AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 2001
REGISTRATION NO.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
CMS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2726431
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
Executive Vice President, Chief Financial Officer
and Chief Administrative Officer
Fairlane Plaza South
330 Town Center Drive, Suite 1100
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:
Michael D. VanHemert, Esq.
CMS Energy Corporation
330 Town Center Drive
Dearborn, MI 48126
------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective and as determined by
market conditions and other factors.
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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------
General Term Notes(R),
Series G............... $300,000,000 100% $300,000,000 $71,700
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(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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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.
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Preliminary Prospectus Dated December 12, 2001
(Subject to Completion)
[CMS ENERGY LOGO]
$300,000,000
General Term Notes(R), Series G
Due from 9 Months to 25 Years from date of issue
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THE COMPANY:
- We are a leading diversified energy company operating in the United States and
selected international regions.
- CMS Energy Corporation
330 Town Center Drive
Dearborn, Michigan 48126
(313) 436-9200
THE OFFERING:
- We will offer the Notes from time to time. When we offer Notes, a pricing
supplement is filed with the Securities and Exchange Commission that describes
the terms of the Notes.
- We intend to use the proceeds of the offering for general corporate purposes.
If we decide to use the proceeds otherwise, we will indicate the use in the
applicable pricing supplement.
THE NOTES:
- Maturity: Nine months to 25 years from date of issue.
- Interest Payments: Interest on the Notes will be at a fixed rate and will be
paid monthly, quarterly or semi-annually in cash.
- Redemption: If provided in the pricing supplement, we can redeem some or all
the Notes on at least 30 days' notice.
- The Notes will be issued in $1,000 increments.
- Ranking: The Notes rank equally in right of payment with our other existing
and future senior unsecured debt.
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PER UNIT TOTAL
------------------------------------------------------------------------------------------------------
Price to Public 100%(1) $300,000,000
Agent's Discount or Commission Not to exceed 4% Not to exceed $12,000,000
Proceeds to Us Not less than 96% Not less than $288,000,000
------------------------------------------------------------------------------------------------------
(1) Unless we state otherwise in a pricing supplement, the price to the public
for each Note will be equal to 100% of the principal amount of the Note.
--------------------------------------------------------------------------------
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We will use J. W. Korth & Company as the underwriter on this offering. The
underwriters are not required to sell any specific number or dollar amount of
securities but will use their best efforts to sell the securities offered.
J. W. KORTH & COMPANY
-------------------------
(R) Registered service mark of J. W. Korth & Company
TABLE OF CONTENTS
Where to Find More Information..... 1
Prospectus Summary................. 2
Risk Factors....................... 9
Forward-Looking Statements and
Information...................... 12
Ratio of Earnings to Fixed
Charges.......................... 14
Use of Proceeds.................... 14
Description of General Terms
Notes(R)......................... 14
Plan of Distribution............... 39
Legal Opinions..................... 40
Experts............................ 40
i
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and current reports, as well as other
information, with the Securities and Exchange Commission. You may read and copy
any reports or other information that we file at the SEC's public reference room
at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling the
SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from
commercial document retrieval services and on the internet at the SEC's web site
at http://www.sec.gov.
We have securities listed on the New York Stock Exchange. You can inspect
and copy reports and other information about us at the NYSE's offices at 20
Broad Street, New York, New York 10005.
We are "incorporating by reference" information into this registration
statement. This means that we are disclosing important information to you when
we refer you to another document that we filed separately with the SEC.
Information incorporated by reference is considered to be part of this
Prospectus, unless the information is updated by information in this Prospectus.
This Prospectus incorporates by reference the documents listed below. We
encourage you to read these additional documents because these documents contain
important information about us and our finances.
SEC FILINGS
(FILE NO. 1-9513) PERIOD/DATE
----------------- -----------
- Registration Statement on Form 8-B/A November 21, 1996.
- Annual Report on Form 10-K Year ended December 31, 2000.
- Quarterly Reports on Form 10-Q Quarters ended March 31, 2001, June
30, 2001 and September 30, 2001.
- Current Reports on Form 8-K Filed February 23, 2001, May 17, 2001,
June 22, 2001, July 12, 2001, August
1, 2001, August 31, 2001, October 26,
2001 and November 2, 2001.
The documents we have filed with the SEC after the date of this Prospectus
and prior to the termination of the offering made by this Prospectus are also
incorporated by reference into this Prospectus. Any statement contained in such
document will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus or any
other subsequently filed document modified or supersedes such statement.
This Prospectus, which is part of the offering registration statement, does
not contain all of the information found in the offering registration statement
including various exhibits and schedules. We are incorporating by reference the
offering registration statement.
We will provide at no cost, upon your oral or written request, a copy of
any or all of the information that has been incorporated by reference in the
prospectus but not delivered with the prospectus. You may request a copy of
these filings at no cost by writing or telephoning CMS Energy at the following
address:
CMS Energy Corporation
Attn: Office of the Secretary
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
Telephone: (313) 436-9200
You should rely only on the information contained in or incorporated by
reference in this Prospectus. We have not authorized anyone to provide you with
information that is different from this information.
1
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus supplement, the accompanying
prospectus and the documents incorporated by reference in this document before
making an investment decision. The terms "CMS," "CMS Energy," "Company," "Our,"
"Us" and "We" as used in this prospectus supplement and the accompanying
prospectus refer to CMS Energy Corporation and its subsidiaries.
In this document, "Bcf" means billion cubic feet, "GWh" means
gigawatt-hour, "KWh" means kilowatt-hour, "MBbls" means thousand barrels, "Mcf"
means thousand cubic feet, "MMBoe" means million barrels of oil equivalent,
"MMBbls" means million barrels, "MMcf" means million cubic feet, "MW" means
megawatts, and "Tbtu" means trillion British thermal units.
CMS ENERGY CORPORATION
We are a leading diversified energy company operating in the United States
and in selected international regions. Our two principal subsidiaries are
Consumers Energy Company and CMS Enterprises Company. Consumers is a public
utility that provides natural gas or electricity to almost 6 million of the
approximately 9.9 million residents in Michigan's lower peninsula. CMS
Enterprises, through subsidiaries, is engaged in several domestic and
international diversified energy businesses including:
- Natural gas transmission, storage and processing;
- Independent power production;
- Oil and gas exploration and production; and
- Energy marketing, services and trading.
OUTLOOK
CMS Energy's vision is to be an integrated energy company with a strong
asset base, supplemented with an active marketing, services and trading
capability. CMS Energy intends to integrate the skills and assets of its
business units to obtain optimal returns and to provide expansion opportunities
for its multiple existing businesses.
To achieve this vision, CMS Energy announced in October 2001, significant
changes in its business strategy in order to strengthen its balance sheet,
provide more transparent and predictable future earnings, and lower its business
risk by focusing its future business growth primarily in North America.
Specifically, the Company plans to sell non-strategic international assets,
discontinue its international energy distribution business and sell its entire
interest in its Equatorial Guinea oil and gas production and reserves and
methanol plant. Consistent with the plan, CMS Energy has entered into a
definitive agreement to sell its entire interest in Equatorial Guinea to
Marathon Oil Company. CMS Energy also plans to discontinue all new development
outside North America, which includes closing all non-U.S. development offices,
except for exploration and production projects and prior commitments in the
Middle East. CMS Energy is pursuing the sale of these non-strategic and
under-performing assets. Upon the sale of these assets, the proceeds realized
may be materially different than the remaining book value of these assets. Even
though these assets have been identified for sale, management cannot predict
when, nor make any assurances that, these assets sales will occur or the
consideration to be received.
2
Consistent with changes in its business strategy, CMS will continue to
sharpen its geographic focus on key growth areas where it already has
significant investments and opportunities. As a result, CMS Energy's focus will
be in North America, particularly in the United States' central corridor and in
existing operations including commitments in the Middle East. At the plan's
completion, approximately 90% of CMS Energy's assets are expected to be in North
America.
CMS Energy is currently evaluating longer-term growth initiatives,
including: acquisitions and joint ventures in CMS Energy's North American
diversified energy businesses and expanded and new North American LNG
degasification terminals.
------------------
We were incorporated in Michigan in 1987 and our World Wide Web address is
http://www.cmsenergy.com. Our web site is not part of this prospectus
supplement. Our telephone number is (313) 436-9200.
RISK FACTORS
You should carefully consider all the information set forth in this
prospectus. In particular, you should evaluate the specific risk factors set for
the under "Risk Factors" beginning on Page 9 to ensure that you understand the
risk associated with an investment in the Notes. Please be aware when reading
this Prospectus that the information contained here may have been updated or
superseded by information in reports that we have filed with the SEC.
3
THE OFFERING
We are issuing the Notes by utilizing a shelf registration process. Under
the shelf process, we may, from time to time, sell the Notes in one or more
offerings, each time providing a Prospectus Supplement with specific information
about the terms of the specific offering (a "Pricing Supplement"). The total of
all of these offerings will not exceed $300,000,000.
Each Pricing Supplement provides the specific details as to interest,
maturity, interest payment dates, redemption terms and other specific details
for the Notes that are issued through the Pricing Supplement. The terms of each
Pricing Supplement will fall within the general terms of this Prospectus, but
the Pricing Supplement will state the fixed terms for each Note. Such general
terms are indicated below:
Issuer....................... CMS Energy Corporation.
Securities Offered........... $300 million principal amount of General Term
Notes(R), Series G (the "Notes").
Maturity Date................ The maturity date can range from 9 months to 25
years from the issue date. Each Pricing
Supplement will state the maturity date.
Interest Rate................ Each Note will bear a fixed interest rate.
Issue Price.................. Each Note will be issued for 100% of the
principal amount unless the Pricing Supplement
specifies a different price.
Interest Payment Dates....... Depending on the Note, the interest may be paid
either monthly, quarterly, or semi-annually.
Repayment upon death......... For Notes with a survivor's option, if the owner
of the Note dies, we will repay the Note at 100%
of the face value of the Note plus accrued
interest, subject to a 120 day holding period.
The survivor's option has annual and individual
limits.
Optional Redemption.......... For Notes where an optional redemption is
provided, we may choose to redeem the Notes upon
not less than 30 days' notice. We will describe
the terms of any optional redemption in the
Pricing Supplement.
Purchase after Change in
Control.................... If we undergo a change in control, you may ask
us to repurchase your Note. We must provide you
with written notice of the change in control and
then you must tell us, in writing, that you want
us to repurchase the Note within 90 days. If you
do so, we will repurchase your Note at 101% of
the face value plus accrued interest.
Ranking...................... The Notes are our unsecured debt securities. Any
of our secured debt will be repaid prior to the
Notes being repaid. The Notes will be paid along
with all other
4
unsecured and unsubordinated debt. As of
September 30, 2001, we had no secured debt
outstanding.
Use of Proceeds.............. We will use the proceeds for general corporate
purposes, unless we specify otherwise in the
Pricing Supplement.
Certain Covenants............ The Indenture will contain covenants that will,
among other things, limit our ability to pay
dividends, repurchase our common stock or make
other payments, incur additional liens and
engage in certain mergers, consolidations and
sale of assets.
Liquidity.................... The Notes do not trade on a public market and we
do not intend to list them on a public market,
such as the New York Stock Exchange or NASDAQ.
Your ability to trade your Note will depend on
many factors including whatever the market
conditions are at the time you try to sell your
note. In the past, non-investment grade debt,
such as the Notes, has seen great changes in the
resale attractiveness based on the then current
market conditions.
