Exhibit 10.1
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
Dated as of November 30, 2007
     THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this “Agreement”) is between
CONSUMERS ENERGY COMPANY (the “Company”) and THE BANK OF NOVA SCOTIA (the
“Bank”).
     The Company has requested, and the Bank has agreed to grant, a secured
letter of credit facility on the terms and subject to the conditions set forth
in this Agreement. Accordingly, the Company and the Bank agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION.
     1.1 Definitions. In addition to the terms defined in the preamble, as used
herein, (a) the terms set forth below shall have the following meanings (such
definitions to be applicable to both the singular and plural forms of such
terms) and (b) other capitalized terms not defined herein have the respective
meanings set forth in the Credit Agreement referred to below:
     Bond Delivery Agreement means a bond delivery agreement whereby the Bank,
among other things, acknowledges delivery of the Bonds, substantially in the
form of Exhibit B.
     Bonds means a series of interest-bearing First Mortgage Bonds created under
the Supplemental Indenture issued in favor of, and in form and substance
satisfactory to, the Bank.
     Business Day means any day on which the Bank’s main office in New York, New
York is open for the transaction of commercial banking business (including the
issuance of, and receipt of drawings under, letters of credit).
     Collateral Account means a special, interest-bearing account maintained
(pursuant to arrangements satisfactory to the Bank) at the Bank’s office at the
address specified pursuant to Section 11.2, which account shall be in the name
of the Company but under the sole dominion and control of the Bank.
     Commitment means the commitment of the Bank to issue Letters of Credit
hereunder.
     Commitment Amount means $200,000,000, as reduced from time to time in
accordance with the terms hereof.
     Commitment Fee Rate — see Schedule 1.
     Credit Agreement means the Fourth Amended and Restated Credit Agreement
dated as of March 30, 2007 among the Company, various financial institutions and
JPMorgan Chase Bank, N.A., as administrative agent, as amended, modified or
waived after the date hereof but without giving effect to any termination
thereof.
     Default means any event described in Section 10.1.

 

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     Designated Covenant means each covenant of the Company set forth in
Articles VI through VIII of the Credit Agreement (excluding Sections 6.5, 6.6,
6.8 and 6.10 of the Credit Agreement), together with all definitions related
thereto.
     Expiration Date means the date that is 364 days after the date hereof, as
such date may be extended pursuant to Section 2.6.
     FMB Release Date means the date on which the Bonds are released pursuant to
Section 11.12.
     Letter of Credit — see Section 2.1.
     Letter of Credit Application — see Section 2.2.
     LC Commission Fee Rate — see Schedule 1.
     Liabilities means all obligations of the Company to the Bank and its
successors and assigns, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing or due or to
become due, arising out of or in connection with the Letters of Credit, this
Agreement or the other Transaction Documents.
     Prime Rate means a rate per annum equal to the prime rate of interest
announced from time to time by the Bank (which is not necessarily the lowest
rate charged to any customer), changing when and as such prime rate changes.
     Stated Amount means, with respect to any Letter of Credit, the sum of
(i) the maximum aggregate amount available for drawing under such Letter of
Credit under any and all circumstances and (ii) the unpaid principal amount of
all reimbursement obligations in respect of drawings under such Letter of
Credit.
     Supplemental Indenture means a supplemental indenture substantially in the
form of Exhibit A.
     Termination Date means the earlier to occur of (a) the Expiration Date and
(b) such other date on which the Commitment Amount shall be reduced to zero
pursuant to Section 4 or the Commitment shall be terminated pursuant to
Section 10.
     Transaction Documents means this Agreement, each Letter of Credit
Application, the Supplemental Indenture, the Bond Delivery Agreement, the Bonds
and each other instrument or document delivered in connection herewith.
     Unmatured Default means any event that if it continues uncured will, with
lapse of time or notice or lapse of time and notice, constitute a Default.
     1.2 Other Interpretive Provisions, (a) The term “including” is not limiting
and means “including without limitation.” (b) Unless otherwise provided herein,
(i) references to agreements and other contractual instruments shall be deemed
to include all subsequent amendments and other modifications thereto, but only
to the extent such amendments and other

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modifications are not prohibited by the terms of any Transaction Document, and
(ii) references to any statute or regulation shall be construed to include all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such statute or regulation.
SECTION 2. COMMITMENT OF THE BANK; LETTER OF CREDIT PROCEDURES.
     2.1 Commitment. The Bank hereby agrees, on the terms and conditions set
forth in this Agreement, to issue standby letters of credit denominated in U.S.
dollars (each, a “Letter of Credit”) and to renew, extend, increase, decrease or
otherwise modify Letters of Credit (“Modify,” and each such action a
“Modification”), from time to time from and including the date hereof and prior
to the Termination Date upon the request of the Company; provided that the
aggregate Stated Amount of all Letters of Credit shall not at any time exceed
the Commitment Amount. No Letter of Credit shall (x) be issued later than
30 days prior to the scheduled Termination Date, (y) have an expiry date later
than the fifth Business Day prior to the scheduled Termination Date (unless the
Company agrees on writing on the date of issuance (or, if applicable, the date
of the Modification extending the expiry date thereof) of such Letter of Credit
to, and the Company does, on or prior to such fifth preceding Business Day,
deliver cash to the Bank for deposit in the Collateral Account in an amount
equal to an amount equal to not less than 105% of the outstanding Stated Amount
of such Letter of Credit) or (z) provide for time drafts.
     2.2 Notice. Subject to Section 2.1, the Company shall give the Bank notice
prior to 12:00 noon (New York time) at least three Business Days (or such lesser
number of days as the Bank may agree in any particular instance) prior to the
proposed date of issuance or Modification of a Letter of Credit, specifying the
beneficiary, the proposed date of issuance (or Modification) and the expiry date
of such Letter of Credit, and describing the proposed terms of such Letter of
Credit and the nature of the transactions proposed to be supported thereby. The
issuance or Modification by the Bank of any Letter of Credit shall, in addition
to the conditions precedent set forth in Section 9, be subject to the condition
precedent that such Letter of Credit shall be satisfactory to the Bank and that
the Company shall have executed and delivered an application therefor on the
Bank’s customary form for the type of Letter of Credit requested (each a “Letter
of Credit Application”). In the event of any conflict between the terms of this
Agreement and the terms of any Letter of Credit Application, the terms of this
Agreement shall control.
     2.3 Reimbursement. Upon receipt of a demand for payment from the
beneficiary of a Letter of Credit, the Bank shall promptly notify the Company as
to the amount to be paid by the Bank as a result of such demand and the proposed
payment date (the “LC Payment Date”). The Bank’s sole responsibility to the
Company upon any such demand shall be to determine that the documents delivered
under the applicable Letter of Credit in connection with such demand are in
conformity in all material respects with the requirements of such Letter of
Credit. The Company shall be irrevocably and unconditionally obligated to
reimburse the Bank on the applicable LC Payment Date for any amounts to be paid
by the Bank upon any drawing under any Letter of Credit, without presentment,
demand, protest or other formalities of any kind; provided that the Company
shall not be precluded from asserting any claim for direct (but not
consequential) damages suffered by the Company to the extent, but only to the
extent, caused by (i) the gross negligence or willful misconduct of the Bank in
determining whether a demand presented under any Letter of Credit complied with
the terms of such Letter of Credit or (ii) the Bank’s failure to

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pay under any Letter of Credit issued after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit. If
the Company fails to reimburse the Bank in full for any drawing under a Letter
of Credit on the applicable LC Payment Date, the unpaid principal amount of such
reimbursement obligation shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to (x) the rate applicable to Floating Rate
Advances under the Credit Agreement plus, beginning on the third Business Day
after the LC Payment Date, 1%.
     2.4 Obligations Absolute. The Company’s obligations under this Section 2
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment that the Company
may have or have had against the Bank or any beneficiary of a Letter of Credit.
The Company further agrees with the Bank that the Bank shall not be responsible
for, and the Company’s reimbursement obligation in respect of any Letter of
Credit shall not be affected by, among other things, the validity or genuineness
of documents or of any endorsements thereon, even if such documents should in
fact prove to be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Company, any of its affiliates, the beneficiary of
any Letter of Credit or any financing institution or other party to whom any
Letter of Credit may be transferred or any claims or defenses whatsoever of the
Company or of any of its affiliates against the beneficiary of any Letter of
Credit or any such transferee. The Bank shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of Credit.
The Company agrees that any action taken or omitted by the Bank under or in
connection with a Letter of Credit and the related drafts and documents, if done
without gross negligence and willful misconduct, shall be binding upon the
Company and shall not put the Bank under any liability to the Company. Nothing
in this Section 2.4 is intended to limit the right of the Company to make a
claim against the Bank for damages as contemplated by the proviso to the second
sentence of Section 2.3.
     2.5 Actions of the Bank. The Bank shall be entitled to rely, and shall be
fully protected in relying, upon any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the Bank.
     2.6 Extension of Expiration Date. Not earlier than 120 days prior to, nor
later than 60 days prior to, the initial Expiration Date (the “Initial
Expiration Date”), the Company may request that the Bank (in its sole
discretion) extend the Initial Expiration Date for an additional 364 days. If
the Bank agrees to so extend the Initial Expiration Date (which agreement may be
conditioned upon the payment of an extension fee to be agreed to by the Company
and the Bank), the Expiration Date shall be extended for an additional 364 days
effective as of the Initial Expiration Date.
     2.7 Indemnification. The Company hereby agrees to indemnify and hold
harmless the Bank and its directors, officers, agents and employees from and
against any and all claims and damages, losses, liabilities, reasonable costs or
expenses that the Bank may incur (or that may be claimed against the Bank by any
Person whatsoever) by reason of or in connection with the

