Securities evidenced by then Outstanding Security Certificates, except:
(i) If a Termination Event has occurred, Securities for which the
underlying Treasury Notes have been theretofore deposited with the Agent
in trust for the Holders of such Securities; and
(ii) On and after the applicable Early Settlement Date, Securities
as to which the Holder has elected to effect Early Termination of the
related Purchase Contracts;
provided, however, that in determining whether the Holders of the requisite
number of Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
Affiliate of the Company shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Agent shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Agent knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Agent the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any Affiliate of the Company.
5
<PAGE> 14
"Outstanding Security Certificates" means, as of the date of
determination, all Security Certificates theretofore authenticated, executed
and delivered under this Agreement, except:
(i) Security Certificates theretofore cancelled by the Agent or
delivered to the Agent for cancellation; and
(ii) Security Certificates in exchange for or in lieu of which
other Security Certificates have been authenticated, executed on behalf
of the Holder and delivered pursuant to this Agreement, other than any
such Security Certificate in respect of which there shall have been
presented to the Agent proof satisfactory to it that such Security
Certificate is held by a bona fide purchaser in whose hands the
Securities evidenced by such Security Certificate are valid obligations
of the Company.
"Payment Date" means each __________ and __________, commencing _________,
1997.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge" means the pledge under the Pledge Agreement of the Treasury Notes
constituting a part of the Securities.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, among the Company, the Collateral Agent and the Agent, on its own
behalf and as attorney-in-fact for the Holders from time to time of the
Securities.
"Predecessor Security Certificate" of any particular Security Certificate
means every previous Security Certificate evidencing all or a portion of the
rights and obligations of the Holder under the Securities evidenced thereby;
and, for the purposes of this definition, any Security Certificate
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security Certificate shall be
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<PAGE> 15
deemed to evidence the same rights and obligations of the Holder as the
mutilated, destroyed, lost or stolen Security Certificate.
"Purchase Contract," when used with respect to any Security, means the
contract obligating the Company to sell and the Holder of such Security to
purchase Common Stock on the terms and subject to the conditions set forth in
Article Five hereof.
"Purchased Shares" has the meaning specified in Section 5.6(a)(6).
"Record Date" for the interest and Yield Enhancement Payments payable on
any Payment Date means [, as to any Global Security Certificate,] the Business
Day next preceding such Payment Date, and as to any other Security
Certificate, the 15th day of the month preceding such Payment Date.
"Reorgainization Event" has the meaning specified in Section 5.6(b).
"Responsible Officer," when used with respect to the Agent, means any
officer of the Agent assigned by the Agent to administer its corporate trust
matters.
"Security" means the collective rights and obligations of a Holder of a
Security Certificate in respect of Treasury Notes with a principal amount
equal to the Stated Amount, subject to the Pledge thereof, and a Purchase
Contract.
"Security Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Securities specified on
such certificate.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5.
"Settlement Rate" has the meaning specified in Section 5.1.
"Stated Amount" means $______.
"Termination Date" means the date, if any, on which a Termination Event
occurs.
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"Termination Event" means the occurrence of any of the following events:
(i) at any time on or prior to the Final Settlement Date, a judgment, decree or
order by a court having jurisdiction in the premises shall have been entered
granting relief under the Bankruptcy Code, adjudicating the Company to be
insolvent, or approving as properly filed a petition seeking reorganization
or liquidation of the Company under the Bankruptcy Code or any other similar
applicable Federal or State law, and, unless such judgment, decree or order
shall have been entered within 60 days prior to the Final Settlement Date, such
decree or order shall have continued undischarged and unstayed for a period of
60 days; or (ii) a judgment, decree or order of a court having jurisdiction in
the premises for the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of the Company or of its property, or for
the winding up or liquidation of its affairs, shall have been entered, and,
unless such judgment, decree or order shall have been entered within 60 days
prior to the Final Settlement Date, such judgment, decree or order shall have
continued undischarged and unstayed for a period of 60 days, or (iii) at any
time on or prior to the Final Settlement Date the Company shall file a petition
for relief under the Bankruptcy Code, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization or liquidation under the United States Bankruptcy Code
or any other similar applicable Federal or State law, or shall consent to the
filing of any such petition, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency of it or of
its property, or shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they become
due.
"Threshold Appreciation Price" has the meaning specified in Section 5.1.
"TIA" means the Trust Indenture Act of 1939, as amended, or any successor
statute.
"Trading Day" has the meaning specified in Section 5.1.
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<PAGE> 17
"Treasury Notes" means _____% United States Treasury Notes due __________,
1999.
"Underwriting Agreement" means the Underwriting Agreement dated ________,
1997 between the Company and , as
representatives of the several
Underwriters named therein.
"Vice President" means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president."
"Yield Enhancement Payment" means the fee payable by the Company in
respect of each Purchase Contract, equal to ____% per annum of the Stated
Amount, accruing from __________, 1997, computed on the basis of the actual
number of days elapsed in a year of 365 or 366 days, as the case may be,
plus any Deferred Yield Enhancement Payments accrued pursuant to Section 5.3,
except that on the initial Payment Date the Yield Enhancement Payment shall be
reduced by an amount equal to accrued interest to __________, 1997, on the
Treasury Note constituting a part of a Security.
Section 1.2. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Agreement, upon any
application or request by the Company to the Agent to take any action under any
provision of this Agreement, the Company shall furnish to the Agent an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Agreement relating to the proposed action have been complied with
and 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
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 shall include:
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<PAGE> 18
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
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 1.3. Form of Documents Delivered to Agent.
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.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows,
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<PAGE> 19
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
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, they may, but need not, be consolidated and
form one instrument.
Section 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent 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 Agent and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Agreement and (subject to Section 7.1) conclusive in favor
of the Agent and the Company, 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 affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, 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 manner which the Agent deems sufficient.
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<PAGE> 20
(c) The ownership of Securities shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security Certificate
evidencing such Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Agent or the Company in reliance thereon, whether or
not notation of such action is made upon such Security Certificate.
(e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Agreement to be given, made or taken
by Holders of Securities. If any record date is set pursuant to this paragraph,
the Holders of Outstanding Securities on such record date, and no other
Holders, shall be entitled to take the relevant action, whether or not such
Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite number of Outstanding Securities on
such record date. Nothing in this paragraph shall be construed to prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite number of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Agent in writing and to each
Holder of Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the Company
may designate any date as the "Expiration Date" and from time to time may
change the Expira-
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<PAGE> 21
tion Date to any earlier or later day; provided that no such change shall be
effective unless notice of the proposed new Expiration Date is given to the
Agent in writing, and to each Holder of Securities in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the Company shall be deemed to have initially designated the 180th day after
such record date as the Expiration Date with respect thereto, subject to its
right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
Section 1.5. Notices, etc., to Agent and the Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Agreement to be
made upon, given or furnished to, or filed with,
(1) the Agent by any Holder or by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing and personally delivered
or mailed, first-class postage prepaid, to the Agent at ________________,
Attention:______________________, or at any other address previously
furnished in writing by the Agent to the Holders and the Company, or
(2) the Company by the Agent or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing and personally delivered
or mailed, first-class postage prepaid, to the Company at________________,
Attention: ____________________, or at any other
address previously furnished in writing to the Agent by the Company.
Section 1.6. Notice to Holders; Waiver.
Where this Agreement provides for notice to Holders of any event, such
notice shall be sufficiently given
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<PAGE> 22
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Agent, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Agent shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7. 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 1.8. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 1.9. Separability Clause.
In case any provision in this Agreement or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
Section 1.10. Benefits of Agreement.
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<PAGE> 23
Nothing in this Agreement or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefits or any legal or equitable right, remedy
or claim under this Agreement. The Holders from time to time shall be
beneficiaries of this Agreement and shall be bound by all of the terms and
conditions hereof and of the Securities evidenced by their Security
Certificates by their acceptance of delivery thereof.
Section 1.11. Governing Law.
This Agreement and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
Section 1.12. Legal Holidays.
In any case where any Payment Date, any Early Settlement Date or the Final
Settlement Date shall not be a Business Day, then (notwithstanding any other
provision of this Agreement or of the Securities) payment in respect of
interest on Treasury Notes or Yield Enhancement Payments shall not be made,
Purchase Contracts shall not be performed and Early Settlement shall not be
effected on such date, but such payments shall be made, or the Purchase
Contracts shall be performed or Early Settlement effected, as applicable, on
the next succeeding Business Day with the same force and effect as if made on
such Payment Date, Early Settlement Date or Final Settlement Date, as the case
may be; provided, that no interest shall accrue or be payable by the Company or
any Holder for the period from and after any such Payment Date, Early
Settlement Date or Final Settlement Date, as the case may be.
Section 1.13. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts
shall together constitute one and the same instrument.
Section 1.14. Inspection of Agreement.
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<PAGE> 24
A copy of this Agreement shall be available at all reasonable times at the
Corporate Trust Office for inspection by any Holder.
ARTICLE II
Security Certificate Forms
Section 2.1. Forms of Security Certificates Generally.
The Security Certificates (including the form of Purchase Contracts
forming part of the Securities evidenced thereby) shall be in substantially the
form set forth in Exhibit A hereto, with such letters, numbers or other marks
of identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Securities are listed or Depositary therefor,
or as may, consistently herewith, be determined by the officers of the Company
executing such Security Certificates, as evidenced by their execution of the
Security Certificates.
The definitive Security Certificates shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing the Security
Certificates, consistent with the provisions of this Agreement, as evidenced by
their execution thereof.
Every Global Security Certificate authenticated, executed on behalf of the
Holders and delivered hereunder shall bear a legend in substantially the
following form:
THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN
THE
MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER
REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
THIS
SECURITY CERTIFICATE MAY NOT BE EXCHANGED IN WHOLE OR IN PART
FOR A
SECURITY CERTIFICATE REGISTERED, AND NO TRANSFER OF THIS SECURITY
CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF
ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT
IN THE LIMITED CIRCUM-
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STANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.
Section 2.2. Form of Agent's Certificate of Authentication.
The form of the Agent's certificate of authentication of the Securities
shall be in substantially the form set forth on the form of the Security
Certificates.
ARTICLE III
The Securities
Section 3.1. Title and Terms; Denominations.
The aggregate number of Securities evidenced by Security Certificates
authenticated, executed on behalf of the Holders and delivered hereunder is
limited to __________ (subject to increase up to a maximum of __________ to the
extent the over-allotment option of the underwriters under the Purchase
Agreement is exercised), except for Security Certificates authenticated,
executed and delivered upon registration of transfer of, in exchange for, or in
lieu of, other Security Certificates pursuant to Section 3.4, 3.5, 3.6, 5.9 or
8.5.
The Security Certificates shall be issuable only in registered form and
only in denominations of a single Security and any integral multiple thereof.
Section 3.2. Rights and Obligations Evidenced by the Security Certificates.
Each Security Certificate shall evidence the number of Securities
specified therein, with each such Security representing the ownership by the
Holder thereof of Treasury Notes with a principal amount equal to the Stated
Amount, subject to the Pledge of such Treasury Notes by such Holder pursuant to
the Pledge Agreement, and the rights and obligations of the Holder under one
Purchase Contract. Pursuant to the Pledge Agreement, dated as of the date
hereof, the Agent as attorney-in-fact for, and on behalf of, the Holder shall
pledge the Treasury Notes to the Collateral Agent and grant to the Collateral
Agent a security interest in the right, title,
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<PAGE> 26
and interest of such Holders in the Treasury Notes, for the benefit of the
Company, to secure the obligation of the Holders under the Purchase Contracts
to purchase the Common Stock of the Company. Prior to the purchase, if any, of
shares of Common Stock under the Purchase Contracts, the Securities shall not
entitle the Holders to any of the rights of a holder of shares of Common Stock,
including, without limitation, the right to vote or receive any dividends or
other payments or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or for the election of directors of the Company or
for any other matter, or any other rights whatsoever as stockholders of the
Company, except to the extent otherwise expressly provided in this Agreement.
Section 3.3. Execution, Authentication, Delivery and Dating.
Upon the execution and delivery of this Agreement, and at any time and
from time to time thereafter, the Company may deliver Security Certificates
executed by the Company to the Agent for authentication, execution on behalf of
the Holders and delivery, together with its Issuer Order for authentication of
such Security Certificates, and the Agent in accordance with such Issuer Order
shall authenticate, execute on behalf of the Holder and deliver such Security
Certificates.
The Security Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, its President or one
of its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant Secretaries. The signature of any of
these officers on the Security Certificates may be manual or facsimile.
Security Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Security
Certificates or did not hold such offices at the date of such Security
Certificates.
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<PAGE> 27
No Purchase Contract underlying a Security evidenced by a Security
Certificate shall be valid until such Security Certificate has been executed on
behalf of the Holder by the manual signature of an authorized signatory of
the Agent, as such Holder's attorney-in-fact. Such signature by an authorized
signatory of the Agent shall be conclusive evidence that the Holder of such
Security Certificate has entered into the Purchase Contracts underlying the
Securities evidenced by such Security Certificate.