5
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(Subject to Completion)
The following selected historical and pro forma financial information has
been derived from our historical consolidated financial statements. We have
prepared pro forma financial information to reflect our acquisition of the
common stock of Panhandle Eastern Pipe Line Company, Panhandle Storage Company,
Trunkline LNG Company and their subsidiaries (collectively, the "Panhandle
Companies"). Please refer to our Form 10-K for the fiscal year ended December
31, 2000, which is incorporated by reference. The financial information set
forth below should be read in conjunction with our consolidated financial
statements, related notes and other financial information incorporated by
reference in the accompanying base prospectus. See "Incorporation of Certain
Documents by Reference" in the accompanying prospectus.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------- SEPTEMBER 30,
PRO FORMA ----------------
1998 1999 1999(1) 2000 2000 2001
------ -------------- -------------- ------ ------ -------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Operating revenue.......... $5,111 $5,926 $6,039 $8,739 $5,620 $11,472
Operating expenses......... 4,375 5,035 5,088 8,036 4,900 11,290
Pretax operating income.... 736 891 951 703 720 182
Income taxes............... 102 63 71 50 78 (108)
Income (loss) from
continuing operations... 254 291 301 38 208 (222)
Discontinued operations.... (12) (14) (14) 3 4 (185)
Income (loss) before
cumulative effect of
change in accounting
principle............... 242 277 287 41 212 (407)
Cumulative effect of change
in accounting for
property taxes, net of
tax(2).................. 43 -- -- (5) (5) --
------ ------ ------ ------ ------ -------
Consolidated net income.... $ 285 $ 277 $ 287 $ 36 $ 207 $ (407)
====== ====== ====== ====== ====== =======
Net income attributable to
common stocks(2)
CMS Energy.............. $ 272 $ 241(8) $ 251(8) $ 36 $ 207 $ (407)
Class G................. 13 36(9) 36(9) -- -- --
Average common shares
outstanding
CMS Energy.............. 102 110 110 113 111 130
Class G................. 8 9(9) 9(9) -- -- --
Earnings per average common
share(2)
CMS Energy
Basic................. $ 2.65 $ 2.18(8) $ 2.27(8) $ 0.32 $ 1.86 $ (3.13)
Diluted............... 2.62 2.17(8) 2.26(8) 0.32 1.85 (3.13)
Class G Basic and
Diluted................. 1.56 4.21(8)(9) 4.21(8)(9) -- -- --
Dividends declared per
common share
CMS Energy.............. 1.26 1.39 1.39 1.46 1.095 1.095
Class G................. 1.27 0.99(9) 0.99(9) -- -- --
6
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
----------------------------- --------------------
1998 1999 2000 2000 2001
------- ------- ------- -------- --------
Balance Sheet Data:
Cash and cash equivalents......... $ 101 $ 132 $ 182 $ 281 $ 213
Net plant and property............ 6,040 8,121 7,835 8,165 8,095
Total assets...................... 11,310 15,462 15,851 16,241 16,089
Long-term debt, excluding current
maturities..................... 4,726 6,428 6,770 7,246 7,402
Non-current portion of capital
leases......................... 105 88 54 81 57
Notes payable..................... 328 230 403 432 153
Other liabilities................. 3,304 5,097 5,130 5,049 5,232
Company-obligated mandatorily
redeemable trust preferred
securities of:
Consumers Power Company
Financing I(3)............... 100 100 100 100 100
Consumers Energy Company
Financing II(3).............. 120 120 120 120 120
Consumers Energy Company
Financing III(4)............. -- 175 175 175 175
Consumers Energy Company
Financing IV(4).............. -- -- -- -- 125
Company-obligated convertible
trust preferred securities of:
CMS Energy Trust I(5).......... 173 173 173 173 173
CMS Energy Trust II(6)......... -- 301 301 301 301
CMS Energy Trust III........... -- -- 220 220 220
Company-obligated trust preferred
securities of CMS RHINOS
Trust(7)....................... -- 250 -- -- --
Preferred stock of subsidiary..... 238 44 44 44 44
Common stockholders' equity....... 2,216 2,456 2,361 2,300 1,987
-------------------------
(1) The pro forma selected financial information illustrates the effects of (i)
various restructuring, realignment, and elimination of activities between
the Panhandle Companies and Duke Energy Corporation prior to the closing of
the acquisition of the Panhandle Companies by CMS Energy, (ii) the
adjustments resulting from the acquisition of the Panhandle Companies and
(iii) financing transactions which include the public issuance of $800
million of senior notes by Panhandle, $850 million of senior notes by CMS
Energy and the private sale of $250 million of trust preferred securities by
CMS Energy.
(2) During the first quarter of 1998, our subsidiary, Consumers, implemented a
change in the method of accounting for property taxes which had the
cumulative effect of increasing net income by $66 million, including $18
million attributable to the portion of our business relating to Class G
common stock. Earnings, net of tax, increased by $43 million or $.40 per
share for CMS Energy common stock and $12 million or $.36 per share for
Class G common stock.
(3) The primary asset of Consumers Power Company Financing I is $103 million
principal amount of 8.36% subordinated deferrable interest notes due 2015
from Consumers. The primary asset of Consumers Energy Company Financing II
is
7
$124 million principal amount of 8.20% subordinated deferrable interest
notes due 2027 from Consumers.
(4) The primary asset of Consumers Energy Company Financing III is $180 million
principal amount of 9.25% subordinated deferrable interest notes due 2029
from Consumers. The primary asset of Consumers Energy Company Financing IV
is $129 million principal amount of 9.0% subordinated deferrable interest
notes due 2031 from Consumers.
(5) The primary asset of CMS Energy Trust I is $178 million principal amount of
7.75% convertible subordinated debentures due 2027 from us.
(6) The primary asset of CMS Energy Trust II is $310 million principal amount of
8.625% convertible junior subordinated deferrable interest debentures due
2004 from us.
(7) The primary asset of CMS RHINOS Trust was $258 million principal amount of
floating rate, subordinated interest notes due 2001 from us; however, these
securities were redeemed on August 22, 2000.
(8) Reflects the reallocation of net income and earnings per share as a result
of the premium on exchange of Class G common stock. As a result, CMS
Energy's basic and diluted earnings per share were reduced $.26 and $.25,
respectively, and Class G's basic and diluted earnings per share were
increased $3.31.
(9) From January 1, 1999 to October 25, 1999.
8
RISK FACTORS
In addition to the information set forth in this Prospectus, you should
carefully consider the risks described below before making an investment
decision in the Notes. The risks described below are not the only ones facing
us. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
RISKS RELATED TO THE NOTES
NO PUBLIC MARKET FOR THE NOTES
There is no active trading market for the Notes and this market may never
develop. If any of the Notes are traded after their initial issuance, they may
trade at a discount from their initial offering price. Factors that could cause
the Notes to trade at a discount include:
- An increase in prevailing interest rates;
- A decline in our credit worthiness;
- A weakness in the market for similar securities; and
- Declining general economic conditions.
POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE IN CONTROL
In the event of a change in control of our Company, each holder of the
Notes may require us to purchase all or a portion of their Notes at a purchase
price of 101% of the principal amount, plus accrued interest. Our ability to
purchase the Notes will be limited by the terms of our other debt agreements and
our ability to finance the purchase. We cannot assure holders of the Notes that
we will be able to finance these purchase obligations or obtain consents to do
so from holders of the Notes under other debt agreements restricting these
purchases.
RISKS RELATING TO CMS ENERGY
WE HAVE SUBSTANTIAL INDEBTEDNESS THAT COULD LIMIT OUR FINANCIAL FLEXIBILITY
As of September 30, 2001, we had outstanding $4.1 billion aggregate
principal amount of indebtedness (excluding subsidiaries), none of which was
secured. None of such indebtedness would be senior to the Notes and the Notes
will not be senior to such indebtedness. On a consolidated basis, we and our
subsidiaries had approximately $8.9 billion in total indebtedness and
mandatorily redeemable trust preferred securities as of September 30, 2001. We
may incur additional indebtedness in the future. The level of our indebtedness
could have several important effects on our future operations, including, among
others:
- a significant portion of our cash flow from operations will be
dedicated to the payment of principal and interest on our
indebtedness and will not be available for other purposes;
- covenants contained in our existing debt arrangements require us to
meet certain financial tests, that may affect our flexibility in
planning for, and reacting to, changes in our business;
- our ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate and other
purposes may be limited;
9
- we may be at a competitive disadvantage to our competitors that are
less leveraged; and
- our vulnerability to adverse economic and industry conditions may
increase.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will be dependent upon our future performance, which will be
subject to general economic conditions, industry cycles and financial, business
and other factors affecting our operations, many of which are beyond our
control. We cannot assure you that our business will continue to generate
sufficient cash flow from operations to service our indebtedness. If we are
unable to generate sufficient cash flow from operations, we may be required to
sell assets, to refinance all or a portion of our indebtedness or to obtain
additional financings. We cannot assure you that any such refinancing will be
possible or that additional financing will be available on commercially
acceptable terms or at all.
Covenants contained in our existing debt arrangements and guarantees limit,
among other things, the incurrence of indebtedness by CMS Energy and its
subsidiaries and require maintenance of a minimum net worth and fixed-charge
coverage ratio and a maximum debt-to-capitalization ratio. There can be no
assurance that the requirements of our existing debt arrangements or other
indebtedness will be met in the future. Failure to comply with such covenants
may result in a default with respect to the related debt and could lead to
acceleration of such debt or any instruments evidencing indebtedness that
contain cross-acceleration or cross-default provisions. In such a case, there
can be no assurance that we would be able to refinance or otherwise repay such
indebtedness.
WE ARE SUBJECT TO RESTRICTIONS ON OUR ABILITY TO PAY OUR OBLIGATION AND TO PAY
OUR SHAREHOLDERS DIVIDENDS
We conduct substantially all of our operations through our subsidiaries. We
must receive dividends or other distributions from our subsidiaries or jointly
owned enterprises to meet our payment obligations. In addition, restrictions
contained in Consumers' mortgage bond indenture and preferred stock provisions
and other legal restrictions limit Consumers' ability to pay dividends or
acquire its own stock from us. As of September 30, 2001, based upon Consumers
Articles of Incorporation, its most restrictive provision, Consumers would be
able to pay an aggregate of $240 million in dividends to us. In the four years
ending December 31, 2000, Consumers paid out $966 million or 74% of its earnings
in cash dividends to us. Enterprises is also limited in the amount of dividends
it is able to pay since it is expanding its developing businesses.
WE FACE INCREASED COMPETITION, WHICH COULD REDUCE OUR MARKET SHARES AND PROFIT
MARGINS
Regulatory changes and other developments have resulted and will continue
to result in increased competition in our domestic energy businesses. Generally,
increased competition threatens our market shares in certain segments of our
business and can reduce our profit margins.
Increased competition and direct access in the electric industry. Consumers
has in the last several years experienced and expects to continue to experience
a significant increase in competition for generation services with the
introduction of retail direct access in the state of Michigan. Under Michigan's
Customer Choice and Electric Reliability Act (the, "Customer Choice Act"), all
electric customers will have the choice of electric generation suppliers by
January 1, 2002.
10
Increased competition in the gas pipeline industry. A significant portion
of our domestic revenue and cash flow comes from our interstate pipeline
business. The Federal Energy Regulatory Commission ("FERC") policy allows the
issuance of certificates authorizing the construction of new interstate
pipelines that are competitive with existing pipelines. A number of new pipeline
and pipeline expansion projects have been approved or are pending approval by
the FERC in order to transport large additional volumes of natural gas to the
Midwestern United States from Canada. These pipelines will be able to compete
with our subsidiary Panhandle Eastern Pipe Line Company's pipelines. Increased
competition could reduce the volumes of gas transported by Panhandle to their
existing markets or cause them to lower rates in order to meet competition. This
could lower the financial results of our subsidiary, Panhandle.
NEW ELECTRIC RESTRUCTURING LEGISLATION COULD ADVERSELY AFFECT OUR BUSINESS.
Federal and state regulation of the electric utility has changed
dramatically in the last two decades and could continue to change over the next
several years. These changes could adversely affect our business, financial
condition and profitability.
In June 2000, the Michigan Legislature enacted the Customer Choice Act that
became effective June 5, 2000. The Customer Choice Act first reduced residential
rates by 5%, then froze them as of the June 2000 effective date of this new
legislation through December 31, 2003. All other electric rates are frozen
through December 31, 2003 without first being reduced. After that date, electric
rates are subject to a rate cap. The length of the rate cap varies depending
upon whether the customer is a residential, commercial or industrial customer,
among other determinations. Ultimately, the rate cap could extend until December
31, 2013 depending upon whether Consumers and two other utilities jointly
complete expansion of available transmission capability in the state of Michigan
of at least 2,000 MW and do not exceed the market control test established by
the legislation (a requirement with which Consumers is currently in compliance).