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issuance, execution and delivery or transfer of or payment or failure to pay
under any Letter of Credit or any actual or proposed use of any Letter of
Credit, including any claims, damages, losses, liabilities, costs or expenses
(“indemnified liabilities”) that the Bank may incur by reason of or on account
of the Bank issuing any Letter of Credit which specifies that the term
“Beneficiary” included therein includes any successor by operation of law of the
named Beneficiary, but which Letter of Credit does not require that any drawing
by any such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the Bank, evidencing the appointment of such successor
Beneficiary; provided that the Company shall not be required to indemnify the
Bank for indemnified liabilities to the extent it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such
indemnified liabilities arose out of an event described in the proviso to the
second sentence of Section 2.3.
     2.8 Evidence. The obligation of the Company to repay the Liabilities shall
be evidenced by one or more Bonds.
SECTION 3. FEES.
     3.1 Commitment and LC Commission Fees. The Company agrees to pay the Bank
(a) a commitment fee in an amount equal to the Commitment Fee Rate in effect
from time to time on the daily remainder of (i) the Commitment Amount and
(ii) the Stated Amount of all Letters of Credit and (b) a letter of credit
commission fee in an amount equal to the LC Commission Fee Rate in effect from
time to time on the daily Stated Amount of each Letter of Credit, in each case
for the period from the date of issuance of such Letter of Credit to the date
such Letter of Credit expires or otherwise terminates; provided that, at any
time any Default exists, the Bank may, by written notice to the Company,
increase the rate per annum for the commitment fee and/or the letter of credit
commission fee by 1.0% (which increased rate shall, unless otherwise agreed by
the Bank, remain effective until the first date on which no Default exists).
Such fees shall be computed for the actual number of days elapsed on the basis
of a 360-day year and payable in arrears on the last day of each calendar
quarter and on the Termination Date (and, if applicable, thereafter on demand),
in each case for the period then ended for which such fees have not previously
been paid.
     3.2 Issuance Fees. The Company agrees to pay to the Bank (i) an issuance
fee of $100 for each Letter of Credit, payable not more than 30 days following
delivery by the Bank of an invoice therefor, (ii) if at any time any other
financial institution holds a risk participation in all or any portion of a
Letter of Credit, a fronting fee of 12.5 basis points per annum of the face
amount of such Letter of Credit, payable quarterly in arrears on the last day of
each calendar quarter and on the Termination Date (and thereafter, if
applicable, on demand), and (iii) documentary and processing charges in
connection with the issuance or modification of and draws under any Letter of
Credit in accordance with the Bank’s standard schedule for such charges as in
effect from time to time.
SECTION 4. REDUCTIONS OF THE COMMITMENT AMOUNT. The Company may from time to
time, upon not less than five Business Days’ prior written notice to the Bank,
permanently reduce the Commitment Amount to an amount that is not less than the
Stated Amount of all Letters of Credit. Upon any such reduction in the
Commitment Amount, the Bank shall, upon request of the Company, promptly
surrender to or upon the order of the Company one

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or more Bonds specified by the Company; provided that the Company remains in
compliance with Section 8.2.
SECTION 5. SECTION 6 MAKING OF PAYMENTS.
     5.1 Making of Payments. All amounts payable by the Company hereunder shall
be paid in U.S. dollars in immediately available funds to the Bank at its
principal office in New York, New York not later than 2:30 p.m., New York time,
on the date due, and funds received after such time shall be deemed to have been
received by the Bank on the immediately following Business Day. The Company
hereby authorizes the Bank to charge any account of the Company maintained with
the Bank for (a) any reimbursement obligations that become due upon any drawing
under a Letter of Credit and (b) each payment of fees or other amounts that are
due and payable hereunder (but the failure of the Bank to charge any such
account shall not affect the Company’s obligation to pay the Bank all amounts
payable hereunder as such amounts become due).
     5.2 Due Date Extension. If any amount required to be paid hereunder becomes
due on a date that is not a Business Day, then such amount shall be paid on the
immediately following Business Day.
SECTION 6. YIELD PROTECTION.
     6.1 Yield Protection. The Company agrees to reimburse the Bank for any
increase in the cost (including any increase in capital costs) to the Bank of,
or any reduction in the amount of any sum receivable by the Bank in respect of,
any Letter of Credit in accordance with the terms of Section 4.1 of the Credit
Agreement as if such Section were set forth in full herein mutatis mutandis (it
being understood that (a) any reference to the “Agent”, a “Bank” or an “L/C
Issuer” shall be deemed to be a reference to the Bank, (b) any reference to a
“Letter of Credit” shall be deemed to be a reference to a Letter of Credit and
(c) any reference to “this Agreement” shall be deemed to be a reference to this
Agreement).
     6.2 Bank Statements; Limitations on Demands; Survival. Each demand by the
Bank pursuant to this Section 6 shall be accompanied by a statement setting
forth in reasonable detail the basis for such demand and a calculation of the
amount being demanded. Determinations and statements of the Bank pursuant to
this Section 6 shall be conclusive absent demonstrable error. Notwithstanding
the foregoing, the Bank shall not be entitled to demand compensation or be
compensated hereunder to the extent that such compensation relates to any period
of time more than 90 days prior to the date upon which the Bank first notified
the Company of the occurrence of the event entitling the Bank to such
compensation (unless, and to the extent that, any such compensation so demanded
relates to the retroactive application of any event so notified to the Company).
The provisions of this Section 6 shall survive termination of this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES. To induce the Bank to enter into this
Agreement and to issue Letters of Credit hereunder, the Company represents and
warrants that:
     7.1 Incorporation and Good Standing. The Company is duly incorporated,
validly existing and in good standing under the laws of the State of Michigan.

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     7.2 Corporate Power and Authority: No Conflicts. The execution, delivery
and performance by the Company of the Transaction Documents are within the
Company’s corporate powers, have been duly authorized by all necessary corporate
action and do not (a) violate the Company’s charter, bylaws or any applicable
law, or (b) breach or result in an event of default under any indenture or
material agreement, and do not result in or require the creation of any Lien
upon or with respect to any of its properties (except the Lien of the Indenture
securing the Bonds and any Lien in favor of the Bank on the Collateral Account
or any funds therein).
     7.3 Governmental Approvals. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by the Company
of any Transaction Document, except for the authorization to issue, sell or
guarantee secured and/or unsecured short-term debt granted by the Federal Energy
Regulatory Commission, which authorization has been obtained and is in full
force and effect.
     7.4 Legally Enforceable Agreements. Each Transaction Document constitutes a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, subject to (a) the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and (b) the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
     7.5 Bonds. The issuance to the Bank of the Bonds to evidence the
Liabilities (a) will not violate any provision of the Indenture or any other
agreement or instrument, or any law or regulation, or judicial or regulatory
order, judgment or decree, to which the Company or any of its Subsidiaries is a
party or by which any of the foregoing is bound and (b) will, prior to the FMB
Release Date, provide the Bank, as beneficial holder of the Bonds, the benefit
of the Lien of the Indenture equally and ratably with the holders of other First
Mortgage Bonds.
     7.6 Credit Agreement Representations and Warranties. Each of the
representations and warranties of the Company set forth Sections 5.5 through
5.11, 5.13 and 5.14 of the Credit Agreement is true and correct in all material
respects, except to the extent that any such representation or warranty
expressly relates to an earlier date, in which case it was true and correct as
of such earlier date (it being understood that, for purposes hereof, all
references in such provisions of the Credit Agreement, and in any related
definitions, to (a) the “Agent” or the “Banks” shall be deemed to be references
to the Bank and (b) a “Material Adverse Change” shall mean any event,
development or circumstance that has had or could reasonably be expected to have
a material adverse effect on (i) the financial condition or results of
operations of the Company and its Consolidated Subsidiaries, taken as a whole,
(ii) the Company’s ability to perform its obligations under any Transaction
Document or (iii) the validity or enforceability of any Transaction Document or
the rights or remedies of the Bank thereunder.
SECTION 8. COVENANTS. The Company agrees that until the expiration or
termination of the Commitment and thereafter until all Liabilities are paid in
full in cash and all outstanding Letters of Credit are cancelled, have expired
or are fully drawn, it will:

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     8.1 Compliance with Designated Covenants. Comply with each Designated
Covenant as if all such covenants were set forth in full herein, mutatis
mutandis.
     8.2 Minimum Amount of Bonds. Beginning on the date hereof and continuing
until the earlier of (i) the FMB Release Date and (ii) the date on which the
Commitment and Letters of Credit have terminated and all Liabilities have been
paid in full, cause the face amount of all Bonds to at all times be equal to or
greater than the greater of (x) the Commitment Amount and (y) the sum of (A) the
aggregate undrawn Stated Amount of all outstanding Letters of Credit plus
(B) the aggregate unpaid amount of all reimbursement obligations under all
Letters of Credit.
     8.3 Maintenance of Books and Records; Inspections. Keep adequate records
and books of account, in which full and correct entries shall be made of all of
its financial transactions and its assets and business so as to permit the
Company and its Consolidated Subsidiaries to present financial statements in
accordance with GAAP and, subject to any necessary approval from the Nuclear
Regulatory Commission, at any reasonable time and from time to time, permit the
Bank or any agent or representative thereof to examine and make copies of and
abstracts from its records and books of account, visit its properties and
discuss its affairs, finances and accounts with any of its officers.
     8.4 Notice of Default. As soon as practicable and in any event within five
Business Days after becoming aware of the occurrence of any Default or Unmatured
Default, a statement of a Designated Officer as to the nature thereof, and as
soon as practicable and in any event within five Business Days thereafter, a
statement of a Designated Officer as to the action which the Company has taken,
is taking or proposes to take with respect thereto.
SECTION 9. CONDITIONS TO ISSUANCE OF LETTERS OF CREDIT. The obligation of the
Bank to issue any Letter of Credit is subject to the following conditions
precedent:
     9.1 Initial Letter of Credit. The obligation of the Bank to issue the
initial Letter of Credit is, in addition to the conditions precedent specified
in Section 9.2, subject to the condition precedent that the Bank shall have
received all of the following, each duly executed and dated the date of issuance
of such Letter of Credit (or such earlier date as shall be satisfactory to the
Bank), in form and substance satisfactory to the Bank:
     (a) a copy of the Restated Articles of Incorporation of the Company,
together with all amendments, certified by the Secretary or an Assistant
Secretary of the Company, and a certificate of good standing, certified by the
appropriate governmental officer in its jurisdiction of incorporation;
     (b) a copy, certified by the Secretary or an Assistant Secretary of the
Company, of its bylaws and of its Board of Directors’ resolutions (and
resolutions of other bodies, if any are deemed necessary by counsel for the
Bank) authorizing the execution of the Transaction Documents;
     (c) an incumbency certificate, executed by the Secretary or an Assistant
Secretary of the Company, which shall identify by name and title and bear the
original or facsimile signature of the officers of the Company authorized to
sign the Transaction Documents and the officers or

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other employees authorized to request Letters of Credit hereunder, upon which
certificate the Bank shall be entitled to rely until informed of any change in
writing by the Company;
     (d) a certificate, signed by a Designated Officer of the Company, stating
that on the date of such issuance (i) no Default or Unmatured Default has
occurred and is continuing and (ii) each representation or warranty contained in
Section 7 is true and correct;
     (e) the opinion letter of James E. Brunner, Esq., General Counsel of the
Company, covering substantially the same matters as the corresponding opinion
letter issued in connection with the Credit Agreement;
     (f) an executed Supplemental Indenture;
     (g) evidence satisfactory to the Bank of the issuance of the Bonds in the
form set forth in the Supplemental Indenture and in an aggregate principal
amount of $200,000,000 pursuant to the Bond Delivery Agreement; and
     (h) such other documents as the Bank may reasonably request.
     9.2 All Letters of Credit. The obligation of the Bank to issue each Letter
of Credit is subject to the following further conditions precedent that (and the
submission of a Letter of Credit Application pursuant to Section 2.2 shall
constitute a representation and warranty by the Company that such conditions
will be satisfied on the date of the issuance of such Letter of Credit):
     (a) no Default or Unmatured Default has occurred and is continuing or will
result from the issuance of such Letter of Credit; and
     (b) the representations and warranties of the Company contained in
Section 7 are true and correct as of the date of the issuance of such Letter of
Credit, with the same effect as though made on such date.
SECTION 10. EVENTS OF DEFAULT AND THEIR EFFECT.
     10.1 Events of Default. Each of the following shall constitute a “Default”
under this Agreement:
     10.1.1 Non-Payment of Liabilities, etc. The Company shall fail to pay
(a) any reimbursement obligation within one day after the same becomes due, or
(b) any interest or any fee or other Liability payable hereunder within five
days after such interest, fee or other Liability becomes due and payable.
          10.1.2 Bankruptcy, Insolvency, etc. The Company: (a) shall make an
assignment for the benefit of creditors, or petition or apply to any tribunal
for the appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (b) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
(c) shall have had any such petition or application filed or any such proceeding
shall have been

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commenced, against it, in which an adjudication or appointment is made or order
for relief is entered, or which petition, application or proceeding remains
undismissed for a period of 30 consecutive days or more; or (d) by any act or
omission shall indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for all or any substantial part of its property;
or (e) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of 30 days or more; or (f) shall take any
corporate action to authorize any of the actions set forth above in this
Section 10.1.2.
          10.1.3 Non-Compliance with this Agreement. The Company fails to comply
with or to perform any provision of this Agreement or any other Transaction
Document (and not constituting a Default under any other provision of this
Section 10) and continuance of such failure for 30 consecutive days after the
earlier of (a) a Designated Officer obtaining knowledge of such breach and
(b) written notice thereof by means of facsimile, regular mail or written notice
delivered in person (or telephonic notice thereof confirmed in writing) having
been given to the Company by the Bank.
          10.1.4 Warranties. Any representation or warranty made by the Company
(or any of its officers) in this Agreement or any other Transaction Document or
in any certificate, document, report, financial or other written statement
furnished at any time pursuant to any Transaction Document shall prove to have
been incorrect in any material respect on or as of the date made or deemed made.
          10.1.5 Cross-Default. Any “Event of Default” under and as defined in
the Credit Agreement occurs.
     10.2 Effect of Default.
     (a) If any Default described in Section 10.1.2 shall occur, the Commitment
(if it has not theretofore terminated) shall immediately terminate and all
Liabilities shall immediately become due and payable upon demand (regardless of
any provision hereof to the contrary); and in the case of any other Default, the
Bank may (i) without presentment, demand or any other notice whatsoever, declare
all Liabilities to be due and payable upon demand (regardless of any provision
hereof to the contrary) and/or (ii) by notice to the Company, declare the
Commitment (if it has not theretofore terminated) to be terminated, and the
Company will be and become thereby unconditionally obligated, without any
further notice, act or demand, to pay to the Bank an amount in immediately
available funds, which funds shall be held in the Collateral Account, equal to
the difference between (x) 105% of the Stated Amount of all Letters of Credit at
such time and (y) the amount on deposit in the Collateral Account at such time
which is free and clear of all rights and claims of third parties and has not
been applied against the Liabilities (such difference, the “Collateral Shortfall
Amount”).
     (b) If at any time while any Default is continuing, the Bank determines
that the Collateral Shortfall Amount at such time is greater than zero, the Bank
may make demand on the Company to pay, and the Company will, forthwith upon such
demand and without any further notice or act, pay to the Bank the Collateral
Shortfall Amount, which funds shall be deposited in the Collateral Account.

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     (c) The Bank may, at any time or from time to time after funds are
deposited in the Collateral Account, apply such funds to the payment of the
Liabilities and any other amounts as shall from time to time have become due and
payable by the Company to the Bank thereunder. The Company hereby pledges,
assigns and grants to the Bank a security interest in all of the Company’s
right, title and interest in and to all funds which may from time to time be on
deposit in the Collateral Account to secure the prompt and complete payment and
performance of the Liabilities. The Bank will invest any funds on deposit from
time to time in the Collateral Account in certificates of deposit of The Bank of
Nova Scotia having a maturity not exceeding 30 days.
     (d) At any time while any Default is continuing, neither the Company nor
any Person claiming on behalf of or through the Company shall have any right to
withdraw any of the funds held in the Collateral Account. After all of the
Liabilities have been indefeasibly paid in full, all Letters of Credit have
expired or been terminated and the Commitment has been terminated, any funds
remaining in the Collateral Account shall be returned by the Bank to the Company
or paid to whomever may be legally entitled thereto at such time.
     (e) The Bank shall promptly advise the Company in writing of any
declaration pursuant to clause (a)(i) above, but failure to do so shall not
impair the effect of such declaration.
SECTION 11. GENERAL.
     11.1 Waiver; Amendments. No delay on the part of the Bank in the exercise
of any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement shall be effective unless the same shall be in
writing and signed and delivered by the Bank, and then such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
     11.2 Notices. All notices and other communications provided to any party
hereto under this Agreement shall be in writing (including by facsimile) and
addressed or delivered to such party at its address set forth below its
signature hereto or at such other address as may be designated by such party in
a notice to the other party. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice, if transmitted
by facsimile, shall be deemed given when transmitted and transmission is
confirmed.
     11.3 Costs and Expenses; Indemnity; Taxes.
     (a) The Company shall reimburse the Bank for (a) any reasonable costs,
internal charges and out-of-pocket expenses (including reasonable attorneys’
fees and time charges of attorneys for the Bank) paid or incurred by the Bank in
connection with the preparation, review, execution, delivery, syndication,
distribution (including via the internet), amendment and modification of the
Transaction Documents and (b) any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys’ fees and time charges of
attorneys for the Bank) paid or incurred by the Bank in connection with the
collection and enforcement of the Transaction Documents. The Company further
agrees to indemnify the Bank and its Affiliates,