Each Security Certificate shall be dated the date of its authentication.
No Security Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on
such Security Certificate a certificate of authentication substantially in the
form provided for herein executed by an authorized signatory of the Agent by
manual signature, and such certificate upon any Security Certificate shall be
conclusive evidence, and the only evidence, that such Security Certificate has
been duly authenticated and delivered hereunder.
Section 3.4. Temporary Security Certificates.
Pending the preparation of definitive Security Certificates, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holders, and deliver, in lieu of such definitive
Security Certificates, temporary Security Certificates which are in
substantially the form set forth in Exhibit A hereto, with such letters,
numbers or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as may be required by
the rules of any securities exchange on which the Securities are listed, or as
may, consistently herewith, be determined by the officers of the Company
executing such Security Certificates, as evidenced by their execution of the
Security Certificates.
If temporary Security Certificates are issued, the Company will cause
definitive Security Certificates to be prepared without unreasonable delay.
After the preparation of definitive Security Certificates, the temporary
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<PAGE> 28
Security Certificates shall be exchangeable for definitive Security
Certificates upon surrender of the temporary Security Certificates at the
Corporate Trust Office, at the expense of the Company and without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Security
Certificates, the Company shall execute and deliver to the Agent, and the
Agent shall authenticate, execute on behalf of the Holder, and deliver in
exchange therefor, one or more definitive Security Certificates of authorized
denominations and evidencing a like number of Securities as the temporary
Security Certificate or Security Certificates so surrendered. Until so
exchanged, the temporary Security Certificates shall in all respects evidence
the same benefits and the same obligations with respect to the Securities
evidenced thereby as definitive Security Certificates.
Section 3.5. Registration; Registration of Transfer and Exchange.
The Agent shall keep at the Corporate Trust Office a register (the
register maintained in such office being herein referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Agent shall provide for the registration of Security
Certificates and of transfers of Security Certificates (the Agent, in such
capacity, the "Security Registrar").
Upon surrender for registration of transfer of any Security Certificate at
the Corporate Trust Office, the Company shall execute and deliver to the Agent,
and the Agent shall authenticate, execute on behalf of the designated
transferee or transferees, and deliver, in the name of the designated
transferee or transferees, one or more new Security Certificates of any
authorized denominations and evidencing a like number of Securities.
At the option of the Holder, Security Certificates may be exchanged for
other Security Certificates, of any authorized denominations and evidencing a
like number of Securities, upon surrender of the Security Certificates to be
exchanged at the Corporate Trust Office. Whenever any Security Certificates are
so surrendered for exchange, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the Holder, and
deliver the Security Certifi-
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<PAGE> 29
cates which the Holder making the exchange is entitled to receive.
All Security Certificates issued upon any registration of transfer or
exchange of a Security Certificate shall evidence the ownership of the same
number of Securities and be entitled to the same benefits and subject to the
same obligations, under this Agreement as the Securities evidenced by the
Security Certificate surrendered upon such registration of transfer or
exchange.
Every Security Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Agent) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Agent duly executed, by the Holder thereof or his attorney
duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of a Security Certificate, but the Company and the Agent may require
payment from the Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Security Certificates, other than any exchanges
pursuant to Sections 3.6 and 8.5 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder and deliver any Security
Certificate presented or surrendered for registration of transfer or for
exchange on or after the Final Settlement Date or the Termination Date. In lieu
of delivery of a new Security Certificate, upon satisfaction of the applicable
conditions specified above in this Section and receipt of appropriate
registration or transfer instructions from such Holder, the Agent shall (i) if
the Final Settlement Date has occurred, deliver the shares of Common Stock
issuable in respect of the Purchase Contracts forming a part of the Securities
evidenced by such Security Certificate, or (ii) if a Termination Event shall
have occurred prior to the Final Settlement Date, transfer the principal amount
of the Treasury Notes evidenced thereby, in each case subject to the applicable
conditions and in
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<PAGE> 30
accordance with the applicable provisions of Article Five hereof.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Security Certificates:
(1) Each Global Security Certificate authenticated and executed on
behalf of the Holders under this Agreement shall be registered in the
name of the Depositary designated for such Global Security Certificate
or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security Certificate
shall constitute a single Security Certificate for all purposes of this
Agreement.
(2) Notwithstanding any other provision in this Agreement, no
Global Security Certificate may be exchanged in whole or in part for
Security Certificates registered, and no transfer of a Global Security
Certificate in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security Certificate or
a nominee thereof unless (A) such Depositary (i) has notified the
Company that it is unwilling or unable to continue as Depositary for
such Global Security Certificate or (ii) has ceased to be a clearing
agency registered under the Exchange Act or (B) there shall have
occurred and be continuing a default by the Company in respect to its
obligations under one or more Purchase Contracts.
(3) Subject to Clause (2) above, any exchange of a Global Security
Certificate for other Security Certificates may be made in whole or in
part, and all Security Certificates issued in exchange for a Global
Security Certificate or any portion thereof shall be registered in such
names as the Depositary for such Global Security Certificate shall
direct.
(4) Every Security Certificate authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security Certificate or any portion thereof, whether pursuant to this
Section, Section 3.4, 3.6, 5.9 or 8.5 or otherwise, shall be
authenticated, executed on behalf of the Holders and delivered in the
form of,
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<PAGE> 31
and shall be, a Global Security Certificate, unless such Security
Certificate is registered in the name of a Person other than the
Depositary for such Global Security Certificate or a nominee thereof.
Section 3.6. Mutilated, Destroyed, Lost and Stolen Security Certificates.
If any mutilated Security Certificate is surrendered to the Agent, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange
therefor, a new Security Certificate, evidencing the same number of Securities
and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i) evidence to
their satisfaction of the destruction, loss or theft of any Security
Certificate, and (ii) such security or indemnity as may be required by them to
save each of them and any agent of any of them harmless, then, in the absence
of notice to the Company or the Agent that such Security Certificate has been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the Holder, and
deliver to the Holder, in lieu of any such destroyed, lost or stolen Security
Certificate, a new Security Certificate, evidencing the same number of
Securities and bearing a number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder, and deliver to the Holder, a
Security Certificate on or after the Final Settlement Date or the Termination
Date. In lieu of delivery of a new Security Certificate, upon satisfaction of
the applicable conditions specified above in this Section and receipt of
appropriate registration or transfer instructions from such Holder, the Agent
shall (i) if the Final Settlement Date has occurred, deliver the shares of
Common Stock issuable in respect of the Purchase Contracts forming a part of
the Securities evidenced by such Security Certificate, or (ii) if a Termination
Event shall have occurred prior to the Final Settlement Date, transfer the
principal amount of the Treasury Notes evidenced thereby, in
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each case subject to the applicable conditions and in accordance with the
applicable provisions of Article Five hereof.
Upon the issuance of any new Security Certificate under this Section, the
Company and the Agent may require the payment by the Holder 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 Agent)
connected therewith.
Every new Security Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder, whether or
not the destroyed, lost or stolen Security Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of this Agreement equally and proportionately with any
and all other Security Certificates delivered hereunder.
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
settlement of mutilated, destroyed, lost or stolen Security Certificates.
Section 3.7. Persons Deemed Owners.
Prior to due presentment of a Security Certificate for registration of
transfer, the Company and the Agent, and any agent of the Company or the Agent,
may treat the Person in whose name such Security Certificate is registered as
the owner of the Securities evidenced thereby, for the purpose of receiving
payments of interest on the Treasury Notes, receiving payments of Yield
Enhancement Payments, performance of the Purchase Contracts and for all other
purposes whatsoever, whether or not the payment of interest on the Treasury
Notes or any Yield Enhancement Payment payable in respect of the Purchase
Contracts constituting a part of the Securities evidenced thereby shall be
overdue and notwithstanding any notice to the contrary, and neither the Company
nor the Agent, nor any agent of the Company or the Agent, shall be affected by
notice to the contrary.
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Notwithstanding the foregoing, with respect to any Global Security
Certificate, nothing herein shall prevent the Company, the Agent or any agent
of the Company or the Agent, from giving effect to any written certification,
proxy or other authorization furnished by any Depositary (or its nominee), as a
Holder, with respect to such Global Security Certificate or impair, as between
such Depositary and owners of beneficial interests in such Global Security
Certificate, the operation of customary practices governing the exercise of
rights of such Depositary (or its nominee) as Holder of such Global Security
Certificate.
Section 3.8. Cancellation.
All Security Certificates surrendered for delivery of shares of Common
Stock on or after the Final Settlement Date, transfer of Treasury Notes after
the occurrence of a Termination Event or pursuant to an Early Settlement or
registration of transfer or exchange shall, if surrendered to any Person other
than the Agent, be delivered to the Agent and, if not already cancelled, shall
be promptly cancelled by it. The Company may at any time deliver to the Agent
for cancellation any Security Certificates previously authenticated, executed
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Security Certificates so delivered shall, upon Issuer
Order, be promptly cancelled by the Agent. No Security Certificates shall be
authenticated, executed on behalf of the Holder and delivered in lieu of or in
exchange for any Security Certificates cancelled as provided in this Section,
except as expressly permitted by this Agreement. All cancelled Security
Certificates held by the Agent shall be disposed of as directed by Issuer
Order.
If the Company or any Affiliate of the Company shall acquire any Security
Certificate, such acquisition shall not operate as a cancellation of such
Security Certificate unless and until such Security Certificate is delivered to
the Agent cancelled or for cancellation.
Section 3.9. Securities Not Separable.
Notwithstanding anything contained herein or in the Security Certificates
to the contrary, for so long as the Purchase Contract comprising a portion of
a Security re-
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mains in effect, such Security shall not be separable into its constituent
parts, for purposes of transfer or exchange of such Security, and the rights
and obligations of the Holder of such Security in respect of the Treasury Notes
and Purchase Contracts comprising such Security may be acquired, and may be
transferred and exchanged, only as a Security. Other than a Security
Certificate evidencing a Security, no Holder of a Security, or any transferee
thereof, shall be entitled to receive a certificate evidencing the ownership of
Treasury Notes or the rights and obligations of the Holder and the Company
under a Purchase Contract for so long as the Purchase Contract underlying the
Security remains in effect.
Section 3.10. No Consent To Assumption
Each Holder of a Security, by acceptance thereof, shall be deemed
expressly to have withheld any consent to the assumption under Section 365 of
the Bankruptcy Code or otherwise, of the Purchase Contract by the Company or
its trustee in the event that the Company becomes the debtor under the
Bankruptcy Code.
ARTICLE IV
The Treasury Notes
Section 4.1. Payment of Interest; Interest Rights Preserved.
Interest on any Treasury Note which is paid on any Payment Date shall,
subject to receipt thereof by the Agent from the Collateral Agent as provided
by the terms of the Pledge Agreement, be paid to the Person in whose name the
Security Certificate (or one or more Predecessor Security Certificates) of
which such Treasury Note is a part is registered at the close of business on
the Record Date next preceding such Payment Date.
Each Security Certificate evidencing Treasury Notes delivered under this
Agreement upon registration of transfer of or in exchange for or in lieu of any
other Security Certificate shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by
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<PAGE> 35
the Treasury Notes underlying such other Security Certificate.
In the case of any Security with respect to which Early Settlement of the
underlying Purchase Contract is effected on an Early Settlement Date after any
Record Date and on or prior to the next succeeding Payment Date, interest on
the Treasury Notes underlying such Security otherwise payable on such Payment
Date shall be payable on such Payment Date notwithstanding such Early
Settlement, and such interest shall, subject to receipt thereof by the Agent,
be paid to the Person in whose name the Security Certificate (or one or more
Predecessor Security Certificates) is registered at the close of business on
the Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Security with respect to which Early
Settlement of the underlying Purchase Contract is effected on an Early
Settlement Date, interest on the related Treasury Notes that would otherwise be
payable after the Early Settlement Date shall not be payable hereunder to the
Holder of such Security.
Section 4.2. Transfer of Treasury Notes Upon Occurrence of Termination Event.
Upon the occurrence of a Termination Event and the transfer to the Agent
of the Treasury Notes underlying such Securities pursuant to the terms of the
Pledge Agreement, the Agent shall request transfer instructions with respect to
such Treasury Notes from each Holder of Securities by written request mailed to
such Holder at his address as it appears in the Security Register, in respect
of the Treasury Notes underlying the Security Certificate held by such Holder.
Upon surrender to the Agent of a Security Certificate with such transfer
instructions in proper form for transfer of the Treasury Notes by Federal
Reserve Bank-Wire or other appropriate procedure, the Agent shall transfer the
Treasury Notes evidenced by such Security Certificate to such Holder in
accordance with such instructions. If a Security Certificate is not duly
surrendered to the Agent with appropriate transfer instructions, the Agent
shall hold the Treasury Notes evidenced by such Security Certificate as
custodian for the Holder of such Security Certificate.