Under circumstances specified in the Customer Choice Act certain costs can be
deferred for future recovery after the expiration of the rate cap period.
However, the rate cap could result in Consumers being unable to collect customer
rates sufficient to fully recover its cost of doing business. Some of these
costs may be wholly or partially beyond Consumers' power to control. In
particular, to the extent Consumers may need to purchase power from wholesale
suppliers at market-based prices during the period when retail rates are frozen
or capped, it may be difficult to purchase power at prices that can be recovered
in rates. As a result, it is not certain that Consumers' can maintain its profit
margin in its electric utility business during the rate freeze over the long
run.
WE COULD INCUR SIGNIFICANT CAPITAL EXPENDITURES TO COMPLY WITH ENVIRONMENTAL
STANDARDS
We and our subsidiaries are subject to costly and increasingly stringent
environmental regulations. We expect that the cost of future environmental
compliance, especially compliance with clean air laws, will be significant.
In 1997, the Environmental Protection Agency introduced new regulations
regarding nitrogen oxide and particulate-related emissions that are the subject
of litigation. The United States Supreme Court determined that the EPA has the
power to revise the standards but that the EPA implementation plan was not
lawful. In 1998, the EPA Administrator issued final regulations requiring the
state of Michigan to further limit nitrogen oxide emissions. The EPA has also
issued additional final regulations regarding
11
nitrogen oxide emissions that require certain generators, including some of
Consumers' electric generating facilities, to achieve the same emissions rate as
that required by the 1998 plan. These regulations will require Consumers to make
significant capital expenditures estimated between $470 million and $560
million, calculated in year 2001 dollars. Consumers anticipates that it will
incur these capital expenditures between 2000 and 2004. As of September 2001,
Consumers has incurred $251 million in capital expenditures to comply with these
regulations.
At some point after 2004, if new environmental standards for
multi-pollutants become effective, Consumers may need additional capital
expenditures to comply with the standards. Consumers is unable to estimate the
additional capital expenditures until the proposed standards are further
defined.
Beginning January 2004, an annual return of and on these capital
expenditures above depreciation levels are expected to be recoverable, subject
to an MPSC prudency hearing, in future rates.
These and other required environmental expenditures may have a material
adverse effect upon our financial condition and results of operations.
TERRORIST ATTACKS
Since the September 11, 2001 terrorist attacks in the United States, CMS
Energy has increased security at substantially all facilities, and will continue
to evaluate security on an ongoing basis. In the future, CMS Energy may be
required to comply with potential federal and state regulatory security
measures. As a result, CMS Energy anticipates increased operating costs related
to security after September 11, 2001 that could be significant, although not
quantifiable at this time. Additionally, it is not certain that these additional
costs will be recovered in Consumers' or Panhandle's rates.
FORWARD-LOOKING STATEMENTS AND INFORMATION
This prospectus contains or incorporates by reference forward-looking
statements. From time to time, we may make statements regarding our assumptions,
projections, expectations, intentions or beliefs about future events. These
statements are intended as "Forward-Looking Statements" under the Private
Securities Litigation Reform Act of 1995. The words "believe," "expect,"
"estimate," "project," and "anticipate" or similar expressions identify
forward-looking statements. Where any forward-looking statement includes a
statement of the assumptions or bases underlying such forward-looking statement,
we caution that, while such assumptions or bases are believed to be reasonable
and are made in good faith, assumed facts or bases almost always vary from
actual results, and the differences between assumed facts or bases and actual
results can be material, depending upon the circumstances. Some of the factors
that could cause actual achievements and events to differ materially from those
expressed or implied in any forward-looking statements are:
- the ability to achieve operating synergies and revenue enhancements;
- capital and financial market conditions, including the current price
of our common stock, interest rates and availability of financing;
- market perceptions of the energy industry, our company or any of our
subsidiaries;
12
- our or any of our subsidiaries' securities ratings;
- currency fluctuations and exchange controls;
- factors affecting utility and diversified energy operations such as
unusual weather conditions, catastrophic weather-related damage,
unscheduled generation outages, maintenance or repairs,
unanticipated changes to fossil fuel, nuclear fuel or gas supply
costs or availability due to higher demand, shortages,
transportation problems or other developments;
- environmental incidents;
- electric transmission or gas pipeline system constraints;
- international, national, regional and local economic, competitive
and regulatory conditions and developments;
- adverse regulatory or legal decisions, including environmental laws
and regulations;
- pace of implementation and provisions for deregulation of the
natural gas industry, whether by legislative or regulatory action;
- federal regulation of electric sales and transmission of electricity
that grants independent power producers, electricity marketers and
other utilities "direct access" to the interstate electric
transmission systems, creating opportunities for competitors to
market electricity to our wholesale customers;
- energy markets, including the timing and extent of unanticipated
changes in commodity prices for oil, coal, natural gas, natural gas
liquids, electricity and certain related products due to higher
demand, shortages, transportation problems or other developments;
- the timing and success of business development efforts;
- potential disruption, expropriation or interruption of facilities or
operations due to accidents or political events and the ability to
get or maintain insurance coverage for such events;
- nuclear power plant performance, decommissioning, policies,
procedures, incidents and regulation, including the availability of
spent nuclear fuel storage;
- technological developments in energy production, delivery and usage;
- financial or regulatory accounting principles or policies;
- cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
- limitations on our ability to control the development or operation
of projects in which our subsidiaries have minority interests;
- other uncertainties, all of which are difficult to predict and many
of which are beyond our control; and
- The ability to efficiently sell non-strategic international assets
and discontinue our international energy distribution systems.
These and other factors are discussed more completely in our public filings
with the SEC, including our annual report on Form 10-K for the year ended
December 31, 2000 and our reports on Form 10-Q for the periods ended March 31
and June 30, 2001 and September 30, 2001.
13
The factors identified under "Risk Factors" on page S-10 are also important
factors, but not necessarily all of the important factors, that could cause
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, us or our subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of CMS Energy and its consolidated
subsidiaries for each of the years ended December 31, 1996 through 2000, and for
the nine months ended September 30, 2001, are as follows:
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------
2001 2000 1999 1998 1997 1996
------------- ---- ----- ----- ----- -----
Ratio of earnings to fixed
charges........................ (a) (b) 1.41x 1.62x 1.78x 1.95x
-------------------------
(a) For the nine months ended September 30, 2001, fixed charges exceeded
earnings by $336 million. Earnings as defined include $628 million of pretax
contract losses and asset revaluations. The ratio of earnings to fixed
charges would have been 1.55x excluding these amounts.
(b) For the year ended December 31, 2000, fixed charges exceeded earnings by
$127 million. Earnings as defined include a $329 million pretax impairment
loss on the Loy Yang investment. The ratio of earnings to fixed charges
would have been 1.31x excluding this amount.
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
Unless otherwise provided in a Pricing Supplement, we will use the net
proceeds from the sale of the Notes for our general corporate purposes including
refinancing of debt, capital expenditures, investment in subsidiaries, and
working capital.
DESCRIPTION OF GENERAL TERM NOTES(R)
The Notes will be issued as a series of debt securities under an Indenture,
dated as of January 15, 1994 (such Indenture as amended or supplemented from
time to time by one or more supplemental indentures thereto, including a
supplemental indenture relating to the Notes, being referred to herein as the
"Indenture" and all debt securities hereafter issued under such Indenture being
collectively referred to herein as "Securities"), between the Company and The
JPMorgan Chase Bank, a New York banking corporation, as trustee (the "Trustee").
The Company is not limited by the Indenture as to the aggregate principal amount
of Securities it may issue. The descriptions of the Notes and the Indenture in
this Prospectus are brief summaries of the provisions contained in such
documents and do not purport to be complete. The form of the Indenture is filed
as an exhibit to the Registration Statement of which this Prospectus is a part,
and reference is made thereto for the definitive provisions of such Indenture.
The descriptions herein are
14
qualified in their entirety by such reference. Certain capitalized terms used
herein without definition shall have the meanings respectively set forth in the
Indenture.
GENERAL
The Notes offered under this Prospectus are offered on a continuing basis.
Each Note will mature from 9 months to 25 years from its date of issue, as
specified in the Prospectus Supplement. The Notes will be issued without coupons
in registered form only and in increments of $1,000.
We are a holding company and our assets consist primarily of our investment
in our subsidiaries. The Securities (including the Notes) will be exclusively
our obligations, and not our subsidiaries' obligations. Our ability to service
our indebtedness, including the Securities, depends on the earnings of our
subsidiaries and the distribution or other payment from our subsidiaries of such
earnings to us in the form of dividends, loans or advances, and repayment of
loans and advances from us. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts due
under the Securities or to make payments to us in order for us to pay the
obligations under these Notes.
A substantial portion of the consolidated liabilities of the Company have
been incurred by its subsidiaries. Therefore, the Company's rights and the
rights of its creditors, including holders of Securities, to participate in the
distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including trade creditors, except to the extent that the Company may itself be a
creditor with recognized claims against the subsidiary (in which case the claims
of the Company would still be subject to the prior claims of any secured
creditor of such subsidiary and of any holder of indebtedness of such subsidiary
that is senior to that held by CMS Energy). As of September 30, 2001, the
Company's subsidiaries had total indebtedness for borrowed money (excluding
intercompany indebtedness) of approximately $4.8 billion.
The Notes rank on parity with all other unsecured and unsubordinated
indebtedness of the Company. As of September 30, 2001, the Company had no
secured indebtedness outstanding. However, the Company has retained the right to
secure indebtedness, subject to certain limitations. See "Certain Restrictive
Covenants -- Limitations on Certain Liens."
The Notes will be represented by a Global Note registered in the name of
the nominee of the Depository, except under the limited circumstances described
below under "Certificated Notes." A single Global Note will represent all Notes
issued on the same day and having the same terms, including, but not limited to,
the same Interest Payment Dates, rate of interest, stated maturity and
repurchase and redemption provisions (if any). A beneficial interest in a Global
Note will be shown on, and transfers thereof will be effected only through,
records maintained by the Depository (with respect to interests of its
participants) and its participants (with respect to interests of persons other
than its participants).
Unless the applicable Pricing Supplement provides otherwise, the price at
which each Note will be issued (the "Issue Price") will be 100% of the principal
amount of the Note. Notes will not be issued as discounted securities, at prices
below stated principal amounts, or having an original issue discount for U.S.
federal income tax purposes, unless the
15
applicable Pricing Supplement so provides and, if applicable, describes
potential U.S. federal income tax consequences.
The Pricing Supplement relating to a Note will set forth, among other
things, the following terms:
- The issue date of the Note;
- The Issue Price;
- The stated maturity date of such Note;
- The annual interest rate;
- The Interest Payment Dates for such Note;
- The Survivor's Option, if applicable;
- Any redemption option of the Company prior to the stated maturity;
and
- Any other terms not inconsistent with the provisions of the
Indenture.
INTEREST
Each Note will bear interest from the date of issue at the fixed annual
rate specified in the applicable Pricing Supplement until the principal is paid
or made available for payment. Interest will be payable either monthly,
quarterly or semi-annually on each Interest Payment Date and at Maturity.
Interest will be payable to the person in whose name a Note is registered at the
close of business on the Regular Record Date preceding each Interest Payment
Date; provided, however, interest payable at Maturity will be payable to the
person to whom principal shall be payable. Unless otherwise indicated in the
applicable Pricing Supplement, interest will be paid in arrears and shall be the
amount of interest accrued to, but excluding, the Interest Payment Date.
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months.
Monthly Interest: The Interest Payment Dates for a Note that provides for
monthly interest payments shall be the fifteenth day of each calendar month. If
a Note is issued between the first and fifteenth day of a calendar month,
interest otherwise payable on the fifteenth day of such calendar month will be
payable on the fifteenth day of the next succeeding calendar month.