11

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and the directors, officers, employees and agents of the foregoing (all of the
foregoing, the “Indemnified Persons”), against all losses, claims, damages,
penalties, judgments, liabilities and reasonable expenses (including all
reasonable expenses of litigation or preparation therefor whether or not an
Indemnified Person is a party thereto) which any of them may pay or incur
arising out of or relating to this Agreement, the other Transaction Documents,
the transactions contemplated hereby, the direct or indirect application or
proposed application of the proceeds of any Letter of Credit, any actual or
alleged presence or release of any Hazardous Substance on or from any property
owned or operated by the Company or any Subsidiary or any Environmental
Liability related in any way to the Company or any Subsidiary; provided that the
Company shall not be liable to any Indemnified Person for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of such
Indemnified Person. Without limiting the foregoing, the Company shall pay any
civil penalty or fine assessed by the Office of Foreign Assets Control against
any Indemnified Person, and all reasonable costs and expenses (including
reasonable fees and expenses of counsel to such Indemnified Person) incurred in
connection with defense thereof, as a result of any breach or inaccuracy of the
representation made in Section 5.14 of the Credit Agreement. The obligations of
the Company under this Section shall survive the termination of this Agreement.
     11.4 Captions. Section captions used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
     11.5 Governing Law. This Agreement shall be a contract made under and
governed by the internal laws of the State of New York except, in the case of a
Letter of Credit, to the extent that such laws are inconsistent with the ISP (as
defined below). Except as otherwise expressly provided in the applicable Letter
of Credit or Letter of Credit Application, each Letter of Credit shall be
subject to the International Standby Practices (the “ISP”) as most recently
published by the International Chamber of Commerce. All obligations of the
Company and rights of the Bank expressed herein shall be in addition to and not
in limitation of those provided by applicable law.
     11.6 Severability. Whenever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
     11.7 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Agreement.
     11.8 Successors and Assigns. This Agreement shall be binding upon the
Company and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Company, the Bank and the successors and assigns of
the Bank.
     11.9 Waiver of Jury Trial. EACH OF THE COMPANY AND THE BANK HEREBY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER

12

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INSTRUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
     11.10 Submission to Jurisdiction. The Company hereby irrevocably and
unconditionally submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of America for
the Southern District of New York and appellate courts from any thereof, and
agrees that any such action or proceeding may be brought in such courts. The
Company (a) waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same, (b) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Company at its
address set forth on the signature page hereof or at such other address of which
the bank shall have been notified pursuant hereto, (c) agrees that nothing
herein shall affect the right of the bank to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction and (d) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, indirect, consequential or punitive damages.
     11.11 USA Patriot Act. The Bank hereby notifies the Company that pursuant
to requirements of the USA Patriot Act, the Bank is required to obtain, verify
and record information that identifies the Company, which information includes
the name and address of the Company and other information that will allow the
Bank to identify the Company in accordance with the USA Patriot Act.
     11.12 Release of Bonds. The Bank will release the Bonds and deliver, at the
Company’s expense, such documents to the Company or the trustee under the
Indenture as the Company may reasonably require to evidence such release, upon
written request by the Company accompanied by a certificate of a Designated
Officer certifying that (a) no Default or Unmatured Default exists prior to or
after giving effect to such release and (b) at least two of the three then
current ratings of the Company’s senior unsecured long-term debt (without
third-party credit enhancement) are as follows: (i) Baa2 or higher in the case
of Moody’s, (ii) BBB or higher in the case of S&P and (iii) BBB or higher in the
case of Fitch.

13

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the day
and year first above written.

                  CONSUMERS ENERGY COMPANY    
 
           
 
  By:   /s/ Laura L. Mountcastle
 
   
 
  Name:   Laura L. Mountcastle
 
   
 
  Title:   Vice President and Treasurer
 
   
 
                One Energy Plaza         Jackson, MI 49201         Attention:
Beverly S. Burger         Facsimile No.: (517) 788-0412         Telephone No.:
(517) 788-2541         E-Mail Address: bsburger@cmsenergy.com    

S-1

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                  THE BANK OF NOVA SCOTIA    
 
           
 
  By:   /s/ Thane Rattew
 
   
 
  Name:   Thane Rattew    
 
  Title:   Managing Director    

One Liberty Plaza
New York, NY 10006
Attention: Kevin Kober
Facsimile No: (212) 225 5480
Telephone No: (212) 225 5186
E-Mail Address: Kevin_kober@scotiacapital.com

S-2

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EXHIBIT A
[FORM OF SUPPLEMENTAL INDENTURE]
ONE HUNDRED SIXTH SUPPLEMENTAL INDENTURE
Providing among other things for
FIRST MORTGAGE BONDS,
2007-2 Collateral Series (Interest Bearing)
 
Dated as of November 30, 2007
 
CONSUMERS ENERGY COMPANY
TO
THE BANK OF NEW YORK,
TRUSTEE
Counterpart ____ of 80

 

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     THIS ONE HUNDRED SIXTH SUPPLEMENTAL INDENTURE, dated as of November 30,
2007 (herein sometimes referred to as “this Supplemental Indenture”), made and
entered into by and between CONSUMERS ENERGY COMPANY, a corporation organized
and existing under the laws of the State of Michigan, with its principal
executive office and place of business at One Energy Plaza, in Jackson, Jackson
County, Michigan 49201, formerly known as Consumers Power Company (hereinafter
sometimes referred to as the “Company”), and THE BANK OF NEW YORK, a New York
banking corporation, with its corporate trust offices at 101 Barclay St., New
York, New York 10286 (hereinafter sometimes referred to as the “Trustee”), as
Trustee under the Indenture dated as of September 1, 1945 between Consumers
Power Company, a Maine corporation (hereinafter sometimes referred to as the
“Maine corporation”), and City Bank Farmers Trust Company (Citibank, N.A.,
successor, hereinafter sometimes referred to as the “Predecessor Trustee”),
securing bonds issued and to be issued as provided therein (hereinafter
sometimes referred to as the “Indenture”),
     WHEREAS at the close of business on January 30, 1959, City Bank Farmers
Trust Company was converted into a national banking association under the title
“First National City Trust Company”; and
     WHEREAS at the close of business on January 15, 1963, First National City
Trust Company was merged into First National City Bank; and
     WHEREAS at the close of business on October 31, 1968, First National City
Bank was merged into The City Bank of New York, National Association, the name
of which was thereupon changed to First National City Bank; and
     WHEREAS effective March 1, 1976, the name of First National City Bank was
changed to Citibank, N.A.; and
     WHEREAS effective July 16, 1984, Manufacturers Hanover Trust Company
succeeded Citibank, N.A. as Trustee under the Indenture; and
     WHEREAS effective June 19, 1992, Chemical Bank succeeded by merger to
Manufacturers Hanover Trust Company as Trustee under the Indenture; and
     WHEREAS effective July 15, 1996, The Chase Manhattan Bank (National
Association), merged with and into Chemical Bank which thereafter was renamed
The Chase Manhattan Bank; and
     WHEREAS effective November 11, 2001, The Chase Manhattan Bank merged with
Morgan Guaranty Trust Company of New York and the surviving corporation was
renamed JPMorgan Chase Bank; and
     WHEREAS, effective November 13, 2004, the name of JPMorgan Chase Bank was
changed to JPMorgan Chase Bank, N.A.; and
     WHEREAS, effective October 2, 2006, The Bank of New York assumed the rights
and obligations of JPMorgan Chase Bank, N.A. under the Indenture; and

 

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     WHEREAS the Indenture was executed and delivered for the purpose of
securing such bonds as may from time to time be issued under and in accordance
with the terms of the Indenture, the aggregate principal amount of bonds to be
secured thereby being limited to $5,000,000,000 at any one time outstanding
(except as provided in Section 2.01 of the Indenture), and the Indenture
describes and sets forth the property conveyed thereby and is filed in the
Office of the Secretary of State of the State of Michigan and is of record in
the Office of the Register of Deeds of each county in the State of Michigan in
which this Supplemental Indenture is to be recorded; and
     WHEREAS the Indenture has been supplemented and amended by various
indentures supplemental thereto, each of which is filed in the Office of the
Secretary of State of the State of Michigan and is of record in the Office of
the Register of Deeds of each county in the State of Michigan in which this
Supplemental Indenture is to be recorded; and
     WHEREAS the Company and the Maine corporation entered into an Agreement of
Merger and Consolidation, dated as of February 14, 1968, which provided for the
Maine corporation to merge into the Company; and
     WHEREAS the effective date of such Agreement of Merger and Consolidation
was June 6, 1968, upon which date the Maine corporation was merged into the
Company and the name of the Company was changed from “Consumers Power Company of
Michigan” to “Consumers Power Company”; and
     WHEREAS the Company and the Predecessor Trustee entered into a Sixteenth
Supplemental Indenture, dated as of June 4, 1968, which provided, among other
things, for the assumption of the Indenture by the Company; and
     WHEREAS said Sixteenth Supplemental Indenture became effective on the
effective date of such Agreement of Merger and Consolidation; and
     WHEREAS the Company has succeeded to and has been substituted for the Maine
corporation under the Indenture with the same effect as if it had been named
therein as the mortgagor corporation; and
     WHEREAS effective March 11, 1997, the name of Consumers Power Company was
changed to Consumers Energy Company; and
     WHEREAS, the Company has entered into a Letter of Credit Reimbursement
Agreement dated as of November 30, 2007 (as amended or otherwise modified from
time to time, the “Reimbursement Agreement”) with The Bank of Nova Scotia (the
“Lender”) providing for the making of certain financial accommodations
thereunder, and pursuant to such Reimbursement Agreement the Company has agreed
to issue to the Lender, as evidence of and security for the Liabilities (as such
term is defined in the Reimbursement Agreement), a new series of bonds under the
Indenture; and
     WHEREAS, for such purposes the Company desires to issue a new series of
bonds, to be designated First Mortgage Bonds, 2007-2 Collateral Series (Interest
Bearing), each of which