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Treasury Notes shall be transferred only in denominations of $1,000 and
integral multiples thereof. As promptly as practicable following the occurrence
of a Termination Event, the Agent shall determine the excess of (i) the
aggregate principal amount of Treasury Notes underlying the Outstanding
Securities over (ii) the aggregate principal amount of Treasury Notes in
denominations of $1,000 and integral multiples thereof transferrable to Holders
of record on the date of such Termination Event (such excess being herein
referred to as the "Excess Treasury Notes"). As soon as practicable after
transfer to the Agent of the Treasury Notes underlying the Outstanding
Securities as provided in the Pledge Agreement, the Agent shall sell the Excess
Treasury Notes to or through one or more U.S. Government securities dealers at
then prevailing prices. The Agent shall deduct from the proceeds of such sales
all commissions and other out-of-pocket transaction costs incurred in
connection with such sales of Excess Treasury Notes and, until the net proceeds
of such sale or sales have been distributed to Holders of the Securities, the
Agent shall hold such proceeds as custodian for the Holders of Securities. Such
proceeds shall be held by the Agent uninvested without liability to any Person
for interest or other compensation thereon. Each Holder shall be entitled to
receive a portion, if any, of such net proceeds in lieu of Treasury Notes with
a principal amount of less than $1,000 determined by multiplying the aggregate
amount of such net proceeds by a fraction, the numerator of which is the
fraction of $1,000 in principal amount of Treasury Notes to which such Holder
would otherwise be entitled (after taking into account all Securities then held
by such Holder) and the denominator of which is the aggregate principal amount
of Excess Treasury Notes.
ARTICLE V
The Purchase Contracts
Section 5.1 Purchase of Shares of Common Stock.
Each Purchase Contract shall obligate the Holder of the related Security
to purchase, and the Company to sell, on the Final Settlement Date at a price
equal to the Stated Amount, a number of shares of Common Stock
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<PAGE> 37
equal to the Settlement Rate, unless, on or prior to the Final Settlement Date,
there shall have occurred a Termination Event or an Early Settlement with
respect to the Security of which such Purchase Contract is a part. The
"Settlement Rate" is equal to (a) if the Applicable Market Value (as defined
below) is greater than $_____ (the "Threshold Appreciation Price"), _____ of a
share of Common Stock per Purchase Contract, (b) if the Applicable Market
Value is less than or equal to the Threshold Appreciation Price but is greater
than the Stated Amount, a fractional share of Common Stock per Purchase
Contract equal to the Stated Amount divided by the Applicable Market Value
(rounded upward or downward to the nearest 1/10,000th of a share) and (c) if
the Applicable Market Value is less than or equal to the Stated Amount, one
share of Common Stock per Purchase Contract, in each case subject to adjustment
as provided in Section 5.6. As provided in Section 5.10, no fractional shares
of Common Stock will be issued upon settlement of Purchase Contracts.
The "Applicable Market Value" means the average of the Closing Prices per
share of Common Stock on each of the twenty consecutive Trading Days ending on
the second Trading Day immediately preceding the Final Settlement Date. The
"Closing Price" of the Common Stock on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of the Common Stock on the New York Stock Exchange (the "NYSE") on such
date or, if the Common Stock is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, as reported by The Nasdaq Stock Market, or, if the Common Stock is
not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Stock on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. A "Trading
Day" means a day on which the Common Stock (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at
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<PAGE> 38
least once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the
Common Stock.
Each Holder of a Security Certificate evidencing Securities, by his
acceptance thereof, authorizes the Agent to enter into and perform
the related Purchase Contracts on his behalf as his attorney-in-fact, agrees to
be bound by the terms and provisions thereof, covenants and agrees to perform
his obligations under such Purchase Contracts, consents to the provisions
hereof, irrevocably authorizes the Agent as his attorney-in-fact to enter into
and perform the Pledge Agreement on his behalf as his attorney-in-fact, and
consents to and agrees to be bound by the Pledge of the Treasury Notes
underlying such Security Certificate pursuant to the Pledge Agreement; provided
that upon an Event of Termination the rights of the Holder of such Security
under the Purchase Contract may be enforced without regard to any other rights
or obligations. Each Holder of a Security, by his acceptance thereof, further
covenants and agrees, that, to the extent and in the manner provided in Section
5.4 and the Pledge Agreement, but subject to the terms thereof, payments in
respect of principal of the Treasury Notes on the Final Settlement Date shall
be paid by the Collateral Agent to the Company in satisfaction of such Holder's
obligations under such Purchase Contract and such Holder shall acquire no
right, title or interest in such payments.
Upon registration of transfer of a Security Certificate evidencing
Purchase Contracts, the transferee shall be bound (without the necessity of any
other action on the part of such transferee), under the terms of this
Agreement, the Purchase Contracts evidenced thereby and the Pledge Agreement
and the transferor shall be released from the obligations under the Purchase
Contracts evidenced by the Security Certificates so transferred. The Company
covenants and agrees, and each Holder of a Security Certificate, by his
acceptance thereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
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Section 5.2. Yield Enhancement Payments.
Subject to Section 5.3, the Company shall pay, on each Payment Date, the
Yield Enhancement Payments payable in respect of each Purchase Contract to the
Person in whose name the Security Certificate (or one or more Predecessor
Security Certificates) evidencing such Purchase Contract is registered at the
close of business on the Record Date next preceding such Payment Date. The
Yield Enhancement Payment will be payable at the office of the Agent in The
City of New York maintained for that purpose or, at the option of the Company,
by check mailed to the address of the Person entitled thereto at such address
as it appears on the Security Register.
Each Security Certificate delivered under this Agreement upon registration
of transfer of or in exchange for or in lieu of any other Security Certificate
shall carry the rights to Yield Enhancement Payments accrued and unpaid, and to
accrue, which were carried by the Purchase Contracts evidenced by such other
Security Certificate.
[In the case of any Security with respect to which Early Settlement of the
underlying Purchase Contract is effected on an Early Settlement Date after any
Record Date and on or prior to the next succeeding Payment Date, Yield
Enhancement Payments otherwise payable on such Payment Date shall be payable on
such Payment Date notwithstanding such Early Settlement, and such Yield
Enhancement Payments shall be paid to the Person in whose name the Security
Certificate evidencing such Security (or one or more Predecessor Security
Certificates) is registered at the close of business on such Record Date.
Except as otherwise expressly provided in the immediately preceding sentence,
in the case of any Security with respect to which Early Settlement of the
underlying Purchase Contract is effected on an Early Settlement Date, Yield
Enhancement Payments that would otherwise be payable after the Early Settlement
Date with respect to the Purchase Contract underlying such Security shall not
be payable.]
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The Company's obligations with respect to Yield Enhancement Payments are
subordinate and junior in right of payment to all liabilities of the Company
and pari passu with the most senior preferred stock issued from time to time,
if any, by the Company.
Section 5.3. Deferral of Payment Dates For Yield Enhancement Payment.
The Company shall have the right, at any time prior to the Final
Settlement Date, to defer the payment of any or all of the Yield Enhancement
Payments otherwise payable on any Payment Date, but only if the Company shall
give the Holders and the Agent written notice of its election to defer such
payment (specifying the amount to be deferred) at least ten Business Days prior
to the earlier of (i) the next succeeding Payment Date or (ii) the date the
Company is required to give notice of the Record Date or Payment Date with
respect to payment of such Yield Enhancement Payment to the New York Stock
Exchange or other applicable self-regulatory organization or to Holders of the
Securities, but in any event not less than two Business Days prior to such
Record Date. Any Yield Enhancement Payments so deferred shall bear additional
Yield Enhancement Payments thereon at the rate of_____% per annum (computed on
the basis of the actual number of days elapsed in a year of 365 or 366 days, as
the case may be), compounding on each succeeding Payment Date, until paid in
full (such deferred installments of Yield Enhancement Payments together with
the additional Yield Enhancement Payments accrued thereon, are referred to
herein as the "Deferred Yield Enhancement Payments"). Deferred Yield
Enhancement Payments shall be due on the next succeeding Payment Date except to
the extent that payment is deferred pursuant to this Section. No Yield
Enhancement Payments may be deferred to a date that is after the Final
Settlement Date or, with respect to any particular Purchase Contract, Early
Settlement thereof.
In the event that the Company elects to defer the payment of Yield
Enhancement Payments on the Purchase Contracts until the Final Settlement Date,
each holder will receive on the Final Settlement Date, in lieu of a cash
payment, a number of shares of Common Stock (in addition to a number of shares
of Common Stock equal to the Settlement Rate) equal to (x) the aggregate amount
of
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Deferred Yield Enhancement Payments payable to a Holder divided by (y) the
Applicable Market Value.
No fractional shares of Common Stock will be issued by the Company with
respect to the payment of Deferred Yield Enhancement Payments on the Final
Settlement Date. In lieu of fractional shares otherwise issuable with respect
to such payment of Deferred Yield Enhancement Payments, the Holder will be
entitled to receive an amount in cash as provided in Section 5.10.
In the event the Company exercises its option to defer the payment of
Yield Enhancement Payments, then (a) the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock (other than (i) purchase or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares
of Common Stock, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged) or make any guarantee
payments with respect to the foregoing), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to such Yield Enhancement Payments and (c) the
Company shall not make any guarantee payments with respect to the foregoing.
Section 5.4. Payment of Purchase Price.
The purchase price for the shares of Common Stock purchased pursuant to a
Purchase Contract, shall be paid by application of payments received by the
Company on the Final Settlement Date from the Collateral Agent pursuant to the
Pledge Agreement in respect of the principal of the Treasury Notes Pledged to
secure the obliga-
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tions. of the relevant Holder under such Purchase Contract. Such
application shall satisfy in full the obligations under such Purchase Contract
of the Holder of the Security of which such Purchase Contract is a part. The
Company shall not be obligated to issue any shares of Common Stock in respect
of a Purchase Contract or deliver any certificates therefor to the Holder
unless it shall have received payment in full of the aggregate purchase price
for the shares of Common Stock to be purchased thereunder in the manner herein
set forth.
Section 5.5. Issuance of Shares of Common Stock.
Unless a Termination Event shall have occurred on or prior to the Final
Settlement Date, on the Final Settlement Date, upon its receipt of payment in
full of the purchase price for the shares of Common Stock purchased by the
Holders pursuant to the foregoing provisions of this Article, and in payment
of Deferred Yield Enhancement Payments, if any, owed by the Company to the
Holders and subject to Section 5.6(b), the Company shall issue and deposit with
the Agent, for the benefit of the Holders of the Outstanding Securities,
one or more certificates representing the shares of Common Stock registered in
the name of the Agent (or its nominee) as custodian for the Holders (such
certificates for shares of Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the "Final
Settlement Fund") to which the Holders are entitled hereunder. Subject to the
foregoing, upon surrender of a Security Certificate to the Agent on or after
the Final Settlement Date, together with settlement instructions thereon duly
completed and executed, the Holder of such Security Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Common Stock which such Holder is entitled to receive
pursuant to the provisions of this Article Five (after taking into account all
Securities then held by such Holder) together with cash in lieu of fractional
shares as provided in Section 5.10 and any dividends or distributions with
respect to such shares constituting part of the Final Settlement Fund, but
without any interest thereon, and the Security Certificate so surrendered shall
forthwith be cancelled. Such shares shall be registered in the name of the
Holder or the Holder's designee as specified in the settlement instructions on
the Security Certificate. If any shares
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<PAGE> 43
of Common Stock issued in respect of a Purchase Contract and in
payment of any Deferred Yield Enhancement Payments are to be registered to a
Person other than the Person in whose name the Security Certificate evidencing
such Purchase Contract is registered, no such registration shall be made unless
the Person requesting such registration has paid any transfer and other taxes
required by reason of such registration in a name other than that of the
registered Holder of the Security Certificate evidencing such Purchase Contract
or has established to the satisfaction of the Company that such tax either has
been paid or is not payable.
Section 5.6. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or other distribution
on any class of Common Stock of the Company in Common Stock, the Settlement
Rate in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or
other distribution shall be increased by dividing such Settlement Rate by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
increase to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes of this
paragraph (1), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock (not being available on an equivalent basis to
Holders of the Securities upon settlement of the Purchase Contracts underlying
such Securities) entitling them, for a period expir-
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ing within 45 days after the record date for the determination of stockholders
entitled to receive such rights, options or warrants, to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price per share of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights, options or
warrants (other than pursuant to a dividend reinvestment plan), the Settlement
Rate in effect at the opening of business on the day following the date fixed
for such determination shall be increased by dividing such Settlement Rate by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this paragraph (2), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company shall not issue any such rights, options or warrants in
respect of shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided or
split into a greater number of shares of Common Stock, the Settlement Rate in
effect at the opening of business on the day following the day upon which such
subdivision or split becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Settlement Rate in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such increase
or reduction, as the case may be, to become effective immediately after the
opening of business on
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the day following the day upon which such subdivision, split or combination
becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in paragraph (2)
of this Section, any dividend or distribution paid exclusively in cash and any
dividend or distribution referred to in paragraph (1) of this Section), the
Settlement Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Settlement Rate in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator
shall be the Current Market Price per share of the Common Stock on the date
fixed for such determination less the then fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and described
in a Board Resolution filed with the Agent) of the portion of the assets or
evidences of indebtedness so distributed applicable to one share of Common
Stock and the denominator shall all be such Current Market Price per share of
the Common Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination
of stockholders entitled to receive such distribution. In any case in which
this paragraph (4) is applicable, paragraph (2) of this Section shall not be
applicable.