Quarterly Interest: The Interest Payment Dates for a Note that provides for
quarterly interest payments, shall be the fifteenth day of each of the months
specified in the Pricing Supplement. Interest payments will begin three months
from the Quarterly Interest Calculation Date specified in the table below:
ISSUE DAY OF
CALENDAR MONTH QUARTERLY INTEREST CALCULATION DATE
---------------------- -------------------------------------------------------------
Before the 15th....... The 15th day of the previous calendar month of the Issue Date
The 15th.............. The Issue Date
After the 15th........ The 15th day of the calendar month of the Issue Date
Semi-Annual Interest: In the case of a Note that provides for semi-annual
interest payments, the Interest Payment Dates shall be the fifteenth day of each
of the months
16
specified in the Pricing Supplement. Interest payments will begin six months
from the Semi-Annual Interest Calculation date specified in the table below:
ISSUE DAY OF
CALENDAR MONTH SEMI-ANNUAL INTEREST CALCULATION DATE
---------------------- -------------------------------------------------------------
Before the 15th....... The 15th day of the previous calendar month of the Issue Date
The 15th.............. The Issue Date
After the 15th........ The 15th day of the calendar month of the Issue Date
Record Date for Interest: The Regular Record Date for any Interest Payment
Date (other than at Maturity) shall be the first day (whether or not a Business
Day) of the calendar month in which such Interest Payment Date occurs. In the
case of interest payable at Maturity, the Regular Record Date shall be the date
of Maturity.
Defaulted Interest: Interest on the Notes that is not punctually paid or
duly provided for on any Interest Payment Date ("defaulted interest") shall
cease to be payable to the Holder thereof on the relevant Regular Record Date.
The Company may pay such defaulted interest to Holders of Notes in one of two
ways. First, the Company may set a Special Record Date for the payment of such
defaulted interest fixed by the Trustee. To do so, the Company must notify the
Trustee in writing of the amount of the defaulted interest not more than 15 nor
less than 10 days prior to the date of the proposed payment. The Company must
also deposit with the Trustee funds equal to the amount of the proposed payment
or make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment. The second option is to pay defaulted interest in
such other lawful manner that is not inconsistent with the requirements of any
securities exchange on which the Notes are listed for trading.
REDEMPTION
A Note is not subject to redemption at the option of the Company prior to
the date, if any, fixed at the time of sale and designated as the "Initial
Redemption Date" on the face of such Note and in the applicable Pricing
Supplement hereto. If no Initial Redemption Date is indicated with respect to a
Note, such Note is not subject to redemption at the option of the Company prior
to Stated Maturity. If so specified in the applicable Pricing Supplement, on and
after the Initial Redemption Date, the related Note will be redeemable in whole
or in part in increments of $1,000, at the option of the Company, at redemption
prices declining from a specified premium, if any, to par, together with accrued
interest to the date of redemption, on notice given by the Company not more than
60 nor less than 30 days prior to the date of redemption. If less than all of
the Notes of like tenor and terms are to be redeemed, the Notes to be redeemed
will be selected by the Trustee by such method as the Trustee shall deem fair
and appropriate. Notwithstanding the foregoing however, the Company may at any
time purchase Notes at any price in the open market or otherwise. Notes so
purchased by the Company may, at the discretion of the Company, be held or
resold or surrendered to the Trustee for cancellation. The Notes will not have a
sinking fund. See "Purchase of Notes Upon Change in Control" and "Repayment Upon
Death."
With respect to Notes redeemable at the option of the Company, the
applicable Pricing Supplement will specify if the Company would be prohibited
from redeeming such Note as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an effective interest cost to the Company of less than the effective interest
cost to the Company of such Note.
17
PURCHASE OF NOTES UPON CHANGE IN CONTROL
If there is a Change in Control (as defined below), each Holder of a Note
may choose to require the Company to repurchase all or any part of such Holder's
Note pursuant to the terms and conditions of the Indenture. The Company must
select a date for repurchase no earlier than 60 days nor later than 90 days (the
"Change in Control Purchase Date") after the mailing of written notice by the
Company of the occurrence of such Change in Control. If a Holder decides to have
the Company repurchase their Note, the Company must pay a repurchase price
payable in cash equal to 101% of the principal amount of such Note plus accrued
interest to the Change in Control Purchase Date (the "Change in Control Purchase
Price").
Company's Obligations on a Change in Control:
If there is a Change in Control, the Company must notify each Holder within
30 days by mail a notice regarding the Change in Control.
The notice must state, among other things:
- That a Change in Control has occurred and that each such Holder has
the right to require the Company to repurchase all or any part of
such Holder's Notes at the Change in Control Purchase Price;
- The Change in Control Purchase Price;
- The Change in Control Purchase Date;
- The name and address of the Paying Agent; and
- The procedures that Holders must follow to cause the Notes to be
repurchased.
Holder's Obligations:
To exercise this right, a Holder must deliver a Change in Control Purchase
Notice to the Paying Agent. at the Paying Agent's office in The City of New
York, or any other office of the Paying Agent maintained for such purposes, not
later than 30 days prior to the Change in Control Purchase Date.
The Change in Control Purchase Notice shall state:
- The portion of the principal amount of any Notes to be repurchased,
which must be in increments of $1,000;
- That such Notes are to be repurchased by the Company pursuant to the
applicable change-in-control provisions of the Indenture; and
- The certificate numbers of the Notes to be repurchased, unless the
Notes are represented by one or more Global Notes.
The Holder may withdraw any Change in Control Purchase Notice by a written
notice of withdrawal delivered to the Paying Agent not later than three Business
Days prior to the Change in Control Purchase Date. The notice of withdrawal
shall state the principal amount and, if applicable, the certificate numbers of
the Notes as to which the withdrawal notice relates and the principal amount, if
any, which remains subject to a Change in Control Purchase Notice.
18
Obligations when represented by a Global Note:
If a Note is represented by a Global Note, the Depository or its nominee
will be the holder of such Note and therefore will be the only entity that can
require the Company to repurchase Notes upon a Change in Control.
To obtain repayment with respect to such Note upon a Change in Control, the
beneficial owner of such Note must provide to the broker or other entity through
which it holds the beneficial interest in such Note:
- A Change in Control Purchase Notice signed by such beneficial owner.
The signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc. ("NASD") or a commercial bank or trust
company having an office or correspondent in the United States; and
- Instructions to such broker or other entity to notify the Depository
of such beneficial owner's desire to cause the Company to repurchase
such Notes.
Such broker or other entity will provide to the Paying Agent:
- A Change in Control Purchase Notice received from such beneficial
owner; and
- A certificate, satisfactory to the Paying Agent from such broker or
other entity, that it represents such beneficial owner. Such broker
or other entity will be responsible for disbursing any payments it
receives upon the repurchase of such Notes by the Company.
Additional Payment Requirements for Certificated Notes:
To receive payment of the Change in Control Purchase Price for a Note in
Certificated form (a "Certificated Note") for which a Change in Control Purchase
Notice has been delivered and not withdrawn you must deliver such Note (together
with necessary endorsements) to the Paying Agent. This delivery should be made
to the Paying Agent at its office in The City of New York, or any other office
of the Paying Agent maintained for such purpose. This delivery may be made at
any time (whether prior to, on or after the Change in Control Purchase Date)
after the delivery of the Change in Control Purchase Notice. Payment of the
Change in Control Purchase Price for such Note will be made promptly following
the later of the Change in Control Purchase Date or the time of delivery of such
Note.
If the Paying Agent holds, in accordance with the terms of the Indenture,
money sufficient to pay the Change in Control Purchase Price of a Note on the
Business Day following the Change in Control Purchase Date for such Note, then,
on and after such date, interest on such Note will cease to accrue, whether or
not such Note is delivered to the Paying Agent, and all other rights of the
Holder shall terminate (other than the right to receive the Change in Control
Purchase Price upon delivery of the Note).
19
Definition of Change in Control:
Under the Indenture, a "Change in Control" means an event or series of
events by which:
- CMS Energy ceases to beneficially own, directly or indirectly, at
least 80% of the total voting power of all classes of Capital Stock
then outstanding of Consumers. This situation may arise from
issuance of securities of the Company or Consumers, any direct or
indirect transfer of securities by CMS Energy or Consumers, any
merger, consolidation, liquidation or dissolution of CMS Energy or
Consumers or otherwise; or
- Any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person or group shall be deemed to have "beneficial
ownership" of all shares that such person or group has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 30% of
the Voting Stock of CMS Energy; or
- CMS Energy consolidates with or merges into another corporation or
directly or indirectly conveys, transfers or leases all or
substantially all of its assets to any person, or any corporation
consolidates with or merges into CMS Energy, in either event
pursuant to a transaction in which the outstanding Voting Stock of
CMS Energy is changed into or exchanged for cash, securities, or
other property, other than any such transaction where:
- The outstanding Voting Stock of CMS Energy is changed into
or exchanged for Voting Stock of the surviving
corporation; and
- The holders of the Voting Stock of CMS Energy immediately
prior to such transaction retain, directly or indirectly,
substantially proportionate ownership of the Voting Stock
of the surviving corporation immediately after such
transaction.
The Indenture requires CMS Energy to comply with the provisions of Rule
13e-4 and any other tender offer rules under the Exchange Act which may then be
applicable and file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by CMS Energy to purchase Notes at the option of
Holders upon a Change in Control. The Change in Control purchase feature of the
Notes may in certain circumstances make more difficult or discourage a takeover
of CMS Energy and, thus, the removal of incumbent management. The Change in
Control purchase feature, however, is not the result of management's knowledge
of any specific effort to accumulate shares of its common stock or to obtain
control of the Company by means of a merger, tender offer, solicitation or
otherwise, or part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the Change in Control purchase feature is a customary term
contained in similar debt offerings and the terms of such feature result from
negotiations between CMS Energy and the Agents. Management has no present
intention to propose any anti-takeover measures although it is possible that CMS
Energy could decide to do so in the future.
No Note may be repurchased by the Company as a result of a Change of
Control if there has occurred and is continuing an Event of Default described
under "Events of Default" below (other than a default in the payment of the
Change in Control Purchase Price with respect to the Notes). In addition, the
Company's ability to purchase Notes may be limited by its financial resources
and its inability to raise the required funds
20
because of restrictions on issuance of securities contained in other contractual
arrangements.
REPAYMENT UPON DEATH (SURVIVOR'S OPTION)
The Pricing Supplement relating to any Note will indicate whether the
holder of such Note will have the Survivor's Option. SEE THE PRICING SUPPLEMENT
TO DETERMINE WHETHER THE SURVIVOR'S OPTION APPLIES TO ANY PARTICULAR NOTE.
The Survivor's Option, if applicable, requires the Company to repay any
Note (or portion thereof) properly tendered for repayment by the representative
of the deceased owner (the "Representative"). The Representative is the person
who has authority to act on behalf of the deceased owner of the beneficial
interest of such Note under the laws of the appropriate jurisdiction. Such
person includes, without limitation, the trustee of a personal trust, the
personal representative, executor, surviving joint tenant or surviving tenant by
the entirety of such deceased beneficial owner. When the option is exercised the
Company will repay the Note at a price equal to 100% of the principal amount of
the beneficial interest of the deceased owner in such Note plus accrued interest
to the date of such repayment, subject to the limitations below. In order for a
holder to exercise the Survivor's Option, the holder or his or her
Representative must have individually or collectively held the Note for 120
days. The Company may, in its sole discretion, limit the principal amount of
Notes as to which exercises of the Survivor's Option will be accepted in any
calendar year. This limit may be by either an Annual Put Limitation and/or an
Individual Put Limitation. The Annual Put Limitation applies to the aggregate
principal amount of Notes that the Company will redeem among all holders of
Notes. The Annual Put Limitation must be at least one percent (1%) of the
outstanding principal amount of the Notes as of the end of the most recent
fiscal year, but not less than $500,000 in any such calendar year. The Company
may elect a greater amount for the Annual Put Limitation as the Company in its
sole discretion may determine for any calendar year. The Individual Put
Limitation is $100,000 or such greater amount as the Company in its sole
discretion may determine for any calendar year. The Individual Put Limitation
applies to the aggregate principal amount of Notes (or portions thereof) as to
which exercise of the Survivor's Option will be accepted in such calendar year
with respect to any individual deceased owner of beneficial interests in such
Notes.