A-2

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bonds shall also bear the descriptive title “First Mortgage Bond” (hereinafter
provided for and hereinafter sometimes referred to as the “2007-2 Collateral
Bonds”), the bonds of which series are to be issued as registered bonds without
coupons and are to bear interest at the rate per annum specified herein and are
to mature on the Termination Date (as such term is defined in the Reimbursement
Agreement); and
     WHEREAS, each of the registered bonds without coupons of the 2007-2
Collateral Bonds and the Trustee’s Authentication Certificate thereon are to be
substantially in the following form, to wit:

A-3

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[FORM OF REGISTERED BOND
OF THE 2007-2 COLLATERAL BONDS]
[FACE]
CONSUMERS ENERGY COMPANY
FIRST MORTGAGE BOND
2007-2 COLLATERAL SERIES (INTEREST BEARING)

            No. 1   $200,000,000

     CONSUMERS ENERGY COMPANY, a Michigan corporation (hereinafter called the
“Company”), for value received, hereby promises to pay to The Bank of Nova
Scotia, as the lender (in such capacity, the “Lender”) under the Letter of
Credit Reimbursement Agreement dated as of November 30, 2007 between the Company
and the Lender (as amended or otherwise modified from time to time, the
“Reimbursement Agreement”), or registered assigns, the principal sum of Two
Hundred Million Dollars ($200,000,000) or such lesser principal amount as shall
be equal to the aggregate amount of obligations (the “Reimbursement
Obligations”) of the Company then outstanding under the Reimbursement Agreement
to reimburse the Lender for amounts paid by the Lender in respect of any one or
more drawings under Letters of Credit (as defined in the Reimbursement
Agreement) included in the Liabilities (as defined in the Reimbursement
Agreement) outstanding on the Termination Date (as defined in the Reimbursement
Agreement) (the “Maturity Date”), but not in excess, however, of the principal
amount of this bond, and to pay interest thereon at the Interest Rate (as
defined below) until the principal hereof is paid or duly made available for
payment on the Maturity Date, or, in the event of redemption of this bond, until
the redemption date, or, in the event of default in the payment of the principal
hereof, until the Company’s obligations with respect to the payment of such
principal shall be discharged as provided in the Indenture (as defined on the
reverse hereof). Interest on this bond shall be payable on each Interest Payment
Date (as defined below), commencing on the first Interest Payment Date next
succeeding November 30, 2007. If the Maturity Date falls on a day which is not a
Business Day, as defined below, principal and any interest and/or fees payable
with respect to the Maturity Date will be paid on the immediately preceding
Business Day. The interest payable, and punctually paid or duly provided for, on
any Interest Payment Date will, subject to certain exceptions, be paid to the
person in whose name this bond (or one or more predecessor bonds) is registered
at the close of business on the Record Date (as defined below); provided,
however, that interest payable on the Maturity Date will be payable to the
person to whom the principal hereof shall be payable. Should the Company default
in the payment of interest (“Defaulted Interest”), the Defaulted Interest shall
be paid to the person in whose name this bond (or one or more predecessor bonds)
is registered on a subsequent record date fixed by the Company, which subsequent
record date shall be fifteen (15) days prior to the payment of such Defaulted
Interest. As used herein, (A)“Business Day” shall mean any day, other than a
Saturday or Sunday, on which banks generally are open in New

A-4

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York, New York for the conduct of substantially all of their commercial lending
activities and on which interbank wire transfers can be made on the Fedwire
system; (B) “Interest Payment Date” shall mean each date on which Liabilities
constituting interest and/or fees are due and payable from time to time pursuant
to the Reimbursement Agreement; (C) “Interest Rate” shall mean a rate of
interest per annum, adjusted as necessary, to result in an interest payment
equal to the aggregate amount of Liabilities constituting interest and fees due
under the Reimbursement Agreement on the applicable Interest Payment Date; and
(D) “Record Date” with respect to any Interest Payment Date shall mean the day
(whether or not a Business Day) immediately next preceding such Interest Payment
Date.
     Payment of the principal of and interest on this bond will be made in
immediately available funds at the office or agency of the Company maintained
for that purpose in the City of Jackson, Michigan, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
     The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though fully
set forth at this place.
     This bond shall not be valid or become obligatory for any purpose unless
and until it shall have been authenticated by the execution by the Trustee or
its successor in trust under the Indenture of the certificate hereon.

A-5

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     IN WITNESS WHEREOF, Consumers Energy Company has caused this bond to be
executed in its name by its Chairman of the Board, its President or one of its
Vice Presidents by his or her signature or a facsimile thereof, and its
corporate seal or a facsimile thereof to be affixed hereto or imprinted hereon
and attested by its Secretary or one of its Assistant Secretaries by his or her
signature or a facsimile thereof.

                  CONSUMERS ENERGY COMPANY    
 
           
 
  Dated:        
 
           
 
  By  
 
   
 
  Printed  
 
   
 
  Title  
 
   
 
           
 
  Attest:        
 
     
 
   

TRUSTEE’S AUTHENTICATION CERTIFICATE
     This is one of the bonds, of the series designated therein, described in
the within-mentioned Indenture.

                  THE BANK OF NEW YORK, Trustee    
 
           
 
  By        
 
     
 
Authorized Officer    

A-6

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[REVERSE]
CONSUMERS ENERGY COMPANY
FIRST MORTGAGE BOND
2007-2 COLLATERAL SERIES (INTEREST BEARING)
     This bond is one of the bonds of a series designated as First Mortgage
Bonds, 2007-2 Collateral Series (Interest Bearing) (sometimes herein referred to
as the “2007-2 Collateral Bonds”) issued under and in accordance with and
secured by an Indenture dated as of September 1, 1945, given by the Company (or
its predecessor, Consumers Power Company, a Maine corporation) to City Bank
Farmers Trust Company (The Bank of New York, successor) (hereinafter sometimes
referred to as the “Trustee”), together with indentures supplemental thereto,
heretofore or hereafter executed, to which indenture and indentures supplemental
thereto (hereinafter referred to collectively as the “Indenture”) reference is
hereby made for a description of the property mortgaged and pledged, the nature
and extent of the security and the rights, duties and immunities thereunder of
the Trustee and the rights of the holders of said bonds and of the Trustee and
of the Company in respect of such security, and the limitations on such rights.
By the terms of the Indenture, the bonds to be secured thereby are issuable in
series which may vary as to date, amount, date of maturity, rate of interest and
in other respects as provided in the Indenture.
     The 2007-2 Collateral Bonds are to be issued and delivered to the Lender in
order to evidence and secure the obligation of the Company under the
Reimbursement Agreement to make payments to the Lender under the Reimbursement
Agreement and to provide the Lender the benefit of the lien of the Indenture
with respect to the 2007-2 Collateral Bonds.
     The obligation of the Company to make payments with respect to the
principal of 2007-2 Collateral Bonds shall be fully or partially, as the case
may be, satisfied and discharged to the extent that, at the time that any such
payment shall be due, the then due Reimbursement Obligations included in the
Liabilities shall have been fully or partially paid. Satisfaction of any
obligation to the extent that payment is made with respect to the Reimbursement
Obligations means that if any payment is made on the Reimbursement Obligations,
a corresponding payment obligation with respect to the principal of the 2007-2
Collateral Bonds shall be deemed discharged in the same amount as the payment
with respect to the Reimbursement Obligations discharges the outstanding
obligation with respect to such Reimbursement Obligations. No such payment of
principal shall reduce the principal amount of the 2007-2 Collateral Bonds.
     The obligation of the Company to make payments with respect to the interest
on 2007-2 Collateral Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at the time that any such payment
shall be due, the then due interest and/or fees under the Reimbursement
Agreement shall have been fully or partially paid. Satisfaction of any
obligation to the extent that payment is made with respect to the interest
and/or fees under the Reimbursement Agreement means that if any payment is made
on the interest and/or fees under the Reimbursement Agreement, a corresponding
payment obligation with respect to the interest on the 2007-2 Collateral Bonds
shall be deemed discharged in the same amount as the payment