(5) In case the Company shall, (I) by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed in
a Reorganization Event to which Section 5.6(b) applies or as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (II) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to this paragraph (5) or paragraph (6)
of this Section has been made and (III) the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) of consideration
payable in respect of any tender or exchange offer
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by the Company or any of its subsidiaries for all or any portion
of the Common Stock concluded within the 12 months preceding the date of
payment of the distribution described in clause (I) above and in respect of
which no adjustment pursuant to this paragraph (5) or paragraph (6) of this
Section has been made, exceeds 15% of the product of the Current Market Price
per share of the Common Stock on the date for the determination of holders of
shares of Common Stock entitled to receive such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each such
case, immediately after the close of business on such date for determination,
the Settlement Rate shall be increased so that the same shall equal the rate
determined by dividing the Settlement Rate in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the Current Market Price per share of the Common Stock on the
date fixed for such determination less an amount equal to the quotient of (x)
the combined amount distributed or payable in the transactions described in
clauses (I), (II) and (III) above and (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the Current Market Price per share of the Common Stock on
such date for determination.
(6) In case (I) a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
Purchased Shares) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with (II) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer, by the
Company or any subsidiary of the Company for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such
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<PAGE> 47
tender or exchange offer and in respect of which no adjustment pursuant to
paragraph (5) of this Section or this paragraph (6) has been made and (III) the
aggregate amount of any distributions to all holders of the Company's Common
Stock made exclusively in cash within the 12 months preceding the expiration of
such tender or exchange offer and in respect of which no adjustment pursuant to
paragraph (5) of this Section or this paragraph (6) has been made, exceeds 15%
of the product of the Current Market Price per share of the Common Stock as of
the last time (the "Expiration Time") tenders could have been made pursuant to
such tender or exchange offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time, then, and in each such case, immediately prior to the opening of business
on the day after the date of the Expiration Time, the Settlement Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Settlement Rate immediately prior to the close of business on the date of the
Expiration Time by a fraction (i) the numerator of which shall be equal to (A)
the product of (I) the Current Market Price per share of the Common Stock on
the date of the Expiration Time and (II) the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time less (B) the
amount of cash plus the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the transactions
described in clauses (I), (II) and (III) above (assuming in the case of clause
(I) the acceptance, up to any maximum specified in the terms of the tender or
exchange offer, of Purchased Shares), and (ii) the denominator of which shall
be equal to the product of (A) the Current Market Price per share of the Common
Stock as of the Expiration Time and (B) the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time less the
number of all shares validly tendered and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 5.6(b) applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the
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effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution"
and the "date fixed for such determination" within the meaning of paragraph (4)
of this Section), and (b) a subdivision, split or combination, as the case may
be, of the number of shares of Common Stock outstanding immediately prior to
such reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall
be deemed to be "the day upon which such subdivision or split becomes
effective" or "the day upon which such combination becomes effective", as the
case may be, and "the day upon which such subdivision, split or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per share of Common Stock on any day means
the average of the daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before
the "ex date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used with
respect to any issuance or distribution, shall mean the first date on which the
Common Stock trades regular way on such exchange or in such market without the
right to receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be calculated to the
nearest 1/10,000th of a share of Common Stock (or if there is not a nearest
1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment
in the Settlement Rate shall be required unless such adjustment would require
an increase or decrease of at least one percent therein; provided, however,
that any adjustments which by reason of this subparagraph are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Settlement Rate pursuant to
paragraph (1), (2), (3), (4), (5), (6), (7) or (10) of this Section 5.6(a), an
adjustment shall also be made to the Applicable Market Value solely to
determine which of clauses (a), (b) or (c) of the definition of Settlement Rate
in Section 5.1 will apply on the Final Settlement Date. Such adjustment shall
be made by multiplying the Applicable
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Market Value by a fraction of which the numerator shall be the Settlement
Rate immediately after such adjustment pursuant to paragraph (1), (2), (3),
(4), (5), (6), (7) or (10) of this Section 5.6(a) and the denominator shall be
the Settlement Rate immediately before such adjustment.
(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be advisable in
order to avoid or diminish any income tax to any holders of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for income tax purposes or for any other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization Event. In
the event of (i) any consolidation or merger of the Company, with or into
another Person (other than a merger or consolidation in which the Company is
the continuing corporation and in which the Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for cash,
securities or other property of the Company or another corporation), (ii) any
sale, transfer, lease or conveyance to another Person of the property of the
Company as an entirety or substantially as an entirety, (iii) any statutory
exchange of securities of the Company with another Person (other than in
connection with a merger or acquisition) or (iv) any liquidation, dissolution
or winding up of the Company other than as a result of or after the occurrence
of a Termination Event (any such event, a "Reorganization Event"), the
Settlement Rate will be adjusted to provide that each Holder of Securities will
receive on the Final Settlement Date with respect to each Purchase Contract
forming a part thereof, the kind and amount of securities, cash and other
property receivable upon such Reorganization Event by a Holder of the number of
shares of Common Stock issuable on account of each Purchase Contract if the
Final Settlement Date had occurred immediately prior to such Reorganization
Event, assuming such Holder of Common Stock is not a Person with which the
Company consolidated or into which the Company merged or which merged into the
Company or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an Affiliate of a constituent Person, and failed to
exercise his rights of election, if any, as to
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the kind or amount of securities, cash and other property receivable upon such
Reorganization Event (provided that if the kind or amount of securities, cash
and other property receivable upon such Reorganization Event is not the same
for each share of Common Stock held immediately prior to such Reorganization
Event by other than a constituent Person or an Affiliate thereof and in respect
of which such rights of election shall not have been exercised ("non-electing
share"), then for the purpose of this Section the kind and amount of
securities, cash and other property receivable upon such Reorganization Event
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). In the event
of such a Reorganization Event, the Person formed by such consolidation, merger
or exchange or the Person which acquires the assets of the Company or, in the
event of a liquidation or dissolution of the Company, the Company or a
liquidating trust created in connection therewith, shall execute and deliver to
the Agent an agreement supplemental hereto providing that the Holders of each
Outstanding Security shall have the rights provided by this Section 5.6. Such
supplemental agreement shall provide for adjustments which, for events
subsequent to the effective date of such supplemental agreement, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section shall similarly apply to
successive Reorganization Events.
Section 5.7. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein provided, the
Company shall:
(i) forthwith compute the adjusted Settlement Rate in accordance
with Section 5.6 and prepare and transmit to the Agent an Officers'
Certificate setting forth the Settlement Rate, the method of
calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based; and
(ii) within 10 Business Days following the occurrence of an event
that permits or requires an
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adjustment to the Settlement Rate pursuant to Section 5.6 (or if the
Company is not aware of such occurrence, as soon as practicable after
becoming so aware), provide a written notice to the Holders of the
Securities of the occurrence of such event and a statement in reasonable
detail setting forth the method by which the adjustment to the
Settlement Rate was determined and setting forth the adjusted
Settlement Rate.
(b) The Agent shall not at any time be under any duty or responsibility
to any holder of Securities to determine whether any facts exist which may
require any adjustment of the Settlement Rate, or with respect to the nature or
extent or calculation of any such adjustment when made, or with respect to the
method employed in making the same. The Agent shall not be accountable with
respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at the time be issued
or delivered with respect to any Purchase Contract; and the Agent makes no
representation with respect thereto. The Agent shall not be responsible for any
failure of the Company to issue, transfer or deliver any shares of Common Stock
pursuant to a Purchase Contract or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article.
Section 5.8. Termination Event; Notice.
The Purchase Contracts and the obligations and rights of the
Company and the Holders thereunder, including, without limitation, the rights
of the Holders to receive and the obligation of the Company to pay any Yield
Enhancement Payment, shall immediately and automatically terminate, without the
necessity of any notice or action by any Holder, the Agent or the Company, if,
on or prior to the Final Settlement Date, a Termination Event shall have
occurred. Upon and after the occurrence of a Termination Event, the Securities
shall thereafter represent the right to receive the Treasury Notes forming a
part of such Securities in accordance with the provisions of Section 4.2 and
the Pledge Agreement. Upon the occurrence of a Termination Event, the Company
shall promptly but in no event after two business days thereafter give written
notice to the Agent, the Collateral Agent and to
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the Holders, at their addresses as they appear in the Security Register.
Each Holder of Securities, by acceptance hereof, expressly withholds any
consent to the assumption (i.e., affirmance) of the Purchase Contracts by the
Company or its trustee in the event that the Company becomes the subject of a
case under the Bankruptcy Code.
Section 5.9. Early Settlement.
(a) Subject to and upon compliance with the provisions of this Section
5.9 at the option of the Holder thereof, any Purchase Contracts underlying
Securities having an aggregate Stated Amount equal to $______ or an integral
multiple thereof may be settled early ("Early Settlement") as provided herein.
In order to exercise the right to effect Early Settlement with respect to any
Purchase Contracts, the Holder of the Security Certificate evidencing such
Purchase Contracts shall deliver such Security Certificate to the Agent at the
Corporate Trust Office duly endorsed for transfer to the Company or in blank
with the form of Election to Settle Early on the reverse thereof duly completed
and accompanied by payment in the form of a certified or cashier's check
payable to the order of the Company in immediately available funds in an amount
(the "Early Settlement Amount") equal to (i) the product of (A) the Stated
Amount times (B) the number of Purchase Contracts with respect to which the
Holder has elected to effect Early Settlement [plus (ii) if such delivery is
made with respect to any Purchase Contracts during the period from the close of
business on any Record Date next preceding any Payment Date to the opening of
business on such Payment Date, an amount equal to the sum of (x) the Yield
Enhancement Payments payable on such Payment Date with respect to such Purchase
Contracts plus (y) the interest on the related Treasury Notes payable on such
Payment Date. Except as provided in the immediately preceding sentence and
subject to the second to last paragraph of Section 5.2, no payment or
adjustment shall be made upon Early Settlement of any Purchase Contract on
account of any Yield Enhancement Payments accrued on such Purchase Contract or
on account of any dividends on the Common Stock issued upon such Early
Settlement]. If the foregoing requirements are first satisfied with respect to
Purchase Contracts underlying any Securities at or prior to 5:00 p.m., New York
City
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time, on a Business Day, such day shall be the "Early Settlement
Date" with respect to such Securities and if such requirements are first
satisfied after 5:00 p.m., New York City time, on a Business Day or on a day
that is not a Business Day, the "Early Settlement Date" with respect to such
Securities shall be the next succeeding Business Day.
(b) Upon Early Settlement of Purchase Contracts by a Holder of the related
Securities, the Company shall issue, and the Holder shall be entitled to
receive, a number of shares of Common Stock on account of each Purchase
Contract as to which Early Settlement is effected equal to the Early Settlement
Rate; provided, however, that upon the Early Settlement of the Purchase
Contracts, the Holder of such related Securities will forfeit the right to
receive any Deferred Yield Enhancement Payments. The Early Settlement Rate
shall initially be equal to _____ and shall be adjusted in the same manner and
at the same time as the Settlement Rate is adjusted. As promptly as practicable
after Early Settlement of Purchase Contracts in accordance with the provisions
of this Section 5.9, the Company shall issue and shall deliver to the Agent at
the Corporate Trust Office a certificate or certificates for the full number of
shares of Common Stock issuable upon such Early Settlement together with
payment in lieu of any fraction of a share, as provided in Section 5.10.
(c) The Company shall cause the shares of Common Stock issuable, and
Treasury Notes deliverable, upon Early Settlement of Purchase Contracts to be
issued and delivered, in the case of such shares of Common Stock, and released
from the Pledge by the Collateral Agent and transferred, in the case of such
Treasury Notes, to the Agent, for delivery to the Holder thereof or its
designee, no later than the third Business Day after the applicable Early
Settlement Date.
(d) Upon Early Settlement of any Purchase Contracts, and subject to
receipt thereof from the Company or the Collateral Agent, as applicable, the
Agent shall, in accordance with the instructions provided by the Holder
thereof on the applicable form of Election to Settle Early on the reverse of
the Security Certificate evidencing the related Securities, (i) transfer the
Treasury Notes forming a part of such Securities and (ii)
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deliver a certificate or certificates for the full number of shares of Common
Stock issuable upon such Early Settlement together with payment in lieu of any
fraction of a share, as provided in Section 5.10.
