-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RRrbwJ7CLdJDpC/STnXWYaKZXeOwEfWLMIBFdahKUUrIhzaCy0zEKx0/NgcKPOth yO4y/z3tJA2lNMn6HRzjGA== 0000201533-95-000088.txt : 19950726 0000201533-95-000088.hdr.sgml : 19950726 ACCESSION NUMBER: 0000201533-95-000088 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950725 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CMS ENERGY CORP CENTRAL INDEX KEY: 0000811156 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 382726431 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-60007 FILM NUMBER: 95555732 BUSINESS ADDRESS: STREET 1: FAIRLANE PLZ SOUTH STE 1100 STREET 2: 330 TOWN CENTER DR CITY: DEARBORN STATE: MI ZIP: 48126 BUSINESS PHONE: 3134369261 MAIL ADDRESS: STREET 1: FAIRLANE PLAZA SOUTH, SUITE 1100 STREET 2: 330 TOWN CENTER DRIVE CITY: DEARBORN STATE: MI ZIP: 48126 424B2 1 PROSPECTUS FOR CMS ENERGY COMMON STOCK PROSPECTUS 3,000,000 SHARES CMS ENERGY CORPORATION COMMON STOCK This Prospectus relates to 3,000,000 shares of common stock, par value $.01 per share (the "CMS Energy Common Stock"), which may be offered and issued by CMS Energy Corporation ("CMS Energy" or the "Company") from time to time in connection with acquisitions of other businesses or properties. It is anticipated that such acquisitions will consist principally of businesses (or the assets thereof) complementary to and related to the Company's current businesses. The consideration for acquisitions will consist of shares of CMS Energy Common Stock, cash, notes or other evidences of indebtedness, guarantees, assumption of liabilities or a combination thereof, as determined from time to time by negotiations between the Company and the owners or controlling persons of the businesses or properties to be acquired. In addition, the Company may lease property from and enter into management or consulting agreements and non-competition agreements with the former owners and key executive personnel of the businesses to be acquired. It is contemplated that the terms of an acquisition will be determined by negotiations between the Company's representatives and the owners or controlling persons of the businesses or properties to be acquired. Factors taken into account in acquisitions include, among other relevant factors, the quality and reputation of the business, its management and personnel, earning power, cash flow, growth potential, patents, licenses, equipment, locations of the business to be acquired and the market value of the CMS Energy Common Stock when pertinent. It is anticipated that shares of CMS Energy Common Stock issued in any such acquisition will be valued at a price reasonably related to the current market value of the CMS Energy Common Stock, either at the time the terms of the acquisition are tentatively agreed upon, or at or about the time of closing, or during the period or periods prior to delivery of the shares. The CMS Energy Common Stock offered hereby is expected to be listed on the New York Stock Exchange. ________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ________________ The date of this Prospectus is June 30, 1995. 2 It is not expected that underwriting discounts or commissions will be paid by CMS Energy except that finders fees may be paid to persons from time to time in connection with specific acquisitions. Any person receiving any such fees may be deemed to be an underwriter within the meaning of the Securities Act of 1933. No person is authorized to give any information or to make any representation not contained in this Prospectus, and, if given or made, such information or representation should not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this Prospectus in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such an offer, or solicitations of an offer. Neither the delivery of this Prospectus nor any distribution of the securities offered pursuant to this Prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth herein or in the affairs of the Company since the date of this Prospectus or that the information herein is correct as of any time subsequent to its date. ____________________ 3 AVAILABLE INFORMATION CMS Energy is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such materials can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The CMS Energy Common Stock is listed on the New York Stock Exchange and reports, proxy statements and other information concerning CMS Energy may also be inspected and copied at the offices of such exchange at 20 Broad Street, New York, New York 10005. ____________________ INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by CMS Energy with the Commission (File No. 1-9513) pursuant to the Exchange Act are hereby incorporated by reference in this Prospectus and shall be deemed to be a part hereof: (1) CMS Energy's Annual Report on Form 10-K for the year ended December 31, 1994; (2) CMS Energy's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995; (3) CMS Energy's Current Report on Form 8-K dated January 10, 1995; and (4) CMS Energy's Current Report on Form 8-K dated February 2, 1995. All documents subsequently filed by CMS Energy pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of the offering made by this Prospectus shall be deemed to be incorporated by reference herein and shall be deemed to be a part hereof from the date of filing of such documents (such documents, and the documents enumerated above, being hereinafter referred to as "Incorporated Documents"). Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. AS INDICATED ABOVE, THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. CMS ENERGY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO CMS ENERGY CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES LOCATED AT FAIRLANE PLAZA SOUTH, SUITE 1100, 330 TOWN CENTER DRIVE, DEARBORN, MICHIGAN 48126, ATTENTION: INVESTOR RELATIONS DEPARTMENT, TELEPHONE: (517) 788-2590. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FIVE BUSINESS DAYS PRIOR TO THE DATE TO WHICH THE FINAL INVESTMENT DECISION MUST BE MADE. Certain information contained in this Prospectus summarizes, is based upon, or refers to information and financial statements contained in one or more Incorporated Documents; accordingly, such information contained herein is qualified in its entirety by reference to such documents and should be read in conjunction therewith. ____________________ TABLE OF CONTENTS Page Page Available Information . . . 3 Dividends and Price Range of Incorporation of Certain CMS Energy Common Stock . . 7 Documents by Reference . . 3 Selected Consolidated The Company . . . . . . . . 5 Financial Data . . . . . . . 8 Offered Securities . . . . . 6 Description of Capital Use of Proceeds . . . . . . 6 Stock . . . . . . . . . . . 9 Legal Opinions . . . . . . . . 14 Experts . . . . . . . . . . . 14 ____________________ 5 THE COMPANY CMS Energy, incorporated in 1987, is the parent holding company of Consumers Power Company ("Consumers") and CMS Enterprises Company ("Enterprises"). Consumers, a combination electric and gas utility company serving most of Michigan's Lower Peninsula, is CMS Energy's largest subsidiary. Consumers' customer base includes a mix of residential, commercial and diversified industrial customers, the largest of which is the automotive industry. Enterprises is engaged in several non-utility energy-related businesses including: (i) oil and gas exploration and production, (ii) development and operation of independent power production facilities, (iii) gas marketing services to utility, commercial and industrial customers and (iv) transmission and storage of natural gas. CMS Energy conducts its principal operations through the following five business segments: (i) electric utility operations; (ii) natural gas utility operations; (iii) gas transmission and marketing; (iv) oil and gas exploration and production operations; and (v) independent power production. Consumers or Consumers' subsidiaries are engaged in two segments: electric operations and gas operations. Consumers' electric and gas businesses are principally regulated utility operations. At December 31, 1994, CMS Energy had total consolidated assets of $7,384 million. CMS Energy's 1994 consolidated operating revenue was $3,619 million. This consolidated operating revenue was derived from Consumers' sales of electric energy (approximately 61% or $2,189 million), Consumers' gas operations (approximately 32% or $1,151 million), gas transmission and marketing (approximately 4% or $145 million), oil and gas exploration and production activities (approximately 2% or $85 million) and independent power production activities (approximately 1% or $45 million). Consumers' consolidated operations in the electric and gas utility businesses account for the major share of CMS Energy's total assets, revenue and income. CMS Energy's share of 1994 unconsolidated non-utility independent power production revenue was $385 million. On May 30, 1995, Nomeco Oil & Gas Co. ("NOMECO"), an indirect wholly-owned subsidiary of CMS Energy, executed a non-binding letter of intent which calls for a newly formed subsidiary of CMS Energy to merge with and into Terra Energy, Ltd., a Michigan corporation ("Terra"), thereby making Terra a wholly-owned subsidiary of CMS Energy. Terra is a privately held corporation primarily engaged in U.S. gas and oil exploration and production and activities related thereto. Terra's principal office is located at Traverse City, Michigan. It is possible that this transaction may be completed in the future. In such event, the Company intends to use shares of CMS Energy Common Stock registered hereunder for such acquisition. The letter of intent contemplates that the holders of Terra common stock would receive shares of CMS Energy Common Stock with an aggregate market value of approximately $58.5 million. If consummated, this acquisition would not be material to CMS Energy. The foregoing information concerning CMS Energy and its subsidiaries does not