A-7

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with respect to the Reimbursement Obligations discharges the outstanding
obligation with respect to such Reimbursement Obligations.
     The Trustee may at any time and all times conclusively assume that the
obligation of the Company to make payments with respect to the principal of and
interest on this bond, so far as such payments at the time have become due, has
been fully satisfied and discharged unless and until the Trustee shall have
received a written notice from the Lender stating (i) that timely payment of
principal and interest on the 2007-2 Collateral Bonds has not been made,
(ii) that the Company is in arrears as to the payments required to be made by it
to the Lender in connection with the Liabilities pursuant to the Reimbursement
Agreement, and (iii) the amount of the arrearage.
     If a Default (as defined in the Reimbursement Agreement) with respect to
the payment of the principal of the Reimbursement Obligations shall have
occurred, it shall be deemed to be a default for purposes of Section 11.01 of
the Indenture in the payment of the principal of the 2007-2 Collateral Bonds
equal to the amount of such unpaid Reimbursement Obligations (but in no event in
excess of the principal amount of the 2007-2 Collateral Bonds). If a Default (as
defined in the Reimbursement Agreement) with respect to the payment of interest
on the Reimbursement Obligations or any fees shall have occurred, it shall be
deemed to be a default for purposes of Section 11.01 of the Indenture in the
payment of the interest on the 2007-2 Collateral Bonds equal to the amount of
such unpaid interest or fees.
     This bond is not redeemable except upon written demand of the Lender
following the occurrence of a Default under the Reimbursement Agreement and the
acceleration of the Liabilities, as provided in Section 10.2 of the
Reimbursement Agreement. This bond is not redeemable by the operation of the
improvement fund or the maintenance and replacement provisions of the Indenture
or with the proceeds of released property.
     In case of certain defaults as specified in the Indenture, the principal of
this bond may be declared or may become due and payable on the conditions, at
the time, in the manner and with the effect provided in the Indenture. The
holders of certain specified percentages of the bonds at the time outstanding,
including in certain cases specified percentages of bonds of particular series,
may in certain cases, to the extent and as provided in the Indenture, waive
certain defaults thereunder and the consequences of such defaults.
     The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than seventy-five per centum in
principal amount of the bonds (exclusive of bonds disqualified by reason of the
Company’s interest therein) at the time outstanding, including, if more than one
series of bonds shall be at the time outstanding, not less than sixty per centum
in principal amount of each series affected, to effect, by an indenture
supplemental to the Indenture, modifications or alterations of the Indenture and
of the rights and obligations of the Company and the rights of the holders of
the bonds and coupons; provided, however, that no such modification or
alteration shall be made without the written approval or consent of the holder
hereof which will (a) extend the maturity of this bond or reduce the rate or
extend the time of payment of interest hereon or reduce the amount of the
principal hereof, or (b) permit the creation of any lien, not otherwise
permitted, prior to or on a parity with the lien of

A-8

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the Indenture, or (c) reduce the percentage of the principal amount of the bonds
the holders of which are required to approve any such supplemental indenture.
     The Company reserves the right, without any consent, vote or other action
by holders of the 2007-2 Collateral Bonds or any other series created after the
Sixty-eighth Supplemental Indenture, to amend the Indenture to reduce the
percentage of the principal amount of bonds the holders of which are required to
approve any supplemental indenture (other than any supplemental indenture which
is subject to the proviso contained in the immediately preceding sentence)
(a) from not less than seventy-five per centum (including sixty per centum of
each series affected) to not less than a majority in principal amount of the
bonds at the time outstanding or (b) in case fewer than all series are affected,
not less than a majority in principal amount of the bonds of all affected
series, voting together.
     No recourse shall be had for the payment of the principal of or interest on
this bond, or for any claim based hereon, or otherwise in respect hereof or of
the Indenture, to or against any incorporator, stockholder, director or officer,
past, present or future, as such, of the Company, or of any predecessor or
successor company, either directly or through the Company, or such predecessor
or successor company, or otherwise, under any constitution or statute or rule of
law, or by the enforcement of any assessment or penalty, or otherwise, all such
liability of incorporators, stockholders, directors and officers, as such, being
waived and released by the holder and owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the Indenture.
     This bond shall be exchangeable for other registered bonds of the same
series, in the manner and upon the conditions prescribed in the Indenture, upon
the surrender of such bonds at the Investor Services Department of the Company,
as transfer agent. However, notwithstanding the provisions of Section 2.05 of
the Indenture, no charge shall be made upon any registration of transfer or
exchange of bonds of said series other than for any tax or taxes or other
governmental charge required to be paid by the Company.
     The Lender shall surrender this bond to the Trustee when all of the
Reimbursement Obligations and interest thereon arising under the Reimbursement
Agreement, and all of the fees payable pursuant to the Reimbursement Agreement
with respect to the Liabilities shall have been duly paid, and the Reimbursement
Agreement shall have been terminated.
[END OF FORM OF REGISTERED BOND
OF THE 2007-2 COLLATERAL BONDS]
 

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     AND WHEREAS all acts and things necessary to make the 2007-2 Collateral
Bonds (the “Collateral Bonds”), when duly executed by the Company and
authenticated by the Trustee or its agent and issued as prescribed in the
Indenture, as heretofore supplemented and amended, and this Supplemental
Indenture provided, the valid, binding and legal obligations of the Company, and
to constitute the Indenture, as supplemented and amended as aforesaid, as well
as by this Supplemental Indenture, a valid, binding and legal instrument for the
security thereof, have been done and performed, and the creation, execution and
delivery of this Supplemental Indenture and the creation, execution and issuance
of bonds subject to the terms hereof and of the Indenture, as so supplemented
and amended, have in all respects been duly authorized;
     NOW, THEREFORE, in consideration of the premises, of the acceptance and
purchase by the holders thereof of the bonds issued and to be issued under the
Indenture, as supplemented and amended as above set forth, and of the sum of One
Dollar duly paid by the Trustee to the Company, and of other good and valuable
considerations, the receipt whereof is hereby acknowledged, and for the purpose
of securing the due and punctual payment of the principal of and premium, if
any, and interest on all bonds now outstanding under the Indenture and the
$200,000,000 principal amount of the Collateral Bonds and all other bonds which
shall be issued under the Indenture, as supplemented and amended from time to
time, and for the purpose of securing the faithful performance and observance of
all covenants and conditions therein, and in any indenture supplemental thereto,
set forth, the Company has given, granted, bargained, sold, released,
transferred, assigned, hypothecated, pledged, mortgaged, confirmed, set over,
warranted, alienated and conveyed and by these presents does give, grant,
bargain, sell, release, transfer, assign, hypothecate, pledge, mortgage,
confirm, set over, warrant, alien and convey unto The Bank of New York, as
Trustee, as provided in the Indenture, and its successor or successors in the
trust thereby and hereby created and to its or their assigns forever, all the
right, title and interest of the Company in and to all the property, described
in Section 11 hereof, together (subject to the provisions of Article X of the
Indenture) with the tolls, rents, revenues, issues, earnings, income, products
and profits thereof, excepting, however, the property, interests and rights
specifically excepted from the lien of the Indenture as set forth in the
Indenture.
     TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the premises, property,
franchises and rights, or any thereof, referred to in the foregoing granting
clause, with the reversion and reversions, remainder and remainders and (subject
to the provisions of Article X of the Indenture) the tolls, rents, revenues,
issues, earnings, income, products and profits thereof, and all the estate,
right, title and interest and claim whatsoever, at law as well as in equity,
which the Company now has or may hereafter acquire in and to the aforesaid
premises, property, franchises and rights and every part and parcel thereof.
     SUBJECT, HOWEVER, with respect to such premises, property, franchises and
rights, to excepted encumbrances as said term is defined in Section 1.02 of the
Indenture, and subject also to all defects and limitations of title and to all
encumbrances existing at the time of acquisition. TO HAVE AND TO HOLD all said
premises, property, franchises and rights hereby conveyed, assigned, pledged or
mortgaged, or intended so to be, unto the Trustee, its successor or successors
in trust and their assigns forever;

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     BUT IN TRUST, NEVERTHELESS, with power of sale for the equal and
proportionate benefit and security of the holders of all bonds now or hereafter
authenticated and delivered under and secured by the Indenture and interest
coupons appurtenant thereto, pursuant to the provisions of the Indenture and of
any supplemental indenture, and for the enforcement of the payment of said bonds
and coupons when payable and the performance of and compliance with the
covenants and conditions of the Indenture and of any supplemental indenture,
without any preference, distinction or priority as to lien or otherwise of any
bond or bonds over others by reason of the difference in time of the actual
authentication, delivery, issue, sale or negotiation thereof or for any other
reason whatsoever, except as otherwise expressly provided in the Indenture; and
so that each and every bond now or hereafter authenticated and delivered
thereunder shall have the same lien, and so that the principal of and premium,
if any, and interest on every such bond shall, subject to the terms thereof, be
equally and proportionately secured, as if it had been made, executed,
authenticated, delivered, sold and negotiated simultaneously with the execution
and delivery thereof.
     AND IT IS EXPRESSLY DECLARED by the Company that all bonds authenticated
and delivered under and secured by the Indenture, as supplemented and amended as
above set forth, are to be issued, authenticated and delivered, and all said
premises, property, franchises and rights hereby and by the Indenture and
indentures supplemental thereto conveyed, assigned, pledged or mortgaged, or
intended so to be, are to be dealt with and disposed of under, upon and subject
to the terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes expressed in the Indenture, as supplemented and amended as above set
forth, and the parties hereto mutually agree as follows:
     SECTION 1. There is hereby created a series of bonds (the “2007-2
Collateral Bonds”) designated as hereinabove provided, which shall also bear the
descriptive title “First Mortgage Bond”, and the forms thereof shall be
substantially as hereinbefore set forth (collectively, the “Sample Bond”). The
2007-2 Collateral Bonds shall be issued in the aggregate principal amount of
$200,000,000, shall mature on the Termination Date (as such term is defined in
the Reimbursement Agreement) and shall be issued only as registered bonds
without coupons in denominations of $1,000 and any multiple thereof. The serial
numbers of the Collateral Bonds shall be such as may be approved by any officer
of the Company, the execution thereof by any such officer either manually or by
facsimile signature to be conclusive evidence of such approval. The Collateral
Bonds are to be issued to and registered in the name of the Lender under the
Reimbursement Agreement (as such terms are defined in the Sample Bonds) to
evidence and secure any and all Liabilities (as such term is defined in the
Reimbursement Agreement) of the Company under the Reimbursement Agreement.
     The 2007-2 Collateral Bonds shall bear interest as set forth in the Sample
Bond. The principal of and the interest on said bonds shall be payable as set
forth in the Sample Bond.
     The obligation of the Company to make payments with respect to the
principal of 2007-2 Collateral Bonds shall be fully or partially, as the case
may be, satisfied and discharged to the extent that, at the time that any such
payment shall be due, the then due Reimbursement Obligations included in the
Liabilities shall have been fully or partially paid. Satisfaction of any
obligation to the extent that payment is made with respect to the Reimbursement
Obligations