(e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Securities evidenced by a
Security Certificate, upon such Early Settlement the Company shall execute and
the Agent shall authenticate, countersign and deliver to the Holder thereof,
at the expense of the Company, a Security Certificate evidencing the
Securities as to which Early Settlement was not effected.
Section 5.10. No Fractional Shares.
No fractional shares or scrip representing fractional shares of Common
Stock shall be issued or delivered upon settlement on the Final Settlement Date
or upon Early Settlement of any Purchase Contracts or with respect to the
payment of Deferred Yield Enhancement Payments, if any, on the Final Settlement
Date. If Security Certificates evidencing more than one Purchase Contract shall
be surrendered for settlement at one time by the same Holder, the number of
full shares of Common Stock which shall be delivered upon settlement shall be
computed on the basis of the aggregate number of Purchase Contracts evidenced
by the Security Certificates so surrendered. Instead of any fractional share of
Common Stock which would otherwise be deliverable upon settlement of any
Purchase Contracts on the Final Settlement Date or upon Early Settlement or
with respect to the payment of any Deferred Yield Enhancement Payments, the
Company, through the Agent, shall make a cash payment in respect of such
fractional interest in an amount equal to the value of such fractional shares
at the Closing Price per share on the Trading Day immediately preceding the
Final Settlement Date or the related Early Settlement Date, respectively. The
Company shall provide the Agent from time to time with sufficient funds to
permit the Agent to make all cash payments required by this Section 5.10 in a
timely manner.
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Section 5.1.1. Charges and Taxes.
The Company will pay all stock transfer and similar taxes attributable to
the initial issuance and delivery of the shares of Common Stock pursuant to the
Purchase Contracts and in payment of any Deferred Yield Enhancement Payments;
provided, however, that the Company shall not be required to pay any such tax
or taxes which may be payable in respect of any exchange of or substitution for
a Security Certificate evidencing a Purchase Contract or any issuance of a
share of Common Stock in a name other than that of the registered Holder of a
Security Certificate surrendered in respect of the Purchase Contracts evidenced
thereby, other than in the name of the Agent, as custodian for such Holder, and
the Company shall not be required to issue or deliver such share certificates
or Security Certificates unless or until the Person or Persons requesting the
transfer or issuance thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
ARTICLE VI
Remedies
Section 6.1. Unconditional Right of Holders to Receive Yield Enhancement
Payment.
The Holder of any Security shall have the right, which is absolute and
unconditional (subject to the right of the Company to defer payment thereof
pursuant to Section 5.3 and subject to the forfeiture of any Deferred Yield
Enhancement Payments upon Early Settlement pursuant to Section 5.9(b)), to
receive payment of each installment of the Yield Enhancement Payment with
respect to the Purchase Contract constituting a part of such Security on the
respective Payment Date for such Security and to purchase Common Stock pursuant
to such Purchase Contract and, in each such case, to institute suit for the
enforcement of any such payment and right to purchase Common Stock, and such
rights shall not be impaired without the consent of such Holder.
Section 6.2. Restoration of Rights and Remedies.
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If any Holder of Securities has instituted any proceeding to enforce any
right or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of such
Holder shall continue as though no such proceeding had been instituted.
Section 6.3. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement of mutilated,
destroyed, lost or stolen Security Certificates in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the
Holders of Securities is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 6.4. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy shall
impair any such right or remedy or constitute a waiver of any such right. Every
right and remedy given by this Article or by law to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by such
Holders.
Section 6.5. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of any Security by
his acceptance of the Security Certificate evidencing such Security shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Agreement, or in any
suit against the Agent for any action taken, suffered or omitted by it as
Agent, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court
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may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; provided
that the provisions of this Section shall not apply to any suit instituted by
the Company, to any suit instituted by the Agent, to any suit instituted by any
Holder of Securities, or group of Holders, holding in the aggregate more than
10% of the Outstanding Securities, or to any suit instituted by any Holder for
the enforcement of the payment of the interest on any Treasury Note or the
Yield Enhancement Payment on any Purchase Contract on or after the respective
Payment Date therefor constituting a part of the Securities held by such
Holder, or for enforcement of the right to purchase shares of Common Stock
under the Purchase Contracts constituting a part of the Securities held by such
Holder.
Section 6.6. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Agent or the Holders, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE VII
The Agent
Section 7.1. Certain Duties and Responsibilities.
(a) (1) The Agent undertakes to perform, with respect to the
Securities, such duties and only such duties as are specifically set
forth in this Agreement and the Pledge Agreement, and no implied
cove-
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nants or obligations shall be read into this Agreement against the
Agent; and
(2) in the absence of bad faith or negligence on its part, the
Agent may, with respect to the Securities, conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Agent and
conforming to the requirements of this Agreement, but in the case of any
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Agent, the Agent shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Agreement.
(b) No provision of this Agreement shall be construed to relieve the
Agent from liability for its own negligent action, its own negligent failure to
act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Agent shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Agent was negligent in ascertaining the pertinent facts; and
(3) no provision of this Agreement shall require the Agent to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the exercise of
any of its rights or powers, if adequate indemnity is not provided to
it.
(c) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of this
Section.
Section 7.2. Notice of Default.
Within 30 days after the occurrence of any default by the Company
hereunder, of which a Responsible Officer
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of the Agent has actual knowledge, the Agent shall transmit by mail to all
Holders of Securities, as their names and addresses appear in the Security
Register, notice of such default hereunder, unless such default shall have been
cured or waived.
Section 7.3. Certain Rights of Agent.
Subject to the provisions of Section 7.1:
(a) the Agent may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness 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 an Officers' Certificate, Issuer Order or Issuer
Request, and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Agent shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Agent (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate of the Company;
(d) the Agent may consult with counsel and the written 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 Agent 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,
note, other evidence of indebtedness or other paper or document, but the Agent,
in its discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the issuance of the
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Securities and the execution, delivery and performance of the
Purchase Contracts as it may see fit, and, if the Agent shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and promises of the Company, personally or by agent or attorney;
and
(f) the Agent may execute any of its powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys or an
Affiliate and the Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney or an Affiliate appointed with
due care by it hereunder.
Section 7.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Security Certificates shall be
taken as the statements of the Company and the Agent assumes no responsibility
for their accuracy. The Agent makes no representations as to the validity or
sufficiency of either this Agreement or of the Securities, or of the Pledge
Agreement or the Pledge. The Agent shall not be accountable for the use or
application by the Company of the proceeds in respect of the Purchase
Contracts.
Section 7.5. May Hold Securities.
Any Security Registrar or any other agent of the Company, or the Agent and
its Affiliates, in their individual or any other capacity, may become the owner
or pledgee of Securities and may otherwise deal with the Company, the
Collateral Agent or any other Person with the same rights it would have if it
were not Security Registrar or such other agent, or the Agent.
Section 7.6. Money Held in Custody.
Money held by the Agent in custody hereunder need not be segregated from
the other funds except to the extent required by law. The Agent shall be under
no obligation to invest or pay interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
Section 7.7. Compensation and Reimbursement.
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The Company agrees:
(1) to pay to the Agent from time to time reasonable compensation
for all services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to reimburse the
Agent upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Agent 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 or bad faith; and
(3) to indemnify the Agent and any predecessor Agent for, and to
hold each of them harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of its duties
hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
Section 7.8. Corporate Agent Required; Eligibility.
There shall at all times be an Agent hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having (or being a member of a bank
holding company having) a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority and having
a Corporate Trust Office in the Borough of Manhattan, The City of New York, if
there be such a corporation in the Borough of Manhattan, The City of New York
qualified and eligible under this Article and willing to act on reasonable
terms. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
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surplus as set forth in its most recent report of condition so published. If at
any time the Agent shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Agent and no appointment of a
successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.
(b) The Agent may resign at any time by giving written notice thereof
to the Company 60 days prior to the effective date of such resignation. If the
instrument of acceptance by a successor Agent required by Section 7.10 shall
not have been delivered to the Agent within 30 days after the giving of such
notice of resignation, the resigning Agent may petition any court of competent
jurisdiction for the appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders of a
majority in number of the Outstanding Securities delivered to the Agent and the
Company.
(d) if at any time
(1) the Agent fails to comply with Section 310(b) of the TIA, as if
the Agent were an indenture trustee under an indenture qualified under
the TIA, after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Agent shall cease to be eligible under Section 7.8 and shall
fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Agent shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Agent or of its property
shall be appointed or any public officer shall take charge or control
of the Agent or of its property or affairs
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for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Agent, or (ii) any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Agent and
the appointment of a successor Agent.
(e) If the Agent shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Agent for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Agent and
shall comply with the applicable requirements of Section 7.10. If no successor
Agent shall have been so appointed by the Company and accepted appointment in
the manner required by Section 7.10, any Holder who has been a bona fide Holder
of a Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor Agent to give,
notice of each resignation and each removal of the Agent and each appointment
of a successor Agent by mailing written notice of such event by first-class
mail, postage prepaid, to all Holders of Securities as their names and
addresses appear in the Security Register. Each notice shall include the name
of the successor Agent and the address of its Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Agent, every such
successor Agent so appointed shall execute, acknowledge and deliver to
the Company and to the retiring Agent an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Agent shall become
effective and such successor Agent, without any further act, deed or
conveyance, shall become vested with all the rights, powers, agencies and
duties of the retiring Agent; but, on the request of the Company or the
successor Agent, such retiring Agent shall, upon payment of its charges,
exe-
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cute and deliver an instrument transferring to such successor Agent all the
rights, powers and trusts of the retiring Agent and shall duly assign, transfer
and deliver to such successor Agent all property and money held by such
retiring Agent hereunder.
(b) Upon request of any such successor Agent, the Company shall execute
any and all instruments for more fully and certainly vesting in and
confirming to such successor Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at the time
of such acceptance such successor Agent shall be qualified and eligible
under this Article.
Section 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Agent 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 Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Agent, shall be the successor of the Agent hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Security Certificates shall have been
authenticated and executed on behalf of the Holders, but not delivered, by the
Agent then in office, any successor by merger, conversion or consolidation to
such Agent may adopt such authentication and execution and deliver the Security
Certificates so authenticated and executed with the same effect as if such
successor Agent had itself authenticated and executed such Securities.
Section 7.12. Preservation of Information; Communications to Holders.
(a) The Agent shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Agent in its
capacity as Security Registrar.
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(b) If three or more Holders (herein referred to as "applicants") apply
in writing to the Agent, and furnish to the Agent reasonable proof that
each such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their
rights under this Agreement or under the Securities and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Agent shall, within five Business Days after the receipt
of such application, afford such applicants access to the information preserved
at the time by the Agent in accordance with Section 7.12(a).
(c) Every Holder of Securities, by receiving and holding the Security
Certificates evidencing the same, agrees with the Company and the Agent that
none of the Company, the Agent nor any agent of any of them shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders in accordance with Section 7.12(b), regardless of
the source from which such information was derived.
Section 7.13. No Obligations of Agent.
Except to the extent otherwise provided in this Agreement, the Agent
assumes no obligations and shall not be subject to any liability under this
Agreement, the Pledge Agreement or any Purchase Contract in respect of the
obligations of the Holder of any Security thereunder. The Company agrees, and
each Holder of a Security Certificate, by his acceptance thereof, shall be
deemed to have agreed, that the Agent's execution of the Security Certificates
on behalf of the Holders shall be solely as agent and attorney-in-fact for the
Holders, and that the Agent shall have no obligation to perform such Purchase
Contracts on behalf of the Holders, except to the extent expressly provided in
Article Five hereof.
Section 7.14. Tax Compliance.
(a) The Agent, on its own behalf and on behalf of the Company, will
comply with all applicable certification, information reporting and
withholding (including "backup" withholding) requirements imposed by applicable
tax laws, regulations or administrative practice with
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respect to (i) any payments made with respect to the Securities or (ii) the
issuance, delivery, holding, transfer, redemption or exercise of rights under
the Securities. Such compliance shall include, without limitation, the
preparation and timely filing of required returns and the timely payment of all
amounts required to be withheld to the appropriate taxing authority or its
designated agent.
(b) The Agent shall comply with any direction received from the Company
with respect to the application of such requirements to particular payments or
Holders or in other particular circumstances, and may for purposes of this
Agreement rely on any such direction in accordance with the provisions of
Section 7.1(a)(2) hereof.
(c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records
available, on written request, to the Company or to its authorized
representative within a reasonable period of time after receipt of such
request.
ARTICLE VIII
Supplemental Agreements
Section 8.1. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the Company and the Agent, at any time
and from time to time, may enter into one or more agreements supplemental
hereto, in form satisfactory to the Company and the Agent, for any of the
following purposes:
(1) to evidence the succession of another Person to the Company,
and the assumption by any such successor of the covenants of the
Company herein and in the Security Certificates; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
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(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Agent; or
(4) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 5.6(b); or
(5) except as provided for in Section 5.6, to cure any ambiguity,
to correct or supplement any provisions herein which may be inconsistent
with any other provisions herein, or to make any other provisions with
respect to such matters or questions arising under this Agreement,
provided such action shall not adversely affect the interests of the
Holders.