purport to be comprehensive. For additional information concerning CMS Energy and its subsidiaries' business and affairs, including their capital requirements and external financing plans, pending legal and regulatory proceedings and descriptions of certain laws and regulations to which those companies are subject, prospective purchasers should refer to the Incorporated Documents. See "Incorporation of Certain Documents by Reference." OFFERED SECURITIES The securities of CMS Energy which may be offered from time to time by this Prospectus consist of up to 3,000,000 shares of CMS Energy Common Stock, which CMS Energy proposes to issue in connection with acquisitions of other businesses or properties. The CMS Energy Common Stock to be issued hereunder will be freely transferable under the Securities Act of 1933, as amended (the "Securities Act"), except for shares of CMS Energy Common Stock issued in connection with an acquisition to any person deemed to be an affiliate of any acquired company for purposes of Rule 145 under the Securities Act at the time of any such acquisition. Generally, such affiliates may not sell their shares of CMS Energy Common Stock acquired in connection with an acquisition except pursuant to an effective registration statement under the Securities Act covering such shares, or in compliance with Rule 145 under the Securities Act or another applicable exemption from the registration requirements of the Securities Act. The consideration for any acquisition may consist of cash, notes or other evidences of debt, assumptions of liabilities, equity securities, or a combination thereof, as determined from time to time by negotiations between CMS Energy and the owners of businesses or properties to be acquired. CMS Energy will attempt to make acquisitions which are complementary to its present operations. In general, the terms of any acquisitions will be determined by direct negotiations between the representatives of CMS Energy and the owners of the businesses or properties to be acquired or, in the case of entities more widely held, through exchange offers to stockholders or documents soliciting approval of statutory mergers, consolidations or sales of assets. Underwriting discounts or commissions will generally not be paid by CMS Energy. However, under some circumstances, the Company may issue CMS Energy Common Stock covered by this Prospectus to pay brokers' commissions incurred in connection with acquisitions. USE OF PROCEEDS This Prospectus relates to shares of CMS Energy Common Stock which may be offered and issued by the Company from time to time in the acquisition of other businesses or properties. Other than the business or properties acquired, there will be no proceeds to the Company from these offerings. ____________________ 7 DIVIDENDS AND PRICE RANGE OF CMS ENERGY COMMON STOCK CMS Energy Common Stock is listed on the New York Stock Exchange under the symbol "CMS". CMS Energy has paid dividends on its Common Stock each year since its inception except 1988. Future dividends will depend upon CMS Energy's earnings, financial condition and other factors. Reference is made to "Description of Capital Stock" regarding limitations upon payment of dividends on the Company's Common Stock. The following table indicates the high and low sales prices of the CMS Energy Common Stock for the calendar quarters indicated, as reported in The Wall Street Journal under "New York Stock Exchange Composite Transactions," and the quarterly cash dividends declared per share of the CMS Energy Common Stock, for the calendar quarters indicated. Common Stock Calendar Period High Low Dividend 1990 First Quarter . . . . . . . . . $38 1/2 $31 3/8 $.10 Second Quarter . . . . . . . . . 32 1/2 27 1/4 .10 Third Quarter . . . . . . . . . 33 25 1/2 .10 Fourth Quarter . . . . . . . . . 28 3/4 24 7/8 .12 1991 First Quarter . . . . . . . . . $33 $26 1/2 $.12 Second Quarter . . . . . . . . . 30 3/4 23 3/4 .12 Third Quarter . . . . . . . . . 25 7/8 18 .12 Fourth Quarter . . . . . . . . . 19 3/4 16 5/8 .12 1992 First Quarter . . . . . . . . . $22 3/4 $17 7/8 $.12 Second Quarter . . . . . . . . . 21 7/8 14 7/8 .12 Third Quarter . . . . . . . . . 17 1/2 15 1/4 .12 Fourth Quarter . . . . . . . . . 18 3/8 16 3/4 .12 1993 First Quarter . . . . . . . . . $20 7/8 $17 7/8 $.12 Second Quarter . . . . . . . . . 25 1/2 19 1/2 .12 Third Quarter . . . . . . . . . 27 1/2 24 7/8 .18 Fourth Quarter . . . . . . . . . 27 1/8 23 .18 1994 First Quarter . . . . . . . . . $25 $21 1/8 $.18 Second Quarter . . . . . . . . . 22 7/8 19 5/8 .18 Third Quarter . . . . . . . . . 23 3/8 20 5/8 .21 Fourth Quarter . . . . . . . . . 23 1/4 20 7/8 .21 1995 First Quarter . . . . . . . . . $24 3/4 $22 5/8 $.21 Second Quarter (through June 2, 1995) . . . . . . . . . . . . . 24 7/8 22 1/2 .21 On June 2, 1995, the closing price of the CMS Energy Common Stock on The New York Stock Exchange was $24 3/4 per share. On June 2, 1995, there were 61,986 record holders of CMS Energy Common Stock. 8 SELECTED CONSOLIDATED FINANCIAL DATA The following is a summary of certain financial information of the Company and its consolidated subsidiaries and is qualified in its entirety by, and should be read in conjunction with, the detailed information and consolidated financial statements, including notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994, and its Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. The unaudited consolidated interim period financial statement includes, in the opinion of the Company's management, all adjustments necessary to present fairly the data for such period. The results of operations for interim periods are not necessarily indicative of results to be achieved for full fiscal years..