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means that if any payment is made on the Reimbursement Obligations, a
corresponding payment obligation with respect to the principal of the 2007-2
Collateral Bonds shall be deemed discharged in the same amount as the payment
with respect to the Reimbursement Obligations discharges the outstanding
obligation with respect to such Reimbursement Obligations. No such payment of
principal shall reduce the principal amount of the 2007-2 Collateral Bonds.
     The obligation of the Company to make payments with respect to interest on
2007-2 Collateral Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at the time that any such payment
shall be due, the then due interest and/or fees under the Reimbursement
Agreement shall have been fully or partially paid. Satisfaction of any
obligation to the extent that payment is made with respect to the interest
and/or fees under the Reimbursement Agreement means that if any payment is made
on the interest and/or fees under the Reimbursement Agreement, a corresponding
payment obligation with respect to the interest on the 2007-2 Collateral Bonds
shall be deemed discharged in the same amount as the payment with respect to the
interest and/or fees discharges the outstanding obligation with respect to such
interest and/or fees.
     The Trustee may at any time and all times conclusively assume that the
obligation of the Company to make payments with respect to the principal of and
interest on the Collateral Bonds, so far as such payments at the time have
become due, has been fully satisfied and discharged unless and until the Trustee
shall have received a written notice from the Lender stating (i) that timely
payment of principal and interest on the 2007-2 Collateral Bonds has not been
made, (ii) that the Company is in arrears as to the payments required to be made
by it to the Lender pursuant to the Reimbursement Agreement, and (iii) the
amount of the arrearage.
     The Collateral Bonds shall be exchangeable for other registered bonds of
the same series, in the manner and upon the conditions prescribed in the
Indenture, upon the surrender of such bonds at the Investor Services Department
of the Company, as transfer agent. However, notwithstanding the provisions of
Section 2.05 of the Indenture, no charge shall be made upon any registration of
transfer or exchange of bonds of said series other than for any tax or taxes or
other governmental charge required to be paid by the Company.
     SECTION 2. The Collateral Bonds are not redeemable by the operation of the
maintenance and replacement provisions of this Indenture or with the proceeds of
released property.
     SECTION 3. Upon the occurrence of a Default under the Reimbursement
Agreement and the acceleration of the Liabilities, the Collateral Bonds shall be
redeemable in whole upon receipt by the Trustee of a written demand from the
Lender stating that there has occurred under the Reimbursement Agreement both a
Default and a declaration of acceleration of the Liabilities and demanding
redemption of the Collateral Bonds (including a description of the amount of
Reimbursement Obligations, interest and fees which comprise such Liabilities).
The Company waives any right it may have to prior notice of such redemption
under the Indenture. Upon surrender of the Collateral Bonds by the Lender to the
Trustee, the Collateral Bonds shall be redeemed at a redemption price equal to
the aggregate amount of the Liabilities.

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     SECTION 4. The Company reserves the right, without any consent, vote or
other action by the holder of the Collateral Bonds or of any subsequent series
of bonds issued under the Indenture, to make such amendments to the Indenture,
as supplemented, as shall be necessary in order to amend Section 17.02 to read
as follows:
     SECTION 17.02. With the consent of the holders of not less than a majority
in principal amount of the bonds at the time outstanding or their
attorneys-in-fact duly authorized, or, if fewer than all series are affected,
not less than a majority in principal amount of the bonds at the time
outstanding of each series the rights of the holders of which are affected,
voting together, the Company, when authorized by a resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or modifying the rights and obligations of the Company
and the rights of the holders of any of the bonds and coupons; provided,
however, that no such supplemental indenture shall (1) extend the maturity of
any of the bonds or reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or reduce any premium
payable on the redemption thereof, without the consent of the holder of each
bond so affected, or (2) permit the creation of any lien, not otherwise
permitted, prior to or on a parity with the lien of this Indenture, without the
consent of the holders of all the bonds then outstanding, or (3) reduce the
aforesaid percentage of the principal amount of bonds the holders of which are
required to approve any such supplemental indenture, without the consent of the
holders of all the bonds then outstanding. For the purposes of this Section,
bonds shall be deemed to be affected by a supplemental indenture if such
supplemental indenture adversely affects or diminishes the rights of holders
thereof against the Company or against its property. The Trustee may in its
discretion determine whether or not, in accordance with the foregoing, bonds of
any particular series would be affected by any supplemental indenture and any
such determination shall be conclusive upon the holders of bonds of such series
and all other series. Subject to the provisions of Sections 16.02 and 16.03
hereof, the Trustee shall not be liable for any determination made in good faith
in connection herewith.
     Upon the written request of the Company, accompanied by a resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of bondholders as aforesaid
(the instrument or instruments evidencing such consent to be dated within one
year of such request), the Trustee shall join with the Company in the execution
of such supplemental indenture unless such supplemental indenture affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee

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may in its discretion but shall not be obligated to enter into such supplemental
indenture.
     It shall not be necessary for the consent of the bondholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
     The Company and the Trustee, if they so elect, and either before or after
such consent has been obtained, may require the holder of any bond consenting to
the execution of any such supplemental indenture to submit his bond to the
Trustee or to ask such bank, banker or trust company as may be designated by the
Trustee for the purpose, for the notation thereon of the fact that the holder of
such bond has consented to the execution of such supplemental indenture, and in
such case such notation, in form satisfactory to the Trustee, shall be made upon
all bonds so submitted, and such bonds bearing such notation shall forthwith be
returned to the persons entitled thereto.
     Prior to the execution by the Company and the Trustee of any supplemental
indenture pursuant to the provisions of this Section, the Company shall publish
a notice, setting forth in general terms the substance of such supplemental
indenture, at least once in one daily newspaper of general circulation in each
city in which the principal of any of the bonds shall be payable, or, if all
bonds outstanding shall be registered bonds without coupons or coupon bonds
registered as to principal, such notice shall be sufficiently given if mailed,
first class, postage prepaid, and registered if the Company so elects, to each
registered holder of bonds at the last address of such holder appearing on the
registry books, such publication or mailing, as the case may be, to be made not
less than thirty days prior to such execution. Any failure of the Company to
give such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.
     SECTION 5. As supplemented and amended as above set forth, the Indenture is
in all respects ratified and confirmed, and the Indenture and all indentures
supplemental thereto shall be read, taken and construed as one and the same
instrument.
     SECTION 6. Nothing contained in this Supplemental Indenture shall, or shall
be construed to, confer upon any person other than a holder of bonds issued
under the Indenture, as supplemented and amended as above set forth, the
Company, the Trustee and the Lender, any right or interest to avail himself of
any benefit under any provision of the Indenture, as so supplemented and
amended.
     SECTION 7. The Trustee assumes no responsibility for or in respect of the
validity or sufficiency of this Supplemental Indenture or of the Indenture as
hereby supplemented or the due

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execution hereof by the Company or for or in respect of the recitals and
statements contained herein (other than those contained in the sixth, seventh
and eighth recitals hereof), all of which recitals and statements are made
solely by the Company.
     SECTION 8. This Supplemental Indenture may be simultaneously executed in
several counterparts and all such counterparts executed and delivered, each as
an original, shall constitute but one and the same instrument.
     SECTION 9. In the event the date of any notice required or permitted
hereunder shall not be a Business Day, then (notwithstanding any other provision
of the Indenture or of any supplemental indenture thereto) such notice need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the date fixed for such notice.
“Business Day” means, with respect to this Section 9, any day, other than a
Saturday or Sunday, on which banks generally are open in New York, New York for
the conduct of substantially all of their commercial lending activities and on
which interbank wire transfers can be made on the Fedwire system.
     SECTION 10. This Supplemental Indenture and the Collateral Bonds shall be
governed by and deemed to be a contract under, and construed in accordance with,
the laws of the State of Michigan, and for all purposes shall be construed in
accordance with the laws of such state, except as may otherwise be required by
mandatory provisions of law.
     SECTION 11. Detailed Description of Property Mortgaged:
I.
ELECTRIC GENERATING PLANTS AND DAMS
     All the electric generating plants and stations of the Company, constructed
or otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including all powerhouses, buildings, reservoirs, dams, pipelines, flumes,
structures and works and the land on which the same are situated and all water
rights and all other lands and easements, rights of way, permits, privileges,
towers, poles, wires, machinery, equipment, appliances, appurtenances and
supplies and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with such plants and
stations or any of them, or adjacent thereto.
II.
ELECTRIC TRANSMISSION LINES
     All the electric transmission lines of the Company, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including towers, poles, pole lines, wires, switches, switch racks,
switchboards, insulators and other appliances and equipment, and all other
property, real or personal, forming a part of or appertaining to or used,
occupied or enjoyed in connection with such transmission lines or any of them or
adjacent thereto; together with all real