Section 8.2. Supplemental Agreements with Consent of Holders.
With the consent of the Holders of not less than 66 2/3% of the
Outstanding Securities, by Act of said Holders delivered to the Company and the
Agent, the Company when authorized by a Board Resolution, and the Agent may
enter into an agreement or agreements supplemental hereto for the purpose of
modifying in any manner the terms of the Securities, or the provisions of this
Agreement or the rights of the Holders in respect of the Securities; provided,
however, that no such supplemental agreement shall, without the consent of the
Holder of each Outstanding Security affected thereby,
(1) change any Payment Date;
(2) change the amount or type of Treasury Notes underlying a
Security, impair the right of the Holder of any Security to receive
interest payments on the underlying Treasury Notes or otherwise
adversely affect the Holder's rights in or to such Treasury Notes;
(3) reduce any Yield Enhancement Payment or any Deferred Yield
Enhancement Payment, or change any place where, or the coin or currency
in which, any Yield Enhancement Payment is payable;
(4) impair the right to institute suit for the enforcement of any
Purchase Contract;
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(5) reduce the number of shares of Common Stock to be purchased
pursuant to any Purchase Contract, increase the price to purchase shares
of Common Stock upon settlement of any Purchase Contract, change the
Final Settlement Date or otherwise adversely affect the Holder's rights
under any Purchase Contract; or
(6) reduce the percentage of the Outstanding Securities the consent
of whose Holders is required for any such supplemental agreement.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental agreement, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 8.3. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby
of the agencies created by this Agreement, the Agent shall be entitled to
receive and (subject to Section 7.1) 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. The Agent may, but shall not be
obligated to, enter into any such supplemental agreement which affects the
Agent's own rights, duties or immunities under this Agreement or otherwise.
Section 8.4. Effect of Supplemental Agreements.
Upon the execution of any supplemental 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 Security Certificates theretofore or thereafter authenticated,
executed on behalf of the Holders and delivered hereunder shall be bound
thereby.
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Section 8.5. Reference to Supplemental Agreements.
Security Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Agent, bear a notation in form
approved by the Agent as to any matter provided for in such supplemental
agreement. If the Company shall so determine, new Security Certificates so
modified as to conform, in the opinion of the Agent and the Company, to any
such supplemental agreement may be prepared and executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Agent in
exchange for Outstanding Security Certificates.
ARTICLE IX
Consolidation, Merger, Sale or Conveyance
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
The Company covenants that it will not merge or consolidate with any other
Person or sell, assign, transfer, lease or convey all or substantially all of
its properties and assets to any Person or group of affiliated Persons in one
transaction or a series of related transactions, unless (i) either the Company
shall be the continuing corporation, or the successor (if other than the
Company) shall be a corporation organized and existing under the laws of the
United States of America or a State thereof or the District of Columbia and
such corporation shall expressly assume all the obligations of the Company
under the Purchase Contracts, this Agreement and the Pledge Agreement by one or
more supplemental agreements in form satisfactory to the Agent and the
Collateral Agent, executed and delivered to the Agent and the Collateral Agent
by such corporation, and (ii) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation, or such
sale, assignment, transfer, lease or conveyance, be in default in the
performance of any covenant or condition hereunder, under any of the
Securities or under the Pledge Agreement.
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Section 9.2. Rights and Duties fo Successor Corporation.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance and upon any such assumption by the successor corporation
in accordance with Section 9.1, such successor corporation shall succeed to and
be substituted for the Company with the same effect as if it had been named
herein as the Company. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of CMS Energy
Corporation, any or all of the Security Certificates evidencing
Securities issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Agent; and, upon the order of such successor
corporation, instead of the Company, and subject to all the terms,
conditions and limitations in this Agreement prescribed, the Agent shall
authenticate and execute on behalf of the Holders and deliver any Security
Certificates which previously shall have been signed and delivered by the
officers of the Company to the Agent for authentication and execution, and any
Security Certificate evidencing Securities which such successor corporation
thereafter shall cause to be signed and delivered to the Agent for that
purpose. All the Security Certificates so issued shall in all respects have the
same legal rank and benefit under this Agreement as the Security Certificates
theretofore or thereafter issued in accordance with the terms of this Agreement
as though all of such Security Certificates had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance such change in phraseology and form (but not in substance)
may be made in the Security Certificates evidencing Securities thereafter to be
issued as may be appropriate.
Section 9.3. Opinion of Counsel to Agent.
The Agent, subject to Sections 7.1 and 7.3, shall receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
assignment, transfer, lease or conveyance, and any such assumption, complies
with the provisions of this Article and that all conditions precedent to the
consummation of any such
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consolidation, merger, sale, assignment, transfer, lease or conveyance have
been met.
ARTICLE X
Covenants
Section 10.1. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders from time
to time of the Securities that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Security Certificates may be presented or
surrendered for acquisition of shares of Common Stock upon settlement or Early
Settlement and for transfer of Treasury Notes upon occurrence of a Termination
Event, where Security Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Agreement may be served. The Company will
give prompt written notice to the Agent of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Agent
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Company hereby
appoints the Agent as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where Security Certificates may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any
manner relieve the Company of its obligation to maintain an office or agency in
the Borough of Manhattan, The City of New York for such purposes. The
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<PAGE> 72
Company will give prompt written notice to the Agent of any such
designation or rescission and of any change in the location of any such other
office or agency. The Company hereby designates as the place of payment for the
Securities the Corporate Trust Office and appoints the Agent at its Corporate
Trust Office as paying agent in such city.
Section 10.3. Company to Reserve Common Stock.
The Company shall at all times prior to the Final Settlement Date reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock the full number of shares of Common Stock issuable (x)
against tender of payment in respect of all Purchase Contracts constituting a
part of the Securities evidenced by Outstanding Security Certificates and (y)
in payment of Deferred Yield Enhancement Payments, if any, owed by the Company
to the Holders.
Section 10.4. Convenants as to Common Stock.
The Company covenants that all shares of Common Stock which may be issued
against tender of payment in respect of any Purchase Contract constituting a
part of the Outstanding Securities and in payment of any Deferred Yield
Enhancement Payments will, upon issuance, be duly authorized, validly issued,
fully paid and nonassessable.
Section 10.5. Statements of Officers of the Company as
to Default.
The Company will deliver to the Agent, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions hereof, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CMS ENERGY CORPORATION
Attested by
By:
--------------------- ------------------------
__________________________________
Attested by
By:
--------------------- ------------------------
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<PAGE> 74
EXHIBIT A
CMS ENERGY CORPORATION
____% PREFERRED REDEEMABLE INCREASED
DIVIDEND EQUITY SECURITIES
(STATED AMOUNT $______ PER SECURITY)
No. Securities
This Security Certificate certifies that ____________ is the registered
Holder of the number of Securities set forth above. Each Security represents
(i) ownership by the Holder of ____% United States Treasury Notes due
__________, 1999 ("Treasury Notes") with a principal amount equal to the Stated
Amount, subject to the Pledge of such Treasury Notes by such Holder pursuant to
the Pledge Agreement, and (ii) the rights and obligations of the Holder under
one Purchase Contract with CMS Energy Corporation, a Michigan corporation (the
"Company"). [The Treasury Notes represented by this Security Certificate were
acquired by the Underwriters on behalf of the Company with the proceeds of the
offering of this Security Certificate and are being conveyed to the Holder of
this Certificate and pledged pursuant to the Pledge Agreement simultaneously
therewith.]
Pursuant to the Pledge Agreement, the Treasury Notes constituting part of
each Security evidenced hereby have been pledged to the Collateral Agent to
secure the obligations of the Holder under the Purchase Contract constituting
part of such Security.
The Pledge Agreement provides that all payments of principal of, or
interest on, any Treasury Notes constituting part of the Securities received by
the Collateral Agent shall be paid by the Collateral Agent by wire transfer in
same day funds no later than 1:00 p.m., New York City time, on the Business Day
such payment is received by the Collateral Agent (provided that in the event
such payment is received by the Collateral Agent on a day that is not a
Business Day or after 1:00 p.m., New York City time, on a Business Day, then
such payment
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shall be made no later than 10:00 a.m., New York City time, on the next
succeeding Business Day) (i) in the case of (A) interest payments and (B) any
principal payments with respect to any Treasury Notes that have been released
from the Pledge pursuant to the Pledge Agreement, to the Agent to the account
designated by it for such purpose and (ii) in the case of principal payments on
any Pledged Treasury Notes (as defined in the Pledge Agreement), at the
direction of the Agent on behalf of the Holders, to the Company, in full
satisfaction of the respective obligations of the Holders of the Securities of
which such Pledged Treasury Securities are a part under the Purchase Contracts
forming a part of such Securities. Interest on any Treasury Note forming part
of a Security evidenced hereby which is paid on any or __________ , commencing
, 1997 (a "Payment Date"), shall, subject to receipt thereof by the Agent from
the Collateral Agent, be paid to the Person in whose name this Security
Certificate (or a Predecessor Security Certificate) is registered at the close
of business on the Record Date next preceding such Payment Date.
Each Purchase Contract evidenced hereby obligates the Holder of this
Security Certificate to purchase, and the Company to sell, on __________, 1999
(the "Final Settlement Date"), at a price equal to $______ (the "Stated
Amount"), a number of shares of Common Stock, par value $.01 per share ("Common
Stock"), of the Company, equal to the Settlement Rate, unless on or prior to
the Final Settlement Date there shall have occurred a Termination Event or
Early Settlement with respect to the Security of which such Purchase Contract
is a part, all as provided in the Purchase Contract Agreement and more fully
described on the reverse hereof. The purchase price for the shares of Common
Stock purchased pursuant to each Purchase Contract evidenced hereby, if not
paid earlier, shall be paid on the Final Settlement Date by application of
payment received in respect of the principal of the Treasury Notes pledged to
secure the obligations under such Purchase Contract of the Holder of the
Security of which such Purchase Contract is a part.
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<PAGE> 76
The Company shall pay, on each Payment Date, in respect of each
Purchase Contract forming part of a Security evidenced hereby an amount (the
"Yield Enhancement Payment") equal to ____% per annum of the Stated Amount,
from __________, 1997, computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be, subject to deferral
at the option of the Company as provided in the Purchase Contract Agreement and
more fully described on the reverse hereof; except that on the initial Payment
Date the Yield Enhancement Payment shall be reduced by an amount equal to
accrued interest to __________, 1997, on the Treasury Note constituting a part
of this Security. Such Yield Enhancement Payment shall be payable to the Person
in whose name this Security Certificate (or a Predecessor Security Certificate)
is registered at the close of business on the Record Date next preceding such
Payment Date.
Interest on the Treasury Notes and the Yield Enhancement Payment will be
payable at the office of the Agent in The City of New York or, at the option of
the Company, by check mailed to the address of the Person entitled thereto as
such address appears on the Security Register.
Reference is hereby made to the further provisions 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
Agent by manual signature, this Security Certificate shall not be entitled to
any benefit under the Pledge Agreement or the Purchase Contract Agreement or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
CMS ENERGY CORPORATION
By:-------------------
Attest:
---------------------
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<PAGE> 77
HOLDER SPECIFIED ABOVE (as to obligations of
such Holder under the Purchase Contracts evidenced
hereby)
By:__________________________________, not individually but solely
as Attorney-in-Fact of such Holder
By:_________________________________
Dated:
This is one of the Security Certificates referred to in the within
mentioned Purchase Contract Agreement.
as Agent
By:
___________________
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(Form of Reverse of Security Certificate]
Each Purchase Contract evidenced hereby is governed by a Purchase Contract
Agreement, dated as of __________, 1996 (the "Purchase Contract Agreement"),
between the Company and , as Purchase
Contract Agent (herein called the "Agent"), to which Purchase Contract
Agreement and supplemental agreements thereto reference is hereby made for a
description of the respective rights, limitations of rights, obligations,
duties and immunities thereunder of the Agent, the Company, and the Holders and
of the terms upon which the Security Certificates are, and are to be, executed
and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Security Certificate to purchase, and the Company to sell, on the Final
Settlement Date at a price equal to the Stated Amount, a number of shares of
Common Stock of the Company equal to the Settlement Rate, unless, on or prior
to the Final Settlement Date, there shall have occurred a Termination Event or
an Early Settlement with respect to the Security of which such Purchase
Contract is a part. The "Settlement Rate" is equal to (a) if the Applicable
Market Value (as defined below) is greater than $_____ (the "Threshold
Appreciation Price"), _____ of a share of Common Stock per Purchase Contract,
(b) if the Applicable Market Value is less than or equal to the Threshold
Appreciation Price but is greater than the Stated Amount, a fractional share of
Common Stock per Purchase Contract equal to the Stated Amount divided by the
Applicable Market Value and (c) if the Applicable Market Amount is less than or
equal to the Stated Amount, one share of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in the Purchase Contract. No
fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts, as provided in the Purchase Contract Agreement.