Three Months Ended Ended March 31, Year Ended December 31, 1995 1994 1994 1993 1992 1991 1990 (unaudited) (In Millions, Except Per Share Amounts) Income Statement Data: Operating Revenue . . . . . . . . . . . $ 1,119 $ 1,142 $ 3,619 $ 3,482 $ 3,146 $ 2,998 $ 3,028 Pretax operating income . . . . . . . . $ 206 $ 175 $ 504 $ 439 $ 231 $ 261 $ 506 Net income (loss) (1) . . . . . . . . . $ 86 $ 78 $ 179 $ 155 $ (297) $ (276) $ (494) Earnings (loss) per average common share (1) . . . . . . . . . . . . . . $ .99 $ .92 $ 2.09 $ 1.90 $ (3.72) $ (3.44) $ (6.07) Average common shares outstanding (in thousands) . . . . . . . . . . . . 86,918 85,302 85,888 81,251 79,877 79,988 81,339 Cash dividends declared per common share . . . . . . . . . . . . . . . . $ .21 $ .18 $ .78 $ .60 $ .48 $ .48 $ .42 Balance Sheet Data: Net plant and property . . . . . . . . . $ 4,826 $ 4,602 $ 4,814 $ 4,583 $ 4,326 $ 4,121 $ 4,033 Total assets . . . . . . . . . . . . . . $ 7,344 $ 6,825 $ 7,384 $ 6,964 $ 6,848 $ 6,194 $ 7,917 Long-term debt, excluding current maturities . . . . . . . . . . . . . . $ 2,787 $ 2,376 $ 2,709 $ 2,405 $ 2,725 $ 1,941 $ 3,321 Notes payable . . . . . . . . . . . . . $ 135 -- $ 339 $ 259 $ 215 $ 708 $ 337 Other liabilities . . . . . . . . . . . $ 2,857 $ 3,051 $ 2,873 $ 3,171 $ 3,018 $ 2,322 $ 2,701 Preferred stock of subsidiary . . . . . $ 356 $ 356 $ 356 $ 163 $ 163 $ 163 $ 156 Common stockholders' equity . . . . . . $ 1,209 $ 1,042 $ 1,107 $ 966 $ 727 $ 1,060 $ 1,420 (1) Amount in 1991 included an extraordinary loss of $14 million, after tax or $.18 per average common share.
9 DESCRIPTION OF CAPITAL STOCK The following outline of certain rights of the holders of CMS Energy capital stock does not purport to be complete and is qualified in its entirety by express reference to Article III of the Restated Articles of Incorporation of CMS Energy (the "Articles of Incorporation"), the CMS Energy Indenture dated as of September 15, 1992, as amended and supplemented (the "Senior Debt Indenture") to NBD Bank, N.A., as Trustee, the Credit Agreement dated as of July 29, 1994 (the "Credit Facility") among CMS Energy, Citibank, N.A. and Union Bank, as co-agents, and certain banks named therein, and CMS Energy's Indenture dated as of January 15, 1994 (the "GTN Indenture") to The Chase Manhattan Bank, N.A., as Trustee, copies of which are filed as exhibits to the Registration Statement of which this Prospectus is a part. General The Articles of Incorporation currently authorize 320 million shares of capital stock, of which 250 million are shares of CMS Energy Common Stock, par value $.01 per share, 60 million are shares of Class G Common Stock, no par value ("Class G Common Stock"), and 10 million are shares of preferred stock, $.01 par value ("Preferred Stock"). The CMS Energy Common Stock and the Class G Common Stock are together referred to herein as the "Common Stock." As of June 2, 1995, 88,079,758 shares of CMS Energy Common Stock were issued and outstanding and there were no shares of Preferred Stock or Class G Common Stock issued or outstanding. The outstanding shares of the CMS Energy Common Stock are fully paid and non-assessable, and the additional CMS Energy Common Stock offered hereby, when issued and paid for, will be fully paid and non-assessable. The shares of Common Stock may be issued from time to time as the Board of Directors shall determine for such consideration as shall be fixed by the Board of Directors. Class G Common Stock is intended to reflect the separate performance of the gas distribution, storage and transportation businesses conducted by Consumers and Michigan Gas Storage, a subsidiary of Consumers (such businesses, collectively, will be attributed to the "Consumers Gas Group"). Effective January 1, 1995, the management and operations of the Consumers Gas Group were reorganized as a business unit separate from the electric utility operations of the Consumers. The existing CMS Energy Common Stock will continue to be outstanding and, if and after any shares of Class G Common Stock were issued by CMS Energy, will reflect the performance of all of the businesses of CMS Energy and its subsidiaries, including the business of the Consumers Gas Group, except for the interest in