Moreover, the Company will not make principal repayments pursuant to
exercise of the Survivor's Option in amounts that are less than $1,000. In the
event that the limitations described in the preceding paragraph would result in
the partial repayment of any Note, the principal amount of such Note remaining
outstanding after repayment must be at least $1,000 (the minimum authorized
denomination of the Notes). Any Note (or portion thereof) tendered pursuant to
exercise of the Survivor's Option may be withdrawn by a written request by the
Representative of the deceased owner received by the Trustee prior to its
repayment.
Each Note (or portion thereof) that is tendered pursuant to valid exercise
of the Survivor's Option will be accepted promptly in the order all such Notes
are tendered, except for any Note (or portion thereof) the acceptance of which
would contravene (i) the Annual Put Limitation, if applied, or (ii) the
Individual Put Limitation, if applied, with respect to the relevant individual
deceased owner of beneficial interests therein. If, as of the end of any
calendar year, the aggregate principal amount of Notes (or portions
21
thereof) that have been accepted pursuant to exercise of the Survivor's Option
for such year, has not exceeded the Annual Put Limitation, if applied, for such
year, any exercise(s) of the Survivor's Option with respect to Notes (or
portions thereof) not accepted during such calendar year because such acceptance
would have contravened the Individual Put Limitation, if applied, with respect
to an individual deceased owner of beneficial interests therein will be accepted
in the order all such Notes (or portions thereof) were tendered, to the extent
that any such exercise would not exceed the Annual Put Limitation for such
calendar year. Any Note (or portion thereof) accepted for repayment pursuant to
exercise of the Survivor's Option will be repaid no later than the first
Interest Payment Date that occurs 20 or more calendar days after the date of
such acceptance. Each Note (or any portion thereof) tendered for repayment that
is not accepted in any calendar year due to the application of the Annual Put
Limitation will be deemed to be tendered in the following calendar year in the
order in which all such Notes (or portions thereof) were originally tendered,
unless any such Note (or portion thereof) is withdrawn by the Representative for
the deceased owner prior to its repayment. In the event that a Note (or any
portion thereof) tendered for repayment pursuant to valid exercise of the
Survivor's Option is not accepted, the Trustee will deliver a notice by first-
class mail to the registered Holder thereof at its last known address as
indicated in the Security Register or, alternatively to the applicable
Representative that states the reasons such Note (or portion thereof) has not
been accepted for repayment.
Subject to the foregoing, in order for a Survivor's Option to be validly
exercised with respect to any Note (or portion thereof), the Trustee must
receive from the Representative of the deceased owner:
- A written request for repayment signed by the Representative, and
such signature must be guaranteed by a member firm of a registered
national securities exchange or of the NASD or a commercial bank or
trust company having an office or correspondent in the United
States;
- If such Note is not represented by a Global Note as described below,
tender of the Note (or portion thereof) to be repaid;
- Appropriate evidence satisfactory to the Company and the Trustee
that:
(1) the Representative has authority to act on behalf of the
deceased beneficial owner;
(2) the death of such beneficial owner has occurred; and
(3) the deceased was the owner of a beneficial interest in such
Note at the time of death;
- If applicable, a properly executed assignment or endorsement; and
- If the beneficial interest in such Note is held by a nominee of the
deceased beneficial owner, a certificate satisfactory to the Trustee
from such nominee attesting to the deceased's ownership of a
beneficial interest in such Note.
All questions as to the eligibility or validity of any exercise of the
Survivor's Option will be determined by the Company, in its sole discretion,
which determinations will be final and binding on all parties.
If a Note is represented by a Global Note, the Depository or its nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise the Survivor's Option for such Note. To obtain repayment pursuant to
exercise of the Survivor's Option
22
with respect to such Note, the Representative must provide to the broker or
other entity through which the deceased owner holds the beneficial interest in
such Note:
- A written request for repayment signed by the Representative, and
such signature must be guaranteed by a member firm of a registered
national securities exchange or of the NASD or a commercial bank or
trust company having an office or correspondent in the United
States;
- Appropriate evidence satisfactory to the Company and the Trustee
that:
(1) the Representative has authority to act on behalf of the
deceased beneficial owner;
(2) the death of such beneficial owner has occurred; and
(3) the deceased was the owner of a beneficial interest in such
Note at the time of death; and
- Instructions to such broker or other entity to notify the Depository
of such Representative's desire to obtain repayment pursuant to
exercise of the Survivor's Option.
Such broker or other entity will provide to the Trustee:
- The written request for repayment and the evidence received from the
Representative referred to above; and
- a certificate satisfactory to the Trustee from such broker or other
entity stating that it represents the deceased beneficial owner and
that such deceased beneficial owner or his or her Representative
individually or collectively held the Note for 120 days.
Such broker or other entity will be responsible for disbursing any payments
it receives pursuant to exercise of the Survivor's Option to the appropriate
Representative. See "Book-Entry System."
DELIVERIES OF DOCUMENTS TO JPMORGAN CHASE BANK, AS TRUSTEE, IN CONNECTION
WITH THE EXERCISE OF THE SURVIVOR'S OPTION SHALL BE MADE TO JPMORGAN CHASE BANK,
450 WEST 33RD STREET, 15TH FLOOR, NEW YORK, NEW YORK 10001-2697, ATTENTION:
CAPITAL MARKETS FIDUCIARY SERVICES, JAMES P. FREEMAN, VICE PRESIDENT.
PAYMENT AND PAYING AGENTS
Payments of principal, premium, if any, and interest on Notes represented
by a Global Note will be made to the Depository through such Paying Agent or
Paying Agents in The City of New York as the Company may designate from time to
time or by wire transfer to the Depository. See "Book-Entry System." Payments of
principal, premium, if any, and interest on Certificated Notes will be made upon
surrender of such Notes at the office of such Paying Agent or Paying Agents in
The City of New York as the Company may designate from time to time. At the
option of the Company, payment of any interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register for Certificated Notes.
The principal corporate trust office of JPMorgan Chase Bank, located at 450
West 33rd Street, 15th Floor, New York, New York 10001-2697, has been designated
as the Company's sole Paying Agent for payments with respect to the Notes. The
Company may
23
at any time designate additional Paying Agents, rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts, except that the Company will be required to maintain a Paying Agent in
each Place of Payment for the Notes.
BOOK-ENTRY SYSTEM
The Notes will be issued initially in the form of one or more Global Notes
that will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York ("DTC"), which will act as securities depository for the Notes.
The Notes will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). DTC and any other depository that may
replace DTC as depository for the Notes are sometimes referred to herein as the
"Depository."
Upon issuance, all Notes having the same issue date, interest rate,
redemption provisions, provisions for repurchase at the option of the Holder,
stated maturity and other provisions will be represented by one or more Global
Notes. Except under the limited circumstances described below, Notes represented
by Global Notes will not be exchangeable for Certificated Notes.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, such Depository or such nominee, will be considered the sole
registered holder of the individual Notes represented by such Global Note for
all purposes under the Indenture. Payments of principal and premium, if any, and
any interest on individual Notes represented by a Global Note will be made to
the Depository or its nominee as the registered holder of such Global Note.
Except as set forth below, owners of beneficial interests in a Global Note will
not be entitled to have any of the individual Notes represented by such Global
Note registered in their names. Owners of beneficial interests in a Global Note
will not receive or be entitled to receive physical delivery of any such Note.
Owners of beneficial interests in a Global Note will not be considered the
registered holder thereof under the Indenture, including, without limitation,
for purposes of consenting to any amendment thereof or supplement thereto as
described in this Prospectus.
The following is based upon information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants ("Direct
Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the NASD. Access to
the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect
24
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's
records. The ownership interest of each actual purchaser of each Note
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Notes, except in the event that
use of the book-entry system for one or more Notes is discontinued.
To facilitate subsequent transfers, all Global Notes deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Notes. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them. Such notices and other communications are subject to
any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, DTC's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to Beneficial Owners will be governed by standing instructions
and customary practices. Such payments are customary for securities held for the
accounts of customers in bearer form or registered in "street name". Such
payments will be the responsibility of such Participant and not of DTC, any
Agents, or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC is
the responsibility of the Company, disbursement of such payments to Direct
Participants shall
25
be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving 90 days' notice to the Company or the
Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Certificated Notes are required to be printed and
delivered in exchange for the Notes represented by the Global Notes held by the
DTC. See "Certificated Notes."
In addition, the Company may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Certificated Notes will be printed and delivered in exchange for the
Notes represented by the Global Notes held by DTC. See "Certificated Notes."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. The Company believes such information to be
reliable, but the Company takes no responsibility for the accuracy thereof.
CMS Energy, any Agents, the Trustee, any paying agent and the registrar for
the Notes are not responsible or liable for the actions of DTC. Such actions may
include, but are not limited to, any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
CERTIFICATED NOTES
If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company by the
earlier of (i) 90 days from the date the Company receives notice to the effect
that the Depository is unwilling or unable to act, or the Company determines
that the Depository is unable to act or (ii) the effectiveness of the
Depository's resignation or failure to fulfill its duties as Depository, the
Company will issue Certificated Notes in exchange for the Notes represented by
the Global Notes held by the Depository. In addition, the Company may at any
time and in its sole discretion determine not to have Notes represented by a
Global Note and, in such event, will issue individual Certificated Notes in
exchange for the Notes represented by the Global Note. In either instance, the
owner of a beneficial interest in a Note represented by a Global Note will be
entitled to have such Note registered in its name and will be entitled to
physical delivery of such Note in certificated form. Individual Certificated
Notes so issued will be issued in fully registered form, without coupons, in one
or more authorized denominations as described above under "General."
Certificated Notes will be exchangeable for other Certificated Notes of any
authorized denominations and of a like aggregate principal amount and tenor.
Certificated Notes may be presented for exchange as provided above, and may
be presented for registration of transfer (duly endorsed, or accompanied by a
duly executed written instrument of transfer), at the office of JPMorgan Chase
Bank, the Trustee, in The City of New York, (the "Security Registrar") or at the
office of any other transfer agent designated by the Company for such purpose
with respect to the Notes and referred to in the applicable Pricing Supplement,
without service charge and upon payment of any taxes and other governmental
charges as described in the Indenture. Such transfer or exchange will be
effected upon the Security Registrar or such other transfer agent, as the case
may be, being satisfied with the documents of title and identity of the person
making the
26
request. If a Pricing Supplement refers to any transfer agents (in addition to
the Security Registrar) designated by the Company with respect to the Notes, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for the Notes. The Company may at any time designate additional
transfer agents with respect to the Notes.
The Company will not be required to (i) issue, register the transfer of or
exchange Certificated Notes during a period beginning at the opening of business
15 days before the selection of Notes to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; or (ii)
register the transfer of or exchange any Certificated Note, or portion thereof,
called for redemption, except the unredeemed portion of any Certificated Note
being redeemed in part.
If a Certificated Note is mutilated, destroyed, lost or stolen, it may be
replaced at the corporate trust office or agency of the Trustee in The City of
New York upon payment by the Holder of such expenses as may be incurred by the
Company and the Trustee in connection therewith and the furnishing of such
evidence and indemnity as the Company and the Trustee may require. Mutilated
Notes must be surrendered before new Notes will be issued.
CERTAIN RESTRICTIVE COVENANTS
The Indenture contains, among others, the covenants described below.
Certain capitalized terms used below are defined herein under the heading
"Certain Definitions."
Limitation on Consolidated Indebtedness. As of the date of the prospectus
unsecured debt of CMS Energy is rated below BBB-. The Indenture provides that 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, at which time the Company will be permanently released from the
provisions of this "Limitation on Consolidated Indebtedness", the Company shall
not, and shall not permit any Restricted Subsidiary to, issue, create, assume,
guarantee, incur or otherwise become liable for (collectively, "issue"),
directly or indirectly, any Indebtedness unless (a) the Consolidated Coverage
Ratio of the Company and its Consolidated Subsidiaries for the four consecutive
fiscal quarters immediately preceding the issuance of such Indebtedness (as
shown by a pro forma consolidated income statement of the Company and its
Consolidated Subsidiaries for the four most recent fiscal quarters ending at
least 30 days prior to the issuance of such Indebtedness after giving effect to
(i) the issuance of such Indebtedness and (if applicable) the application of the
net proceeds thereof to refinance other Indebtedness as if such Indebtedness was
issued at the beginning of the period, (ii) the issuance and retirement of any
other Indebtedness since the first day of the period as if such Indebtedness was
issued or retired at the beginning of the period and (iii) the acquisition of
any company or business acquired by the Company or any Subsidiary of the Company
since the first day of the period (including giving effect to the pro forma
historical earnings of such company or business), including any acquisition
which will be consummated contemporaneously with the issuance of such
Indebtedness, as if in each case such acquisition occurred at the beginning of
the period) exceeds a ratio of 1.6 to 1.0 and (b) immediately after giving
effect to the issuance of such Indebtedness and (if applicable) the application
of the net proceeds thereof to refinance other Indebtedness, the Consolidated
Leverage Ratio shall not exceed a ratio of 0.75 to 1.0.