The "Applicable Market Value" means the average of the Closing Prices
per share of Common Stock on each of the twenty consecutive Trading Days ending
on the second Trading Day immediately preceding the Final Settlement Date. The
"Closing Price" of the Common Stock on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price)
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of the Common Stock on the New York Stock Exchange (the "NYSE") on such date
or, if the Common Stock is not listed for trading on the NYSE on any such date,
as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, as reported by The Nasdaq Stock Market, or, if the Common Stock is
not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Stock on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. A "Trading
Day" means a day on which the Common Stock (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the Common Stock.
The purchase price for the shares of Common Stock purchased pursuant to
each Purchase Contract shall be paid by application of payments received by the
Company on the Final Settlement Date from the Collateral Agent at the direction
of the Agent on behalf of the Holders pursuant to the Pledge Agreement in
respect of the principal of the Treasury Notes pledged to secure the
obligations of the relevant Holder under such Purchase Contract.
The Company shall not be obligated to issue any shares of Common Stock in
respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate purchase
price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
Subject to the next succeeding paragraph, the Company shall pay, on each
Payment Date, the Yield Enhancement Payment payable in respect of each Purchase
Contract to the Person in whose name the Security Certificate evidencing such
Purchase Contract is registered at the close of business on the Record Date
next preceding such Payment Date. Yield Enhancement Payments will be payable at
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the office of the Agent in The City of New York or, at the option of the
Company, by check mailed to the address of the Person entitled thereto
at such address as it appears on the Security Register.
The Company shall have the right, at any time prior to the Final
Settlement Date, to defer the payment of any or all of the Yield Enhancement
Payments otherwise payable on any Payment Date, but only if the Company shall
give the Holders and the Agent written notice of its election to defer such
payment (specifying the amount to be deferred) as provided in the Purchase
Contract Agreement. Any Yield Enhancement Payments so deferred shall bear
additional Yield Enhancement Payments thereon at the rate of ____% per annum
(computed on the basis of the actual number of days elapsed in a year of 365 or
366 days, as the case may be), compounding on each succeeding Payment Date,
until paid in full (such deferred installments of Yield Enhancement Payments
together with the additional Yield Enhancement Payments accrued thereon, are
referred to herein as the "Deferred Yield Enhancement Payments"). Deferred
Yield Enhancement Payments shall be due on the next succeeding Payment Date
except to the extent that payment is deferred pursuant to the Purchase Contract
Agreement. No Yield Enhancement Payments may be deferred to a date that is
after the Final Settlement Date.
In the event that the Company elects to defer the payment of Yield
Enhancement Payments on the Purchase Contracts until the Final Settlement Date,
the Holder of this Security Certificate will receive on the Final Settlement
Date, in lieu of a cash payment, a number of shares of Common Stock (in
addition to a number of shares of Common Stock equal to the Settlement Rate)
equal to (x) the aggregate amount of Deferred Yield Enhancement Payments
payable to the Holder of the Security Certificate of Securities divided by (y)
the Applicable Market Value. No fractional shares of Common Stock will be
issued with respect to the payment of Deferred Yield Enhancement Payments on
the Final Settlement Date, as provided in the Purchase Contract Agreement.
In the event the Company exercises its option to defer the payment of
Yield Enhancement Payments, then (a) the Company shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
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acquire, or make a liquidation payment with respect to, any of its capital
stock (other than (i) purchase or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares
of Common Stock, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged) or make any guarantee
payments with respect to the foregoing), (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to such Yield Enhancement Payments and (c) the
Company shall not make any guarantee payments with respect to the foregoing.
The Purchase Contracts and the obligations and rights of the Company and
the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Yield
Enhancement Payment or any Deferred Yield Enhancement Payments, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Agent or the Company, if, on or prior to the Final
Settlement Date, a Termination Event shall have occurred. Upon the occurrence
of a Termination Event, the Company shall promptly but in no event after two
business days thereafter give written notice to the Agent, the Collateral Agent
and to the Holders, at their addresses as they appear in the Security Register.
Upon and after the occurrence of a Termination Event, the Collateral Agent
shall release the Treasury Notes from the Pledge in accordance with the
provisions of the Pledge Agreement. The Securities shall thereafter represent
the right to receive the Treasury Notes forming a part of such Securities in
accordance with the provisions of the Purchase Contract Agreement and the
Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement at the option of the
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Holder thereof, Purchase Contracts underlying Securities having an aggregate
Stated Amount equal to $______ or an integral multiple thereof may be settled
early ("Early Settlement") as provided in the Purchase Contract Agreement. In
order to exercise the right to effect Early Settlement with respect to any
Purchase Contracts evidenced by this Security Certificate, the Holder of this
Security Certificate shall deliver this Security Certificate to the Agent at
the Corporate Trust Office duly endorsed for transfer to the Company or in
blank with the form of Election to Settle Early set forth below duly completed
and accompanied by payment in the form of a certified or cashier's check
payable to the order of the Company in immediately available funds in an amount
(the "Early Settlement Amount") equal to (i) the product of (A) the Stated
Amount times (B) the number of Purchase Contracts with respect to which the
Holder has elected to effect Early Settlement, plus (ii) if such delivery is
made with respect to any Purchase Contracts during the period from the close of
business on any Record Date next preceding any Payment Date to the opening of
business on such Payment Date, an amount equal to the sum of (x) the Yield
Enhancement Payments payable on such Payment Date with respect to such Purchase
Contracts plus (y) the interest with respect to the related Treasury Notes
payable on such Payment Date. Upon Early Settlement of Purchase Contracts by a
Holder of the related Securities, the Treasury Notes underlying such Securities
shall be released from the Pledge as provided in the Pledge Agreement and the
Holder shall be entitled to receive, a number of shares of Common Stock on
account of each Purchase Contract forming part of a Security as to which Early
Settlement is effected equal to the Early Settlement Rate; provided however,
that upon the Early Settlement of the Purchase Contracts, the Holder thereof
will forfeit the right to receive any Deferred Yield Enhancement Payments on
such Purchase Contracts. The Early Settlement Rate shall initially be equal to
_____ and shall be adjusted in the same manner and at the same time as the
Settlement Rate is adjusted as provided in the Purchase Contract Agreement.
The Security Certificates are issuable only in registered form and only in
denominations of a single Security and any integral multiple thereof. The
transfer
9
<PAGE> 83
of any Security Certificate will be registered and Security
Certificates may be exchanged as provided in the Purchase Contract Agreement.
The Security Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents permitted by the Purchase
Contract Agreement. No service charge shall be required for any such
registration of transfer or exchange, but the Company and the Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. For so long as the Purchase Contract
underlying a Security remains in effect, such Security shall not be separable
into its constituent parts, and the rights and obligations of the Holder of
such Security in respect of the Treasury Notes and Purchase Contract
constituting such Security may be transferred and exchanged only as a Security.
Upon registration of transfer of this Security Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee, except as may be required by the Agent pursuant to the Purchase
Contract Agreement), under the terms of the Purchase Contract Agreement and the
Purchase Contracts evidenced hereby and the transferor shall be released from
the obligations under the Purchase Contracts evidenced by this Security
Certificate. The Company covenants and agrees, and the Holder, by his
acceptance hereof, likewise covenants and agrees, to be bound by the provisions
of this paragraph.
The Holder of this Security Certificate, by his acceptance hereof,
authorizes the Agent to enter into and perform the related Purchase Contracts
forming part of the Securities evidenced hereby on his behalf as his
attorney-in-fact, expressly withholds any consent to the assumption (i.e.,
affirmance) of the Purchase Contracts by the Company or its trustee in the
event that the Company becomes the subject of a case under the Bankruptcy Code,
agrees to be bound by the terms and provisions thereof, covenants and agrees to
perform his obligations under such Purchase Contracts, consents to the
provisions of the Purchase Contract Agreement, authorizes the Agent to enter
into and perform the Pledge Agreement on his behalf as his attorney-in-fact,
and consents to the Pledge of the Treasury Notes underlying this Security
Certificate pursuant to the Pledge Agreement. The Holder
10
<PAGE> 84
further covenants and agrees, that, to the extent and in the manner provided in
the Purchase Contract Agreement and the Pledge Agreement, but subject to the
terms thereof, payments in respect of principal of the Treasury Notes on the
Final Settlement Date shall be paid by the Collateral Agent to the Company in
satisfaction of such Holder's obligations under such Purchase Contract and such
Holder shall acquire no right, title or interest in such payments.
Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of at least 66 2/3% of
the Outstanding Securities.
All terms used herein which are defined in the Purchase Contract Agreement
have the meanings set forth therein.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the Company or
the Agent may treat the Person in whose name this Security Certificate is
registered as the owner of the Securities evidenced hereby for the purpose of
receiving payments of interest on the Treasury Notes, receiving payments of
Yield Enhancement Payments and any Deferred Yield Enhancement Payments,
performance of the Purchase Contracts and for all other purposes whatsoever,
whether or not any payments in respect thereof be overdue and notwithstanding
any notice to the contrary, and neither the Company, the Agent nor any such
agent shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof, entitle
the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for inspection at
the offices of the Agent.
11
<PAGE> 85
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Final Settlement Date of the
Purchase Contracts underlying the number of Securities evidenced by this
Security Certificate be registered in the name of, and delivered, together with
a check in payment for any fractional share, to the undersigned at the address
indicated below unless a different name and address have been indicated below.
If shares are to be registered in the name of a Person other than the
undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated: ----------------- -----------------------
Signature
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the Holder,
please print such Person's name
and address:
Please print name and address
of Registered Holder:
------------------------- -----------------------------
Name Name
------------------------- -----------------------------
Address Address
------------------------- -----------------------------
Social Security or other
Taxpayer Identification -----------------------------
Number, if any
12
<PAGE> 86
ELECTION TO SETTLE EARLY
The undersigned Holder of this Security Certificate hereby irrevocably
exercises the option to effect Early Settlement in accordance with the terms of
the Purchase Contract Agreement with respect to the Purchase Contracts
underlying the number of Securities evidenced by this Security Certificate
specified below. The option to effect Early Settlement may be exercised only
with respect to Purchase Contracts underlying Securities with an aggregate
Stated Amount equal to $_______ or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement be registered in the name of, and
delivered, together with a check in payment for any fractional share and any
Security Certificate representing any Securities evidenced hereby as to which
Early Settlement of the related Purchase Contracts is not effected, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. Treasury Notes deliverable upon such Early
Settlement will be transferred in accordance with the transfer instructions set
forth below. If shares are to be registered in the name of a Person other than
the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated:
---------------------- ----------------------
Signature
13
<PAGE> 87
Number of Securities evidenced hereby as to which Early Settlement of the
related Purchase Contracts is being elected:
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the Holder,
please print such Person's name
and address:
Please print name and address
of Registered Holder:
------------------------- -----------------------------
Name Name
------------------------- -----------------------------
Address Address
------------------------- -----------------------------
Social Security or other
Taxpayer Identification -----------------------------
Number, if any
---------------------
Transfer Instructions for Treasury Notes Transferable Upon Early Settlement or
a Termination Event:
----- ------------------------------
----- ------------------------------
----- ------------------------------
<PAGE> 1
Exhibit 5(a)
June 12, 1997
CMS Energy Corporation
Fairlane Plaza South
330 Town Center Drive
Suite 1100
Dearborn, MI 48126
Ladies and Gentlemen:
I am the Assistant General Counsel of CMS Energy Corporation,
a Michigan corporation (the "Company"), and have acted as such in connection
with the Registration Statement on Form S-3 (the "Registration Statement")
being filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration of not to exceed $300,000,000 of (i) CMS
Energy Common Stock, $.01 par value ("Common Stock"); (ii) Subordinated
Debentures of the Company ( "Debentures"); (iii) Preferred Securities of CMS
Energy Trust I; (iv) Preferred Securities of CMS Energy Trust II; (v) the
guarantee of the Preferred Securities by the Company ("Preferred Securities
Guarantee"); (vi) Stock Purchase Contracts of the Company; and (vii) Stock
Purchase Units of the Company. (The offered securities, collectively, the
"Securities".) The guarantee of the Preferred Securities is to be issued
pursuant to the Preferred Securities Guarantee Agreement (the "Preferred
Securities Guarantee") to be entered into among the Company and The Bank of New
York, as trustee (the "Guarantee Trustee"). The Debentures are to be issued
under an Indenture to be entered into between the Company and The Bank of New
York, as trustee (the "Indenture Trustee"), and one or more supplemental
indenture thereto (collectively, the "Indenture"). Capitalized terms not
otherwise defined herein have the respective meanings specified in the
Registration Statement.
In rendering this opinion, I have examined and relied upon a copy of
the Registration Statement. I have also examined, or have arranged for the
examination by an attorney or attorneys under my general supervision,
originals, or copies of originals certified to my satisfaction, of such
agreements, documents, certificates and other statements of governmental
officials and other instruments, and have examined such questions of law and
have satisfied myself as to such matters of fact, as I have considered relevant
and necessary as a basis for this opinion. I have assumed the
<PAGE> 2
Page 2
authenticity of all documents submitted to me as originals, the genuineness of
all signatures, the legal capacity of all natural persons and the conformity
with the original documents of any copies thereof submitted to me for
examination.