the Consumers Gas Group attributable to the outstanding shares of Class G Common Stock. Authorized but unissued shares of Class G Common Stock will be available for issuance by CMS Energy from time to time, as determined by the Board of Directors, for any proper corporate purpose, which could include raising capital for use by CMS Energy or for attribution to the Consumers Gas Group, payment of dividends, providing compensation or benefits to employees or acquiring companies or businesses. The issuance of such shares of Class G Common Stock would not be subject to approval by the shareholders of CMS Energy unless deemed advisable by the Board of Directors or required by applicable law, regulation or stock exchange listing requirements. Preferred Stock. The authorized Preferred Stock may be issued without the approval of the holders of Common Stock in one or more series, from time to time, with each such series to have such designation, powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated in a resolution providing for the issue of any such series adopted by the Board of Directors. The specific terms of Preferred Stock will be described in a prospectus supplement relating thereto if, and when, issued. Unless otherwise provided in a prospectus supplement, the holder of any shares of any series of Preferred Stock shall be entitled to vote in the election of directors or in respect of any other matter except as may be required by the Michigan Business Corporation Act, as amended. Unless otherwise provided in a prospectus supplement, holders of Preferred Stock will not have any preemptive rights to subscribe for or purchase any additional shares of the capital stock of CMS Energy of any class now or hereafter authorized, or any Preferred Stock or other securities or other right or option convertible into or exchangeable for or entitling the holder or owner to subscribe for or purchase any shares of capital stock. The future issuance of Preferred Stock may have the effect of delaying, deterring or preventing a change in control of CMS Energy. Dividend Rights and Policy Dividends on the CMS Energy Common Stock will be paid at the discretion of the Board of Directors based primarily upon the earnings and financial condition of CMS Energy, including the Consumers Gas Group, except for the interest in the Consumers Gas Group attributable to the outstanding shares of the Class G Common Stock, and other factors. The holders of the Company's Common Stock are entitled to receive dividends when and as declared by the Board of Directors of the Company out of funds legally available therefor, subject to the terms of any CMS Energy Preferred Stock which may in the future be issued and at the time be outstanding. CMS Energy, in the sole discretion of its Board of Directors, could pay dividends exclusively to the holders of CMS Energy Common Stock, exclusively to the holders of Class G Common Stock, or to the holders of both of such classes in equal or unequal amounts. CMS Energy is a legal entity separate and distinct from its various subsidiaries. As a holding company with no significant operations of its own, the principal sources of its funds are dividends or other distributions from its operating subsidiaries, in particular, Consumers, borrowings and sales of equity. The ability of Consumers and other subsidiaries of CMS Energy to pay dividends or make distributions to CMS Energy, and accordingly, the ability of CMS Energy to pay dividends on its capital stock will depend on the earnings, financial requirements, contractual restrictions of the subsidiaries of CMS Energy, in particular, Consumers, and other factors. See "Primary Source of Funds of CMS Energy; Restrictions on Sources of Dividends" below. There are restrictions on CMS Energy's ability to pay dividends contained in its Credit Facility, the Senior Debt Indenture and the GTN Indenture. The Credit Facility, provides that CMS Energy will not, and will not permit certain of its subsidiaries, directly or indirectly, to (i) declare or pay any cash dividend or distribution on the capital stock of CMS Energy or such subsidiaries, or (ii) purchase, redeem, retire or otherwise acquire for value any such capital stock (a" Restricted Payment"), unless: (1) no event of default under the Credit Facility, or event that with the lapse of time or giving of notice would constitute such an event of default, has occurred and is continuing, and (2) after giving effect to any such Restricted Payment, the aggregate amount of all such Restricted Payments, since September 30, 1993 shall not have exceeded the sum of: (a) $120,000,000, (b) 100% of CMS Energy's consolidated net income (as defined in the Senior Debt Indenture) since September 30, 1993 to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such sum shall be a deficit, minus 100% of the deficit), and (c) any net proceeds (as defined in the Senior Debt Indenture) received by CMS Energy for the issuance or sale of its capital stock