27
As of September 30, 2001, the Consolidated Coverage Ratio was 2.7 to 1.0
and the Consolidated Debt Ratio was 0.73 to 1.0, in each case determined in
accordance with the foregoing but without consideration for the issuance of any
of the Notes.
The foregoing limitation is subject to exceptions for certain revolving
Indebtedness to banks provided that the aggregate outstanding principal amount
of such revolving Indebtedness shall not exceed $1,000,000,000 Indebtedness
outstanding on the date of the original Indenture, certain refinancings and
Indebtedness of the Company to a Subsidiary or by a Subsidiary to the Company.
Limitation upon Restricted Payments. The Indenture provides that, so long
as any of the Notes are Outstanding and until the Notes are rated BBB- or above
(or an equivalent rating) by Standard & Poor's and one Other Rating Agency, at
which time the Company will be permanently released from the provisions of this
"Limitation upon 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 the Company's Capital Stock (except dividends
or distributions payable solely in Non-Convertible Capital Stock of the Company
or in options, warrants or other rights to purchase such Non-Convertible Capital
Stock and except dividends or distributions payable to the Company or a
Subsidiary) or (ii) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company (any such dividend, distribution, purchase,
redemption, repurchase, other acquisition or retirement, being hereinafter
referred to as a "Restricted Payment") if at any time the Company or such
Subsidiary makes such Restricted Payment: (1) an Event of Default, or an event
that with the lapse of time or the giving of notice or both would constitute an
Event of Default, shall have occurred and be continuing (or would result
therefrom); or (2) the aggregate amount of such Restricted Payment and all other
Restricted Payments made since September 30, 1993, would exceed the sum of: (a)
$120,000,000 plus 100% of Consolidated Net Income from September 30, 1993 to the
end of the most recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment (or, in case such sum shall be a deficit, minus 100%
of the deficit) and (b) the aggregate Net Proceeds received by the Company from
the issue or sale of or contribution with respect to its Capital Stock after
September 30, 1993.
The foregoing provisions will not prohibit: (i) dividends or other
distributions paid in respect of any class of Capital Stock issued by the
Company in connection with the acquisition of any business or assets by the
Company or a Restricted Subsidiary where the dividends or other distributions
with respect to such Capital Stock are payable solely from the net earnings of
such business or assets; (ii) any purchase or redemption of Capital Stock of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or
Exchangeable Stock); (iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividends would have
complied with this covenant; or (iv) payments pursuant to the Tax Sharing
Agreement.
Limitations on Certain Liens. The Indenture provides that so long as any of
the Notes are outstanding, the Company shall not create, incur, assume or suffer
to exist any Lien intended to or having the effect of conferring upon a creditor
of the Company or any Subsidiary of the Company a preferential interest upon or
with respect to the Capital Stock of Consumers, Enterprises or CMS Oil & Gas Co.
without making effective provision whereby the Notes shall be (so long as such
creditor shall be so secured) equally and ratably secured. The foregoing does
not apply to (a) Liens securing Indebtedness of
28
the Company, provided that on the date such Liens are created, and after giving
effect to such Indebtedness, the aggregate principal amount at maturity of all
of the secured Indebtedness of the Company shall not exceed 10% of Consolidated
Assets on such date or (b) certain liens for taxes, pledges to secure workman's
compensation, other statutory obligations and certain support obligations not to
exceed $30 million at any one time outstanding, certain materialmen's,
mechanic's and similar liens and certain purchase money liens.
The foregoing limitations regarding Consolidated Indebtedness, Restricted
Payments and Liens do not apply to Consumers, the Company's largest Subsidiary.
In addition, they do not currently limit transactions by any of the Company's
other Subsidiaries because none of such Subsidiaries would currently fall under
the definition of Restricted Subsidiaries.
Limitation on Transactions with Affiliates. The Indenture provides that so
long as any of the Notes are Outstanding, the Company may not, directly or
indirectly, conduct any business or enter into any transaction or series of
related transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with an Affiliate unless the terms of
such business, transaction or series of transactions are as favorable to the
Company as terms that could be obtainable at the time for a comparable
transaction or series of related transactions in arm's-length dealings with an
unrelated third person. This covenant shall not apply to (i) any compensation
paid to officers and directors of the Company which has been approved by the
Board of Directors of the Company or (ii) loans to the Company or an Affiliate
pursuant to a global cash management program, which loans mature within one year
from the date thereof.
Limitation on Consolidation, Merger, Sale or Conveyance. The Indenture
provides that so long as any of the Notes are Outstanding the Company shall not
consolidate with or merge into any other person or sell, lease or convey its
property as an entirety or substantially as an entirety unless, upon any such
consolidation, merger, sale, lease or conveyance, and after giving effect
thereto, (i) the person formed by such consolidation or into which the Company
shall have been merged or which shall have acquired such property (the
"Continuing Entity") shall be a corporation and shall have expressly assumed all
of the Company's obligations under the Notes and the Indenture, and (ii) no
Event of Default, or an event that, with the lapse of time or the giving of
notice or both, would become an Event of Default under the Indenture shall have
happened and be continuing, The Indenture also provides that 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, at which
time the Company will be permanently released from such provisions, the Company
shall not consolidate with or merge into any other person or sell, lease or
convey its property as an entirety or substantially as an entirety unless, upon
any such consolidation, merger, sale, lease or conveyance, and after giving
effect thereto, (i) the Consolidated Net Worth of the Continuing Entity shall be
at least equal to the Consolidated Net Worth of the Company immediately prior to
the transaction and (ii) the Continuing Entity would be entitled to incur at
least $1 of additional Indebtedness (other than revolving Indebtedness to banks)
without violating the restriction set forth in "-- Limitations on Consolidated
Indebtedness" above.
29
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made thereto for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
"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. "Control" with respect to any specified
person means the power to direct or cause the direction of the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise. The terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Amortization Expense" is an accounting term. Amortization applies to
amounts that are recognized as amortization of capital leases, depletion,
nuclear fuel, goodwill and assets classified as intangible assets in accordance
with generally accepted accounting principles.
"Capital Lease Obligations" of a person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles. The amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles. The stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty. Such
obligation shall be deemed secured by a Lien on any property or assets to which
such lease relates.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interest in
(however designated) corporate stock, including any Preferred Stock or Letter
Stock.
"Consolidated Assets" means, at any date of determination, the aggregate
assets of the Company and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Capital" means, at any date of determination, the sum of:
- Consolidated Indebtedness;
- consolidated equity of the common stockholders of the Company and
the Consolidated Subsidiaries;
- consolidated equity of the preference stockholders of the Company
and the Consolidated Subsidiaries; and
- consolidated equity of the preferred stockholders of the Company and
the Consolidated Subsidiaries.
In each case, the individual amounts indicated above would be determined at
the date that is in accordance with generally accepted accounting principles.
"Consolidated Coverage Ratio" with respect to any period means the ratio of
(i) the aggregate amount of Operating Cash Flow for such period to (ii) the
aggregate amount of Consolidated Interest Expense for such period.
"Consolidated Indebtedness" means, without duplication, at any date of
determination, the sum of the aggregate Indebtedness of the Company plus the
aggregate debt (as such
30
term is construed in accordance with generally accepted accounting principles)
of the Consolidated Subsidiaries but shall exclude any subordinated debt owned
by any Hybrid Preferred Securities Subsidiary.
"Consolidated Interest Expense" means, for any period, the total interest
expense in respect of Indebtedness of the Company and its Consolidated
Subsidiaries including, without duplication:
- interest expense attributable to capital leases;
- amortization of debt discount;
- capitalized interest;
- cash and noncash interest payments;
- commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing;
- net costs under Interest Rate Protection Agreements (including
amortization of discount); and
- interest expense in respect of obligations of other persons deemed
to be Indebtedness of the Company or any Consolidated Subsidiaries
under clause (v) or (vi) of the definition of Indebtedness.
However, Consolidated Interest Expense shall exclude any costs otherwise
included in interest expense recognized on early retirement of debt.
"Consolidated Leverage Ratio" means, at any date of determination, the
ratio of Consolidated Indebtedness to Consolidated Capital.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income of any person if such person is not a Subsidiary, except that (A) the
Company's equity in the net income of any such person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such person during such period to the Company or a
Consolidated Subsidiary as a dividend or other distribution and (B) the
Company's equity in a net loss of any such person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income of any
person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; and (iii) any
gain or loss realized upon the sale or other disposition of any property, plant
or equipment of the Company or its Consolidated Subsidiaries which is not sold
or otherwise disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any person.
"Consolidated Net Worth" of any person means the total of the amounts shown
on the consolidated balance sheet of such person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, as of any date selected by such person not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made (and adjusted for any material events since such
date), as (i) the par or state value of all outstanding Capital Stock plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock and (C) any amounts attributable to
Exchangeable Stock.
31
"Consolidated Subsidiary" means, any Subsidiary whose accounts are or are
required to be consolidated with the accounts of the Company in accordance with
generally accepted accounting principles.
"Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than Capital Stock of
such corporation that is neither Exchangeable Stock nor Redeemable Stock).
"Hybrid Preferred Securities" means any preferred securities issued by a
Hybrid Preferred Securities Subsidiary, where such preferred securities have the
following characteristics:
(i) such Hybrid Preferred Securities Subsidiary lends substantially
all of the proceeds from the issuance of such preferred securities to the
Company or Consumers in exchange for subordinated debt issued by the
Company or Consumers, respectively;
(ii) such preferred securities contain terms providing for the
deferral of distributions corresponding to provisions providing for the
deferral of interest payments on such subordinated debt; and
(iii) the Company or Consumers (as the case may be) makes periodic
interest payments on such subordinated debt, which interest payments are in
turn used by the Hybrid Preferred Securities Subsidiary to make
corresponding payments to the holders of the Hybrid Preferred Securities.
"Hybrid Preferred Securities Subsidiary" means any business trust (or
similar entity)(i) all of the common equity interest of which is owned (either
directly or indirectly through one or more wholly-owned Subsidiaries of the
Company or Consumers) at all times by the Company or Consumers, (ii) that has
been formed for the purpose of issuing Hybrid Preferred Securities and (iii)
substantially all of the assets of which consist at all times solely of
subordinated debt issued by the Company or Consumers (as the case may be) and
payments made from time to time on such subordinated debt.
"Indebtedness" of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers' acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
third
32
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) all obligations of the type referred to in clauses (i) through
(iv) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; and
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Indebtedness" of any person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such person is responsible or
liable; (ii) all Capital Lease Obligations of such person; (iii) all obligations
of such person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of such person for the reimbursement of any
obligor or any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such person of a demand for reimbursement following payment on the
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other persons and all dividends of other persons for the payment
of which, in either case, such person is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of the other persons secured by any Lien on any property
or asset of such person (whether or not such obligation is assumed by such
person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured.
"Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Subsidiary against
fluctuations in interest rates.
"Letter Stock,", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is intended to
reflect the separate performance of certain of the businesses or operations
conducted by such corporation or any of its subsidiaries.
"Lien" means any lien, mortgage, pledge, security interest, conditional
sale, title retention agreement or other charge or encumbrance of any kind.
"Net Proceeds" is the consideration received by the Company for any
issuance or sale or contribution in respect of Capital Stock. Net Proceeds
consist of the aggregate proceeds of such issuance, sale or contribution,
including the fair market value (as determined by the Board of Directors and net
of any associated debt and of any consideration other than Capital Stock
received in return) of property. Net Proceeds also include any other
consideration other than cash received by the Company. Net Proceeds are these
aggregate
33
proceeds and are then reduced for any expenses and taxes associated with the
offering. Such expenses include attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with such issuance or
sale. Taxes would include any taxes paid or payable as a result of the offering.