Based on the foregoing, it is my opinion that:
1. The Company is duly incorporated and validly existing under the laws
of the State of Michigan.
2. The Company has corporate power and authority (i) to execute and
deliver the Preferred Securities Guarantee, the Stock Purchase
Agreement and the Indenture, and (ii) to authorize and sell the
Debentures pursuant to the Indenture and the Common Stock pursuant
to the Stock Purchase Agreement.
3. The Preferred Securities Guarantee will be a legally issued and
binding obligation of the Company (except to the extent
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
affecting the enforcement of creditors' rights generally and by the
effect of general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law) when
(i) the Registration Statement, as finally amended (including any
necessary post-effective amendments) shall have become effective under
the Securities Act; (ii) the Preferred Securities Guarantee shall have
been qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and duly executed and delivered by the Company
and the Guarantee Trustee; (iii) the Preferred Securities shall have
been legally issued, as contemplated by paragraph 4 below; and (iv)
the Preferred Securities Guarantees shall have been duly executed and
delivered as provided in the Preferred Securities Guarantee Agreement.
4. The Debentures will be legally issued and binding obligations of the
Company (except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement
of creditors' rights generally and by the effect of general
principles of equity, regardless of whether enforceability is
considered in a proceeding in equity or at law) when (i) the
Registration Statement, as finally amended (including any necessary
post-effective amendments) shall have become effective under the
Securities Act, and the Indenture shall have been qualified under
the Trust Indenture Act, and duly executed and delivered by the
Company and the Indenture Trustee; (ii) an appropriate prospectus
supplement with respect to the particular Debentures then being sold
by the Company shall have been filed with the Commission pursuant to
Rule 424 under the Securities Act; (iii) the Company's Board of
Directors or duly authorized committee thereof shall have duly adopted
final resolutions authorizing the issuance and sale of the Debentures,
as contemplated by the Registration Statement
<PAGE> 3
Page 3
and the Indenture; and (iv) the supplemental indenture under which such
Debentures are to be issued shall have been duly executed and
authenticated as provided in the Indenture and such resolutions, and
shall have been duly delivered to the purchasers thereof against
payment of the agreed consideration therefor.
5. The Stock Purchase Contracts and the Stock Purchase Units, when
issued and sold, will be legally issued and binding obligations
of the Company (except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of
equity, regardless of whether enforceability is considered in a
proceeding in equity or at law) when (i) the Registration Statement,
as finally amended, (including any necessary post-effective
amendments), shall have become effective under the Securities Act;
(ii) an appropriate prospectus supplement with respect to the
particular Stock Purchase Contracts and the Stock Purchase Units then
being sold by the Company shall have been filed with the Commission
pursuant to Rule 424 under the Securities Act; and (iii) and the Stock
Purchase Contracts under which the Common Stock are to be purchased
shall have been duly executed and delivered as provided in the Stock
Purchase Contracts.
6. The Common Stock will be legally issued, fully paid and
non-assessable when; (i) the Registration Statement, as finally
amended, shall have become effective under the Securities Act; (ii)
the Company's Board of Directors or a duly authorized committee
thereof shall have duly adopted final resolutions authorizing the
issuance and sale of the Common Stock, Preferred Securities or
Debentures to be converted into Common Stock or Stock Purchase
Contracts pursuant to which Common Stock may be purchased, as
contemplated by the Registration Statement and prospectus supplement
relating thereto; and (iii) upon delivery, purchase or conversion,
as the case may be, certificates representing the Common Stock shall
have been duly executed, countersigned and registered and duly
delivered to the purchasers thereof against payment of the agreed
consideration therefor.
For purposes of this opinion, I have assumed that there will
be no changes in the laws currently applicable to the Company and that such
laws will be the only laws applicable to the Company.
I do not find it necessary for the purposes of this opinion to
cover, and accordingly I express no opinion as to, the application of the
securities or blue sky laws of the various states to the execution and delivery
of the Preferred Securities Guarantee or the sale of the Securities.
I am a member of the bar of the State of Michigan and I express no
opinion as to the laws of any jurisdiction other than the State of Michigan
and the federal law of the United States of America. I note that the rights,
duties and obligations of the Indenture Trustee under the Indenture
<PAGE> 4
Page 4
are stated to be governed and construed in accordance with the laws of the
State of New York. However, for purposes of paragraph 4 above, I have assumed
that the Indenture, as to the rights, duties and obligations of the Indenture
Trustee, is stated to be governed by the laws of the State of Michigan.
I hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement on Form S-3 relating to the Securities and to
all references to me included in or made a part of the Registration Statement.
Very truly yours,
/s/ Michael D. Van Hemert
--------------------------
Michael D. Van Hemert
<PAGE> 1
EXHIBIT 5(b)
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LETTERHEAD]
June 12, 1997
CMS Energy Corporation
CMS Energy Trust I
CMS Energy Trust II
c/o CMS Energy Corporation
Fairlane Plaza South
330 Town Center Drive, Suite 1100
Dearborn, MI 48126
Re: CMS Energy Corporation;
CMS Energy Trust I;
CMS Energy Trust II;
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special Delaware counsel to (1) CMS Energy
Corporation (the "Company"), a corporation organized under the laws of the
State of Michigan and (2) CMS Energy Trust I and CMS Energy Trust II (each a
"CMS Trust" and, together, the "CMS Trusts"), statutory business trusts formed
under the Business Trust Act of the State of Delaware, in connection with the
preparation of a Registration Statement on Form S-3 (File No. 333-27849), filed
by the Company and the CMS Trusts with the Securities and Exchange Commission
(the "Commission") on May 27, 1997 under the Securities Act of 1933, as amended
(the "Act"), as amended by Amendment No. 1 thereto to be filed on the date
hereof (such Registration Statement, as so amended, being hereinafter referred
to as the "Registration Statement") relating to the registration under the Act
of the preferred securities (the "Preferred Securities") of each of the CMS
Trusts and certain other securities.
The Preferred Securities of each CMS Trust are to be issued
pursuant to the Amended and Restated Trust
<PAGE> 2
CMS Energy Corporation
June 12, 1997
Page 2
Agreement of such CMS Trust (each a "Trust Agreement"), each such Trust
Agreement being among the Company, as sponsor, The Bank of New York, as
property trustee (the "Property Trustee"), The Bank of New York (Delaware), as
Delaware trustee and Alan M. Wright and Thomas A. McNish, as administrative
trustees.
This opinion is being delivered in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
certificate of trust of each of the CMS Trusts (the "Certificates of Trust")
filed with the Secretary of State of the State of Delaware on May 22, 1997;
(ii) the form of the Trust Agreement of each of the CMS Trusts, as filed as an
exhibit to the Registration Statement; and (iii) the form of the Preferred
Securities of each of the CMS Trusts. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us a certified or photostatic copies and the
authenticity of the originals of such copies. In making our examination of
documents executed or to be executed by parties other than the CMS Trusts, we
have assumed that such parties had or will have the power, corporate or other,
to enter into and perform all obligations thereunder and have also assumed the
due authorization by all requisite action, corporate or other, and execution
and delivery by such parties of such documents and that such documents
constitute valid and binding obligations of such parties. In addition, we have
assumed that the Trust Agreement of each CMS Trust, and the Preferred
Securities of each CMS Trust, when executed, will conform to forms thereof
reviewed by us. As to any facts material to the opinions expressed herein
<PAGE> 3
CMS Energy Corporation
June 12, 1997
Page 3
which were not independently established or verified, we have relied upon oral
or written statements and representations of officers, trustees and other
representatives of the Company, the CMS Trusts and others.
Members of our firm are admitted to the bar in the State of
Delaware, and we express no opinion as to the laws of any other jurisdiction.
Based on and subject to the foregoing and to the other
qualifications and limitations set forth herein, we are of the opinion that the
Preferred Securities of each CMS Trust, when the Trust Agreement of such CMS
Trust is duly executed and delivered and the terms of the Preferred Securities
are established in accordance with the terms of the Trust Agreement of such CMS
Trust, will be duly authorized for issuance and, when issued and executed in
accordance with the Trust Agreement of such CMS Trust and delivered and paid
for as set forth in the form of prospectus supplement for the Preferred
Securities included in the Registration Statement, will be validly issued,
fully paid and nonassessable, representing undivided beneficial interests in
the assets of such CMS Trust. We bring to your attention, however, that the
Preferred Securities holders may be obligated, pursuant to the Trust Agreement
of such CMS Trust, to (i) provide indemnity and/or security in connection with
and pay taxes or governmental charges arising from transfers of Preferred
Securities and (ii) provide security and indemnity in connection with the
requests of or directions to the Property Trustee of such CMS Trust to exercise
its rights and powers under the Trust Agreement of such CMS Trust.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement. We also consent to the
use of our name under the heading "Legal Matters" in the prospectus supplement
included in the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission promulgated thereunder. This opinion is expressed as of the date
hereof unless otherwise express-
<PAGE> 4
CMS Energy Corporation
June 12, 1997
Page 4
ly stated and we disclaim any undertaking to advise you of any subsequent
changes of the facts stated or assumed herein or of any subsequent changes in
applicable law.
Very truly yours,
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
<PAGE> 1
EXHIBIT 8
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LETTERHEAD]
June 12, 1997
CMS Energy Corporation
CMS Energy Trust I
c/o CMS Energy Corporation
Fairlane Plaza South
330 Town Center Drive, Suite 1100
Dearborn, MI 48126
Re: Registration Statement on Form S-3
Registration No. 333-27849
Ladies and Gentlemen:
We have acted as special tax counsel to CMS Energy
Corporation, a corporation organized under the laws of the State of Michigan
(the "Company"), and CMS Energy Trust I, a statutory business trust formed
under the Business Trust Act of the State of Delaware (the "Trust"), in
connection with above-captioned registration statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") for the purpose of registering (i) Convertible Quarterly
Income Preferred Securities representing undivided beneficial interests in the
assets of the Trust (the "Preferred Securities") and (ii) Convertible
Subordinated Debentures issued by the Company to the Trust in connection with
the sale of the Preferred Securities (the "Debentures"), as described in the
form of Prospectus Supplement included as an exhibit to such Registration
Statement (the "Prospectus Supplement").
<PAGE> 2
CMS Energy Corporation
CMS Energy Trust I
June 12, 1997
Page 2
In rendering our opinion, we have participated in the
preparation of the Registration Statement and the Prospectus Supplement. Our
opinion is conditioned on, among other things, the initial and continuing
accuracy of the facts, information, covenants and representations set forth in
the Registration Statement, the Prospectus Supplement and certain other
documents and the statements and representations made by officers of the
Company. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents. We also have assumed that the
transactions related to the issuance of the Preferred Securities and the
Debentures will be consummated in the manner contemplated by the Registration
Statement and the Prospectus Supplement.
In rendering our opinion, we have considered the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations promulgated thereunder, judicial decisions and Internal
Revenue Service rulings, all of which are subject to change, which changes may
be retroactively applied. A change in the authorities upon which our opinion
is based could affect our conclusions. There can be no assurance, moreover,
that any of the opinions expressed herein will be accepted by the Internal
Revenue Service or, if challenged, by a court.
Based solely upon the foregoing, we are of the opinion that
under current United States federal income tax law:
(1) The Trust will be classified as a grantor trust and not as an
association taxable as a corporation for United States federal
income tax purposes.
(2) Although the discussion set forth in the Prospectus Supplement
under the heading "UNITED STATES FEDERAL INCOME
<PAGE> 3
CMS Energy Corporation
CMS Energy Trust I
June 12, 1997
Page 3
TAXATION" does not purport to discuss all possible United
States federal income tax consequences of the purchase,
ownership, disposition and conversion of Preferred Securities,
such discussion constitutes, in all material respects, a fair
and accurate summary of the United States federal income tax
consequences of the purchase, ownership, disposition and
conversion of Preferred Securities.
Except as set forth above, we express no opinion to any party
as to the tax consequences, whether federal, state, local or foreign, of the
issuance of the Debentures or the Preferred Securities or of any transaction
related to or contemplated by such issuance. This opinion is furnished to you
solely for your benefit in connection with the offering of the Preferred
Securities and the Debentures and is not to be used, circulated, quoted or
otherwise referred to for any other purpose or relied upon by any other person
without our prior written consent. We consent to the use of our name under the
heading "Legal Matters" in the Prospectus Supplement. We hereby consent to the
filing of this opinion with the Commission as Exhibit 8 to the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Commission
promulgated thereunder. This opinion is expressed as of the date hereof,
unless otherwise expressly stated, and we disclaim any undertaking to advise
you of any subsequent changes of the facts stated or assumed herein or any
subsequent changes in applicable law.
Very truly yours,
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