subsequent to September 30, 1993. At March 31, 1995, CMS Energy could pay cash dividends of $492 million pursuant to this restriction. The First and Second Supplemental Indentures to the Senior Debt Indenture, pursuant to which CMS Energy's Series A Senior Deferred Coupon Notes due October 1, 1997 and Series B Senior Deferred Coupon Notes due October 1, 1999 were issued, provide that so long as any of such Notes are outstanding, CMS Energy will not, and will not permit certain of its subsidiaries, directly or indirectly, to make a Restricted Payment, unless: (1) no event of default under the Senior Debt Indenture, or event that with the lapse of time or giving of notice would constitute such an event of default, has occurred and is continuing, and (2) after giving effect to any such Restricted Payment, the aggregate amount of all such Restricted Payments since September 30, 1992 shall not have exceeded the sum of: (a) $40,000,000, (b) 100% of CMS Energy's consolidated net income (as defined in the Senior Debt Indenture) since September 30, 1992 to the end of the most recent fiscal quarter ending at least 45 days prior to the date of such Restricted Payment (or, in case such sum shall be a deficit, minus 100% of the deficit), and (c) any net proceeds (as defined in the Senior Debt Indenture) received by CMS Energy for the issuance or sale of its capital stock subsequent to September 15, 1992. At March 31, 1995, CMS Energy could pay cash dividends of $499 million pursuant to this restriction. The GTN Indenture provides that, so long as any of the General Term Notes, Series A (the "GTNs") issued thereunder are outstanding and are rated below BBB- by Standard & Poor's or by Duff & Phelps, CMS Energy will not, and will not permit certain of its subsidiaries, directly or indirectly, to make any Restricted Payments, if at any time CMS Energy or such subsidiary makes such Restricted Payment: (1) an Event of Default (as defined in the GTN Indenture), or an event that with the lapse of time or the giving of notice or both would constitute such an Event of Default, has occurred and is continuing (or would result therefrom), or (2) the aggregate amount of such Restricted Payment and all other Restricted Payments made since September 30, 1993, would exceed the sum of: (a) $120,000,000 plus 100% of consolidated net income from September 30, 1993 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 CMS Energy from the issue or sale of or contribution with respect to its capital stock after September 30, 1993. At March 31, 1995, CMS Energy could pay cash dividends of $492 million pursuant to this restriction. The foregoing provisions do not prohibit: (i) dividends or other distributions paid by CMS Energy in respect of the capital stock issued in connection with the acquisition of any business or assets by CMS Energy where such payments are payable solely from the net earnings of such business or assets; (ii) any purchase or redemption of capital stock made by exchange for, or out of the proceeds of the substantially concurrent sale of, capital stock; (iii) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividends would have complied with the aforementioned limitations; or (iv) payments pursuant to the tax sharing agreement among CMS Energy and its subsidiaries. In addition, Michigan law prohibits payment of a dividend if, after giving it effect, CMS Energy would not be able to pay its debts as they become due in the usual course of business, or its total assets would be less than the sum of its total liabilities plus, unless the articles permit otherwise, the amount that would be needed, if CMS Energy were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. CMS Energy's net assets available for payment of dividends under the Michigan Business Corporation Act at March 31, 1995 were $1,207 million. Voting Rights The holders of CMS Energy Common Stock will vote with the holders of Class G Common Stock as a single class, except on matters which would be required by law or the Articles of Incorporation to be voted on by class. Each holder of Common Stock is entitled to one vote for each share of Common Stock held by such holder on each matter voted upon by the shareholders. Such right to vote is not cumulative. A majority of the votes cast by the holders of shares entitled to vote thereon is sufficient for the adoption of any question presented, except that certain provisions of the Articles of Incorporation relating to special shareholder meetings, the removal, indemnification and liability of the Board of Directors and the requirements for amending these provisions may not be amended, altered, changed or repealed unless such amendment, alteration, change or repeal is approved by the affirmative vote of at least 75% of the outstanding shares entitled to vote thereon. Under Michigan law, the approval of the holders of a majority of the outstanding shares of a class of Common Stock, voting as a separate class, would be necessary for