If the fair market value as determined by the Board of Directors of property
other than cash is greater than $25 million, the value thereof shall be based
upon an opinion from an independent nationally recognized firm experienced in
the appraisal or similar review of similar types of transactions.
"Non-Convertible Capital Stock" is any non-convertible Capital Stock of
such corporation and any Capital Stock of such corporation convertible solely
into non-convertible Capital Stock other than Preferred Stock of such
corporation; provided, however, that Non-Convertible Capital Stock shall not
include any Redeemable Stock or Exchangeable Stock.
"Operating Cash Flow" means for any period, with respect to the Company and
its Consolidated Subsidiaries, the aggregate amount of Consolidated Net Income
after adding thereto Consolidated Interest Expense (adjusted to include costs
recognized on early retirement of debt), income taxes, depreciation expense,
Amortization Expense, any noncash amortization of debt issuance costs, any
nonrecurring, noncash charges to earnings and any negative accretion
recognition.
"Other Rating Agency" means any one of Fitch IBCA or Moody's Investors
Service, Inc., and any successor to any of these organizations that is a
nationally recognized statistical rating organization.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock," is a type of Capital Stock of any class or classes,
however designated, of any corporation. Preferred Stock is Capital Stock that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation. Hybrid Preferred Stock is not considered Preferred Stock for
purposes of this definition.
"Redeemable Stock" means any Capital Stock that by its terms or otherwise
must be redeemed prior to the first anniversary of the Maturity of any
Outstanding Notes. Redeemable Stock can also be redeemable at the option of the
holder thereof at any time prior to the first anniversary of the Maturity of any
Outstanding Notes.
"Restricted Subsidiary" means any Subsidiary (other than Consumers and its
subsidiaries) of the Company which at the time of determination had assets
which, as of the date of the Company's most recent quarterly consolidated
balance sheet, constituted at least 10% of the total Consolidated Assets of the
Company and its Consolidated Subsidiaries and any other Subsidiary which from
time to time is designated a Restricted Subsidiary by the Board of Directors of
the Company, provided that no Subsidiary may be designated a Restricted
Subsidiary if, immediately after giving effect thereto, an Event of Default, or
an event that, with the lapse of time or the giving of notice or both, would
constitute an Event of Default, would exist or the Company and its Restricted
Subsidiaries could not incur at least $1 of additional Indebtedness under the
restriction set forth under "-- Limitations on Consolidated Indebtedness" above
and (i) any such Subsidiary so
34
designated as a Restricted Subsidiary must be organized under the laws of the
United States or any state thereof; (ii) more than 80% of the Voting Stock of
such Subsidiary must be owned of record and beneficially by the Company or a
Restricted Subsidiary; (iii) such Restricted Subsidiary must be a Consolidated
Subsidiary; and (iv) such Subsidiary must not therefore have been designated as
a Restricted Subsidiary.
"Standard & Poor's" shall mean Standard & Poor's Rating Group, which is a
division of McGraw Hill Inc. and shall include any successor thereto which is a
nationally recognized statistical rating organization. If such entity shall
cease to rate the Notes or shall cease to exist and there shall be no such
successor thereto, "Standard & Poor's" shall mean any other nationally
recognized statistical rating organization selected by the Company that is
acceptable to the Trustee.
"Subsidiary" means any corporation of which more than 50% of the
outstanding Voting Stock is at the time directly or indirectly owned by the
parent company and/or one or more companies that are themselves subsidiaries of
such parent company. "Subsidiary" means a subsidiary of the Company.
"Tax Sharing Agreement" means the Amended and Restated Agreement for the
Allocation of Income Tax Liabilities and Benefits, dated as of January 1, 1994,
as amended or supplemented from time to time. The Tax Sharing Agreement is by
and among the Company, each of the members of the Consolidated Group (as defined
therein), and each of the corporations that become members of the Consolidated
Group.
"Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
corporate directors (or persons performing similar functions).
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
the Notes:
- default in the payment of interest upon any Note when such interest
becomes due and payable and continuance of such default for 30 days;
- default in the payment of all or any part of the principal of (or
premium, if any, on) any Note when it becomes due and payable at its
Maturity;
- default in the performance of any covenants of the Company in the
Indenture, continued for 60 days after written notice as provided in
the Indenture;
- a default or event of default in respect of any Indebtedness of the
Company shall occur which results in the acceleration of $25,000,000
or more of the principal amount of such Indebtedness or Indebtedness
of the Company in excess of $25,000,000 shall not be paid at
maturity thereof, which default shall not have been waived by the
holder or holders of such Indebtedness within 30 days of such
default;
- entry of final judgments against the Company aggregating in excess
of $25,000,000 which remain undischarged or unbonded for a period
(during which execution shall not be effectively stayed) of 60 days;
- certain events in bankruptcy, insolvency or reorganization involving
the Company.
35
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity.
If an Event of Default with respect to the Notes shall occur and be
continuing, (i) either the Trustee or the Holders of at least a majority in
aggregate principal amount of the Outstanding Notes may accelerate the maturity
of the Outstanding Notes and (ii) the Holders of not less than a majority of the
aggregate outstanding principal amount of the Outstanding Notes, may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee; provided,
however, that after any such acceleration, but before a judgment or decree for
payment of the money due has been obtained, the Holders of not less than a
majority in aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
Events of Default, other than the non-payment of accelerated principal, have
been cured or waived as provided in the Indenture. For information as to waiver
of defaults, see "Modification of the Indenture."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default. Such Holder must represent the holders of at least 25% in aggregate
principal amount of the Outstanding Notes, such request must be written, and
such request must offer satisfactory indemnity to the Trustee to institute such
proceeding as trustee. In addition, the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding Notes a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Note for the enforcement of payment of the principal
of or interest on such Note on or after the respective due dates expressed in
such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION OF THE INDENTURE
Certain modifications and amendments of the Indenture require the consent
of the Holders of a majority of the Notes. Other modifications and Amendment of
the Indenture do not require this consent.
Modifications and Amendments requiring Consent
The Company and the Trustee may modify and amend the Indenture with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities affected thereby. No such modification or
amendment may be made without the consent of the Holder of each Outstanding
Security affected. Such modification or amendment includes, but is not limited
to, the following:
- changes to the Stated Maturity of the principal of, or any
installment of principal or interest on, any Outstanding Security,
or reduction of the principal
36
amount thereof or rate of interest thereon, or change in the
Redemption Price applicable to any Security;
- changes to the place or currency of payment of principal of or
premium, if any, or interest on any Security;
- impairment of the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity (or in the case of
redemption or repayment at the option of the Holder, on or after the
Redemption Date or Repayment Date) thereof;
- reduction in the above-stated percentage of Outstanding Securities
necessary to modify or amend the Indenture or the consent of whose
Holders is required for any waiver or reduction of the percentage
required for quorum or voting; or
- modification of the foregoing requirements.
The Holders of at least a majority in aggregate principal amount of the
Outstanding Securities of a series may waive past defaults with respect to such
series except payment defaults. The Holders of at least a majority in aggregate
principal amount of all Outstanding Securities may waive compliance by the
Company with certain covenants.
Modifications and Amendments not requiring Consent
Modification and amendment of the Indenture may be made by the Company and
the Trustee without the consent of any Holder, for any of the following
purposes:
- to evidence the succession of another corporation to the Company;
- to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities;
- to add additional Events of Default for the benefit of the Holders
of all or any series of Securities;
- to change any provision of the Indenture to facilitate the issuance
of Securities in bearer form
- to change or eliminate any provision of the Indenture, provided no
Outstanding Security of any series is entitled to the benefit of
such provision;
- to secure the Securities;
- to establish the form or terms of Securities;
- to provide for the acceptance of appointment by a successor Trustee;
- to cure any ambiguity, defect or inconsistency in the Indenture
provided such action does not materially adversely affect the
interests of Holders of Securities or
- to supplement provisions of the Indenture to permit or facilitate
the defeasance or discharge of a series of Securities provided that
such action shall not materially adversely affect the interests of
Holders of Securities of such Series.
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The Indenture provides that the Company may elect (A) to defease and be
discharged from all of its obligations with respect to the Securities or any
series thereof (except for the obligations to register the transfer or exchange
of such Securities, to
37
replace temporary or mutilated, destroyed, lost or stolen Securities, to
maintain an office or agency in respect of such Securities, to hold monies for
repayment in trust and certain other obligations), and that the provisions of
the Indenture will no longer be in effect with respect to such Securities
(except as aforesaid) ("defeasance") or (B) to be released from its covenants
set forth in the Indenture with respect to, among other things, limitation on
Consolidated Indebtedness, limitation on Restricted Payments, limitation on
transactions with Affiliates, limitation on Liens, limitation on consolidation,
merger, sale or conveyance, repurchase obligations on Change in Control,
("covenant defeasance") with respect to such Securities, upon in the case of (A)
or (B) the deposit with the Trustee (or other qualifying trustee), in trust for
such purpose, of money and/or U.S. Government Obligations which, without any
reinvestment, but through the scheduled payment of principal and interest in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on the Notes on the
scheduled due dates therefor. Such a trust may only be established, if, among
other things, (x) such defeasance or covenant defeasance will not result
(whether immediately or with notice or lapse of time or both) in a breach or
violation of, or constitute a default under, any material agreement to which the
Company is party or by which it is bound and (y) the Company has delivered to
the Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the Holders of such Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred. Such Opinion of Counsel, in the case of
defeasance under clause (A) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the Indenture.
In the event the Company exercises its option to effect a covenant
defeasance with respect to the Securities of any series as described in the
preceding paragraph and such Securities of such series are declared due and
payable because of the occurrence of any Event of Default (other than an Event
of Default caused by failure to comply with the covenants that are defeased),
and the amount of money and U.S. Government Obligations on deposit with the
Trustee would be insufficient to pay amounts due on the Securities of such
series at the time of the acceleration resulting from such Event of Default, the
Company will remain liable for such payments.
The Company may obtain a discharge of the Indenture with respect to all
Securities then Outstanding (except for certain obligations to register the
transfer or exchange of such Securities, to replace temporary or mutilated,
destroyed, lost or stolen Securities, to maintain an office or agency in respect
of such Securities, to hold monies for repayment in trust and certain other
obligations) when all Securities theretofore authenticated and delivered have,
with certain exceptions, been delivered to the Trustee for cancellation or by
irrevocably depositing in trust with the Trustee money, and/or U.S. Government
Obligations which, without any reinvestment but through the scheduled payment of
principal and interest in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of (and premium, if any) and interest
on the Securities on the Stated Maturities or redemption dates thereof, provided
that such Securities are by their terms due and payable, or are to be called for
redemption, within one year and the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such discharge and will be subject to federal income tax on the
38
same amounts, in the same manner and at the same times as would have been the
case if such discharge had not occurred.
THE TRUSTEE UNDER THE INDENTURE
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the
Trustee under the Indenture. The Company maintains banking and borrowing
relations with JPMorgan Chase Bank.
PLAN OF DISTRIBUTION
The Agents will be J. W. Korth & Company and such other agents as we may
designate from time to time. All agents will be acting as a principal. The names
of any additional Agents will be disclosed in a supplement to this Prospectus.
Subject to the terms and conditions set forth in a distribution agreement (the
"Distribution Agreement") among the Company and the Agents, offers to purchase
the Notes will be solicited from time to time by the Agents on our behalf. Under
this Distribution Agreement, we may offer the Notes on a continuous basis
through the Agents. Each Agent will agree to use its reasonable best efforts to
solicit purchases of the Notes. Following such solicitation, the Agents,
severally and not jointly, may purchase Notes from us, for their own account,
from time to time. Notes acquired by any Agent will be offered either directly
to the public or to certain dealers that will then re-offer the Notes to the
public. Sales by an Agent to any dealer will be made pursuant to an agreement
between such Agent and dealer (each a "Dealer Agreement").
A Pricing Supplement will set forth the details of each offering of Notes
by us. Such details will include, at least, the name of each Agent participating
in the distribution of the Notes, the price to the public of the Notes and the
proceeds to the Company from such sale. In addition, the Pricing Supplement will
indicate any underwriting discounts or commissions and other items constituting
Agent's compensation, and any discounts or concessions allowed, re-allowed or
paid to dealers. After any initial public offering of Notes pursuant to a
Pricing Supplement, the price to the public of such Notes, and the related
underwriting discount and selling concession, may be changed.
The Agent has advised us that all initial offers by any Agents and by any
dealers are to be made at prices equal to 100% of the principal amount of the
Notes being sold, less price concession. The price offered may be different than
100% of the principal amount only if indicated as such in the Pricing
Supplement. A price concession will only apply in the case of an offer by an
Agent to a dealer. Any price concession cannot be in excess of the amount set
forth in the applicable Pricing Supplement. Offers and sales by Agents or
dealers subsequent to the initial offering may be at varying prices determined
at the time of sale.
The Notes will not be listed on any securities exchange and will not be
traded, when issued, on any other established trading market. Any Agent may make
a market in the Notes, but no Agent is obligated to do so. Any such market
making may be discontinued at any time without notice. We make no assurance that
a secondary market for the Notes will exist or as to the liquidity or
continuation of any such market. Moreover, we reserve the right to withdraw,
cancel or modify the offer made hereby at any time without notice. Any
withdrawal, cancellation or modification may adversely affect the liquidity of
the Notes.
39
In order to facilitate the offering of the Notes, any Agent may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, any Agent may over-allot in connection with the offering,
thereby creating a short position in the Notes for its own account. In addition,
to cover over-allotments or to stabilize the price of the Notes, any Agent may
bid for, and purchase, the Notes in the open market. Any of these activities may
stabilize or maintain the market price of the Notes above independent market
levels. The Agents are not required to engage in these activities, and may end
any of these activities at any time.
The Distribution Agreement provides, and the terms of each Dealer Agreement
will provide, that the obligations of any Agent or dealer to purchase Notes will
be subject to certain conditions precedent. The nature of the Agent's
obligations under the Distribution Agreement is such that an Agent will be
obligated to purchase all of the Notes offered by any Pricing Supplement naming
such Agent, if any of such Notes are purchased. Any Agent or we may terminate
the Distribution Agreement at any time upon written notice.
We have agreed to indemnify the Agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments that the Agents may be required
to make in respect thereof.
LEGAL OPINIONS
Michael D. VanHemert, Assistant General Counsel for CMS Energy, will render
opinions as to the legality of the Notes for CMS Energy. Skadden, Arps, Slate,
Meagher & Flom LLP, New York, N.Y., will pass upon certain legal matters with
respect to the Notes. As of December 11, 2001, Mr. VanHemert beneficially owned
approximately 6,000 shares of CMS Energy Common Stock. As of December 11, 2001,
an attorney currently employed by Skadden, Arps, Slate, Meagher & Flom LLP and
formerly employed by CMS Energy owned approximately 51,734 shares of CMS Common
Stock, 10 shares of Consumers $4.50 series preferred stock, $100 per value and
$50,000 aggregate principal amount of certain debt securities issued by CMS
Energy. From time to time, Skadden, Arps, Slate, Meagher & Flom LLP has
represented CMS Energy, the Company and their affiliates.
EXPERTS
The consolidated financial statements and schedules of CMS Energy, and
reports thereon, as of December 31, 2000 and 1999, and for each of the three
years in the period ended December 31, 2000 incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants. These consolidated financial statements and schedules are included
herein in reliance upon the authority of Arthur Andersen as experts in
accounting and auditing in giving said reports.
With respect to the unaudited interim consolidated financial information
for the periods ended March 31, and June 30, 2001 and September 30, 2000, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report
thereon states that they did not audit and they did not express an opinion on
that interim consolidated financial information. Accordingly, the degree of
reliance on their report on that information should be restricted in light of
the limited nature of the review procedures applied. In addition, the
accountants
40
are not subject to the liability provisions of Section 11 of the Securities Act,
for their reports on the unaudited interim consolidated financial information.
This limitation of Section 11 responsibility is because those reports are not a
"report" or "part" of the registration statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
Future consolidated financial statements of CMS Energy and the reports
thereon of Arthur Andersen LLP also will be incorporated by reference in this
Prospectus. This incorporation is 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.
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 J. W. KORTH & COMPANY. 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.
41
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
ESTIMATED
AMOUNT
---------
Filing fee -- Securities and Exchange Commission............ $ 79,200
Services of Trustee (including counsel)..................... 15,000
Printing.................................................... 20,000
Rating Agency fee........................................... 40,000
Services of counsel......................................... 20,000
Services of independent public accountants, Arthur Andersen
LLP....................................................... 30,000
Blue Sky fees and expenses.................................. 4,500
Miscellaneous............................................... 20,000
Total:............................................... $228,700
========
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
II-1
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 transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this Article
VIII, and no modification to its provisions by law, shall apply to, or have any
effect upon, the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment, repeal or modification.
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
hereafter 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 provide
CMS Energy with the power to indemnify directors, officers, employees and agents
against certain expenses and payments, and to purchase and maintain insurance on
behalf of directors, officers, employees and agents.
Officers and directors are covered within specified monetary limits by
insurance against certain losses arising from claims made by reason of their
being directors or officers of CMS Energy or of CMS Energy's subsidiaries. CMS
Energy's officers and directors are indemnified against these losses by reason
of their being or having been directors or officers of 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 summarized
above.
ITEM 16. EXHIBITS.
EXHIBIT NO.
-------------
(1) -- Form of Distribution Agreement
*(4)(a)(i) -- Indenture dated as of January 15, 1994 between CMS Energy
and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank), as Trustee, relating to the Notes.
(Designated in CMS Energy's Form 8-K dated March 29, 1994,
File No. 1-9513, as Exhibit (4)(a).)
II-2
EXHIBIT NO.
-------------
*(4)(a)(ii) -- First Supplemental Indenture dated as of January 20, 1994
between CMS Energy and JPMorgan Chase Bank (formerly known
as 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).)
*(4)(a)(iii) -- Second Supplemental Indenture dated as of March 19, 1996
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee. (Designated in CMS
Energy's Form 10-Q for the quarter ended March 31, 1996,
File No. 9-9513, as Exhibit (4).)
*(4)(a)(iv) -- Third Supplemental Indenture dated as of March 17, 1997
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee (Designated in CMS
Energy's Form 8-K dated May 1, 1997, File No. 9-9513, as
Exhibit (4)(a)(iv).)
*(4)(a)(v) -- Fourth Supplemental Indenture dated as of September 17, 1997
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee (Designated in CMS
Energy's Form S-3 dated September 22, 1997, File No.
333-36115, as Exhibit ((4)(d).)
*(4)(a)(vi) -- Fifth Supplemental Indenture dated as of August 26, 1998
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee. (Designated in CMS
Energy's Form S-4 dated September 10, 1998, File No.
333-63229, as Exhibit ((4)(c).)
*(4)(a)(vii) -- Sixth Supplemental Indenture dated as of November 9, 2000
between CMS Energy Corporation and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as Trustee.
(Designated in CMS Energy's Form 10-Q for the quarter ended
September 30, 2000, File No. 1-9513, as Exhibit (4).)
(4)(a)(viii) -- Form of Seventh Supplemental Indenture
(5) -- Opinion of Michael D. VanHemert, Assistant General Counsel
for CMS Energy.
(12) -- Statement regarding computation of ratio of earnings to
fixed charges.
(15) -- Letter regarding unaudited interim financial information.
(23)(a) -- Consent of Michael D. VanHemert, Assistant General Counsel
for CMS Energy (included in Exhibit (5) above).
(23)(b) -- Consent of Arthur Andersen LLP.
(24) -- Powers of Attorney.
(25) -- Form T-1, Statement of Eligibility of Trustee.
-------------------------
* Previously filed
Exhibits listed above which have been filed with the Securities and
Exchange Commission are incorporated herein by reference with the same effect as
if filed with this registration statement.
II-3
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(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, 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 a 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 will
be governed by the final adjudication of such issue.
-------------------------
II-4
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 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 11th day of
December, 2001.
CMS ENERGY CORPORATION
By /s/ ALAN M. WRIGHT
-----------------------------------
Alan M. Wright
Executive Vice President,
Chief Financial Officer and
Chief Administrative Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the 11th day of December, 2001.
NAME
----
(i) Principal executive officer:
/s/ WILLIAM T. MCCORMICK, JR. Chairman of the Board Chief Executive
--------------------------------------------------- Officer and Director
(William T. McCormick, Jr.)
(ii) Principal financial officer:
/s/ ALAN M. WRIGHT Executive Vice President, Chief
--------------------------------------------------- Financial Officer and Chief
(Alan M. Wright) Administrative Officer
(iii) Controller or principal accounting officer:
/s/ PRESTON D. HOPPER Senior Vice President, Corporate
--------------------------------------------------- Performance and Chief Accounting
(Preston D. Hopper) Officer
* Director
---------------------------------------------------
(John M. Deutch)
* Director
---------------------------------------------------
(James J. Duderstadt)
* Director
---------------------------------------------------
(Kathleen R. Flaherty)
* Director
---------------------------------------------------
(Earl D. Holton)
* Director
---------------------------------------------------
(David W. Joos)
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NAME
----
* Director
---------------------------------------------------
(William U. Parfet)
* Director
---------------------------------------------------
(Percy A. Pierre)
* Director
---------------------------------------------------
(Kenneth L. Way)
* Director
---------------------------------------------------
(Kenneth Whipple)
* Director
---------------------------------------------------
(John B. Yasinsky)
*By /s/ ALAN M. WRIGHT
-------------------------------------------
Alan M. Wright
Attorney-in-fact
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
(1) -- Form of Distribution Agreement.
*(4)(a)(i) -- Indenture dated as of January 15, 1994 between CMS Energy
and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank), as Trustee, relating to the Notes.
(Designated in CMS Energy's Form 8-K dated March 29, 1994,
File No. 1-9513, as Exhibit (4)(a).)
*(4)(a)(ii) -- First Supplemental Indenture dated as of January 20, 1994
between CMS Energy and JPMorgan Chase Bank (formerly known
as 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).)
*(4)(a)(iii) -- Second Supplemental Indenture dated as of March 19, 1996
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee. (Designated in CMS
Energy's Form 10-Q for the quarter ended March 31, 1996,
File No. 9-9513, as Exhibit (4).)
*(4)(a)(iv) -- Third Supplemental Indenture dated as of March 17, 1997
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee (Designated in CMS
Energy's Form 8-K dated May 1, 1997, File No. 9-9513, as
Exhibit (4)(a)(iv).)
*(4)(a)(v) -- Fourth Supplemental Indenture dated as of September 17, 1997
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee(Designated in CMS
Energy's Form S-3 dated September 22, 1997, File No.
333-36115, as Exhibit ((4)(d).)
*(4)(a)(vi) -- Fifth Supplemental Indenture dated as of August 26, 1998
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee. (Designated in CMS
Energy's Form S-4 dated September 10, 1998, File No.
333-63229, as Exhibit ((4)(c).)
*(4)(a)(vii) -- Sixth Supplemental Indenture dated as of November 9, 2000
between CMS Energy and JPMorgan Chase Bank (formerly known
as The Chase Manhattan Bank), as Trustee. (Designated in CMS
Energy's Form 10-Q for the quarter ended September 30, 2001,
File No. 001-02921, as Exhibit (4).
(4)(a)(viii) -- Form of Seventh Supplemental Indenture.
(5) -- Opinion of Michael D. VanHemert, Assistant General Counsel
for CMS Energy
(12) -- Statement regarding computation of ratio of earnings to
fixed charges.
(15) -- Letter regarding unaudited interim financial information.
(23)(a) -- Consent of Michael D. VanHemert, Assistant General Counsel
for CMS Energy (included in Exhibit (5) above).
(23)(b) -- Consent of Arthur Andersen LLP.
(24) -- Powers of Attorney.
(25) -- Form T-1, Statement of Eligibility of Trustee.
-------------------------
* 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.