authorizing, effecting or validating the merger or consolidation of CMS Energy into or with any other corporation if such merger or consolidation would adversely affect the powers of special rights of such class of stock, and to authorize any amendment to the Articles of Incorporation that would increase or decrease the aggregate number of authorized shares of such class or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. The Articles of Incorporation also provide that unless the vote or consent of a greater number of shares shall then be required by law, the vote or consent of the holders of a majority of all the shares of either class of Common Stock then outstanding, voting as a separate class, will be necessary for authorizing, effecting or validating the merger or consolidation of CMS Energy into or with any other entity if such merger or consolidation would adversely affect the powers or special rights of such class of Common Stock, either directly by amendment to the Articles of Incorporation or indirectly by requiring the holders of such class to accept or retain, in such merger or consolidation, anything other than (i) shares of such class or (ii) shares of the surviving or resulting corporation, having, in either case, powers and special rights identical to those of such class prior to such merger or consolidation. In the event that there is more than one class of Common Stock, the effect of these provisions may be to permit the holders of a majority of the outstanding shares of either class of Common Stock to block any such merger or amendment which would adversely affect the powers or special rights of holders of such class of Common Stock. Preemptive Rights Holders of Common Stock have no preemptive rights to subscribe for or purchase any additional shares of the capital stock of CMS Energy of any class now or hereafter authorized, or Preferred Stock, bonds, debentures, or other obligations or rights or options convertible into or exchangeable for or entitling the holder or owner to subscribe for or purchase any shares of capital stock, or any rights to exchange shares issued for shares to be issued. Liquidation Rights In the event of the dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company and after there shall have been paid or set apart for the holders of Preferred Stock the full preferential amounts (including any accumulated and unpaid dividends) to which they are entitled, the holders of Class G Common Stock and CMS Energy Common Stock shall be entitled to receive, on a per share basis, the same portion of all of the assets of the Corporation remaining for distribution to the holders of Common Stock, regardless of whether or not any of such assets were attributed to the Consumers Gas Group. Neither the merger or consolidation of the Company into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Company nor any sale, transfer or lease of all or any part of the assets of the Company, shall be deemed to be a dissolution, liquidation or winding up. Because the Company has subsidiaries which have debt obligations and other liabilities of their own, the Company's rights and the rights of its creditors and its stockholders to participate in the distribution of assets of any subsidiary upon the latter's liquidation or recapitalization will be subject to prior claims of the subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against the subsidiary. Transfer Agent and Registrar CMS Energy Common Stock is transferrable at Consumers Power Company, 212 W. Michigan Avenue, Jackson, MI 49201. The registrar for CMS Energy Common Stock is Consumers Power Company. Primary Source of Funds for the Company's Common Stock; Restrictions on Sources of Dividends The ability of CMS Energy to pay (i) dividends on its capital stock and (ii) its indebtedness depends and will depend substantially upon timely receipt of sufficient dividends or other distributions from its subsidiaries, in particular Consumers. Consumers' ability to pay dividends on its common stock depends upon its revenues, earnings and other factors. Consumers' revenues and earnings will depend substantially upon rates authorized by the Michigan Public Service Commission (the "MPSC"). Consumers' ability to pay dividends is restricted by its First Mortgage Bond Indenture (the"Mortgage Indenture") and its Articles of Incorporation (the "Articles"). The Mortgage Indenture provides that Consumers can only pay dividends on its common stock out of retained earnings accumulated subsequent to September 30, 1945, provided that upon such payment, there shall remain of such retained earnings an amount equivalent to any deficiency in maintenance and replacement expenditures as compared with maintenance and replacement requirements since December 31, 1945. Because of restrictions in its Articles and Mortgage Indenture, Consumers was prohibited from paying dividends on its common stock from June 1991 to December 31, 1992. However, as of December 31, 1992, Consumers effected a quasi-reorganization in which Consumers' accumulated deficit of $574 million was eliminated against other paid-in capital. With the accumulated deficit eliminated, Consumers satisfied the requirements under its Mortgage Indenture and resumed paying dividends on its common stock in May 1993. Consumers' Articles also provide two restrictions on its payment of dividends on its common stock. First, prior to the payment of any common stock dividend, Consumers must reserve retained earnings after giving effect to such dividend payment of at least (i) $7.50 per share on all then outstanding shares of its preferred stock; (ii) in respect to its Class A Preferred Stock, 7.5% of the aggregate amount established by its Board of Directors to be payable on the shares of each series thereof in the event of involuntary liquidation of Consumers; and (iii) $7.50 per share on all then outstanding shares of all other stock over which its preferred stock and Class A Preferred Stock do not have preference as to the payment of dividends and as to assets. Second, dividend payments during the 12 month period ending with the month the proposed payment is to be paid are limited to: (i) 50% of net income available for the payment of dividends during the base period (hereinafter defined) if the ratio of common stock and surplus to total capitalization and surplus for 12 consecutive calendar months within the 14 calendar months immediately preceding the proposed dividend payment (the "base period"), adjusted to reflect the proposed dividend, is less than 20%; and (ii) 75% of net income available for the payment of dividends during the base period if the ratio of common stock and surplus to total capitalization and surplus for the base period, adjusted to reflect the proposed dividend, is at least 20% but less than 25%. Consumers' Articles also prohibit the payment of cash dividends on its common stock if Consumers is in arrears on preferred stock dividend payments. In addition, Michigan law prohibits payment of a dividend if, after giving it effect, Consumers would not be able to pay its debts as they become due in the usual course of business, or its total assets would be less than the sum of its total liabilities plus, unless the articles permit otherwise, the amount that would be needed, if Consumers were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Consumers' net assets available for payment of dividends under the Michigan Business Corporation Act at March 31, 1995 were $1,513 million. Under the most restrictive of these conditions, at March 31, 1995, $69.9 million of Consumers' retained earnings were available to pay cash dividends on its common stock. Currently it is Consumers' policy to pay annual dividends equal to 80% of its annual consolidated net income. Consumers' Board of Directors reserves the right to change this policy at any time. Consumers paid dividends on its common stock of $16.0 million on February 22, 1994, $65.6 million on May 20, 1994, $31.0 million on August 19, 1994, $36.0 million on November 4, 1994, $27.4 million on December 20, 1994 and $69.9 million on May 19, 1995. LEGAL OPINIONS An opinion as to the legality of the CMS Energy Common Stock will be rendered for CMS Energy by Denise M. Sturdy, Esq., Assistant General Counsel of CMS Energy. EXPERTS The consolidated financial statements and schedule of CMS Energy as of December 31, 1994 and 1993, and for each of the five years in the period ended December 31, 1994 incorporated by reference in this Prospectus, have been audited by Arthur Andersen LLP (formerly Arthur Andersen & Co.), independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. With respect to the unaudited interim consolidated financial information for the quarterly periods ended March 31, 1994 and 1995, incorporated by reference in this Prospectus, Arthur Andersen LLP has applied limited procedures in accordance with professional standards for a review of such information. However, their separate report thereon states that they did not audit and they did not express an opinion on that interim consolidated financial information. Accordingly, the degree of reliance on their report on that information should be restricted in light of the limited nature of the review procedures applied. In addition, the accountants are not subject to the liability provisions of Section 11 of the Securities Act, for their report on the unaudited interim consolidated financial information because that report is not a "report" or a "part" of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act. Future consolidated financial statements of CMS Energy and the reports thereon of Arthur Andersen LLP also will be incorporated by reference in this Prospectus in reliance upon the authority of that firm as experts in giving those reports to the extent that said firm has audited said consolidated financial statements and consented to the use of their reports thereon. -----END PRIVACY-ENHANCED MESSAGE-----