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property, rights of way, easements, permits, privileges, franchises and rights
for or relating to the construction, maintenance or operation thereof, through,
over, under or upon any private property or any public streets or highways,
within as well as without the corporate limits of any municipal corporation.
Also all the real property, rights of way, easements, permits, privileges and
rights for or relating to the construction, maintenance or operation of certain
transmission lines, the land and rights for which are owned by the Company,
which are either not built or now being constructed.
III.
ELECTRIC DISTRIBUTION SYSTEMS
     All the electric distribution systems of the Company, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture,
including substations, transformers, switchboards, towers, poles, wires,
insulators, subways, trenches, conduits, manholes, cables, meters and other
appliances and equipment, and all other property, real or personal, forming a
part of or appertaining to or used, occupied or enjoyed in connection with such
distribution systems or any of them or adjacent thereto; together with all real
property, rights of way, easements, permits, privileges, franchises, grants and
rights, for or relating to the construction, maintenance or operation thereof,
through, over, under or upon any private property or any public streets or
highways within as well as without the corporate limits of any municipal
corporation.
IV.
ELECTRIC SUBSTATIONS, SWITCHING STATIONS AND SITES
     All the substations, switching stations and sites of the Company,
constructed or otherwise acquired by it and not heretofore described in the
Indenture or any supplement thereto and not heretofore released from the lien of
the Indenture, for transforming, regulating, converting or distributing or
otherwise controlling electric current at any of its plants and elsewhere,
together with all buildings, transformers, wires, insulators and other
appliances and equipment, and all other property, real or personal, forming a
part of or appertaining to or used, occupied or enjoyed in connection with any
of such substations and switching stations, or adjacent thereto, with sites to
be used for such purposes.
V.
GAS COMPRESSOR STATIONS, GAS PROCESSING PLANTS, DESULPHURIZATION
STATIONS, METERING STATIONS, ODORIZING STATIONS, REGULATORS AND
SITES
     All the compressor stations, processing plants, desulphurization stations,
metering stations, odorizing stations, regulators and sites of the Company,
constructed or otherwise acquired by it and not heretofore described in the
Indenture or any supplement thereto and not heretofore released from the lien of
the Indenture, for compressing, processing, desulphurizing, metering, odorizing
and regulating manufactured or natural gas at any of its plants and

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elsewhere, together with all buildings, meters and other appliances and
equipment, and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with any of such
purposes, with sites to be used for such purposes.
VI.
GAS STORAGE FIELDS
     The natural gas rights and interests of the Company, including wells and
well lines (but not including natural gas, oil and minerals), the gas gathering
system, the underground gas storage rights, the underground gas storage wells
and injection and withdrawal system used in connection therewith, constructed or
otherwise acquired by it and not heretofore described in the Indenture or any
supplement thereto and not heretofore released from the lien of the Indenture:
In the Overisel Gas Storage Field, located in the Township of Overisel, Allegan
County, and in the Township of Zeeland, Ottawa County, Michigan; in the
Northville Gas Storage Field located in the Township of Salem, Washtenaw County,
Township of Lyon, Oakland County, and the Townships of Northville and Plymouth
and City of Plymouth, Wayne County, Michigan; in the Salem Gas Storage Field,
located in the Township of Salem, Allegan County, and in the Township of
Jamestown, Ottawa County, Michigan; in the Ray Gas Storage Field, located in the
Townships of Ray and Armada, Macomb County, Michigan; in the Lenox Gas Storage
Field, located in the Townships of Lenox and Chesterfield, Macomb County,
Michigan; in the Ira Gas Storage Field, located in the Township of Ira, St.
Clair County, Michigan; in the Puttygut Gas Storage Field, located in the
Township of Casco, St. Clair County, Michigan; in the Four Corners Gas Storage
Field, located in the Townships of Casco, China, Cottrellville and Ira, St.
Clair County, Michigan; in the Swan Creek Gas Storage Field, located in the
Township of Casco and Ira, St. Clair County, Michigan; and in the Hessen Gas
Storage Field, located in the Townships of Casco and Columbus, St. Clair,
Michigan.
VII.
GAS TRANSMISSION LINES
     All the gas transmission lines of the Company, constructed or otherwise
acquired by it and not heretofore described in the Indenture or any supplement
thereto and not heretofore released from the lien of the Indenture, including
gas mains, pipes, pipelines, gates, valves, meters and other appliances and
equipment, and all other property, real or personal, forming a part of or
appertaining to or used, occupied or enjoyed in connection with such
transmission lines or any of them or adjacent thereto; together with all real
property, right of way, easements, permits, privileges, franchises and rights
for or relating to the construction, maintenance or operation thereof, through,
over, under or upon any private property or any public streets or highways,
within as well as without the corporate limits of any municipal corporation.

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VIII.
GAS DISTRIBUTION SYSTEMS
     All the gas distribution systems of the Company, constructed or otherwise
acquired by it and not heretofore described in the Indenture or any supplement
thereto and not heretofore released from the lien of the Indenture, including
tunnels, conduits, gas mains and pipes, service pipes, fittings, gates, valves,
connections, meters and other appliances and equipment, and all other property,
real or personal, forming a part of or appertaining to or used, occupied or
enjoyed in connection with such distribution systems or any of them or adjacent
thereto; together with all real property, rights of way, easements, permits,
privileges, franchises, grants and rights, for or relating to the construction,
maintenance or operation thereof, through, over, under or upon any private
property or any public streets or highways within as well as without the
corporate limits of any municipal corporation.
IX.
OFFICE BUILDINGS, SERVICE BUILDINGS, GARAGES, ETC.
     All office, garage, service and other buildings of the Company, wherever
located, in the State of Michigan, constructed or otherwise acquired by it and
not heretofore described in the Indenture or any supplement thereto and not
heretofore released from the lien of the Indenture, together with the land on
which the same are situated and all easements, rights of way and appurtenances
to said lands, together with all furniture and fixtures located in said
buildings.
X.
TELEPHONE PROPERTIES AND
RADIO COMMUNICATION EQUIPMENT
     All telephone lines, switchboards, systems and equipment of the Company,
constructed or otherwise acquired by it and not heretofore described in the
Indenture or any supplement thereto and not heretofore released from the lien of
the Indenture, used or available for use in the operation of its properties, and
all other property, real or personal, forming a part of or appertaining to or
used, occupied or enjoyed in connection with such telephone properties or any of
them or adjacent thereto; together with all real estate, rights of way,
easements, permits, privileges, franchises, property, devices or rights related
to the dispatch, transmission, reception or reproduction of messages,
communications, intelligence, signals, light, vision or sound by electricity,
wire or otherwise, including all telephone equipment installed in buildings used
as general and regional offices, substations and generating stations and all
telephone lines erected on towers and poles; and all radio communication
equipment of the Company, together with all property, real or personal (except
any in the Indenture expressly excepted), fixed stations, towers, auxiliary
radio buildings and equipment, and all appurtenances used in connection
therewith, wherever located, in the State of Michigan.

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XI.
OTHER REAL PROPERTY
     All other real property of the Company and all interests therein, of every
nature and description (except any in the Indenture expressly excepted) wherever
located, in the State of Michigan, acquired by it and not heretofore described
in the Indenture or any supplement thereto and not heretofore released from the
lien of the Indenture. Such real property includes but is not limited to the
following described property, such property is subject to any interests that
were excepted or reserved in the conveyance to the Company:
ALCONA COUNTY
Certain land in Caledonia Township, Alcona County, Michigan described as:
     The East 330 feet of the South 660 feet of the SW 1/4 of the SW 1/4 of
Section 8, T28N, R8E, except the West 264 feet of the South 330 feet thereof;
said land being more particularly described as follows: To find the place of
beginning of this description, commence at the Southwest corner of said section,
run thence East along the South line of said section 1243 feet to the place of
beginning of this description, thence continuing East along said South line of
said section 66 feet to the West 1/8 line of said section, thence N 02 degrees
09’ 30” E along the said West 1/8 line of said section 660 feet, thence West 330
feet, thence S 02 degrees 09’ 30” W, 330 feet, thence East 264 feet, thence S 02
degrees 09’ 30” W, 330 feet to the place of beginning.
ALLEGAN COUNTY
Certain land in Lee Township, Allegan County, Michigan described as:
The NE 1/4 of the NW 1/4 of Section 16, T1N, R15W.
ALPENA COUNTY
Certain land in Wilson and Green Townships, Alpena County, Michigan described
as:
     All that part of the S’ly 1/2 of the former Boyne City-Gaylord and Alpena
Railroad right of way, being the Southerly 50 feet of a 100 foot strip of land
formerly occupied by said Railroad, running from the East line of Section 31,
T31N, R7E, Southwesterly across said Section 31 and Sections 5 and 6 of T30N,
R7E and Sections 10, 11 and the E 1/2 of Section 9, except the West 1646 feet
thereof, all in T30N, R6E.
ANTRIM COUNTY
Certain land in Mancelona Township, Antrim County, Michigan described as:

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     The S 1/2 of the NE 1/4 of Section 33, T29N, R6W, excepting therefrom all
mineral, coal, oil and gas and such other rights as were reserved unto the State
of Michigan in that certain deed running from the State of Michigan to August W.
Schack and Emma H. Schack, his wife, dated April 15, 1946 and recorded May 20,
1946 in Liber 97 of Deeds on page 682 of Antrim County Records.
ARENAC COUNTY
Certain land in Standish Township, Arenac County, Michigan described as:
     A parcel of land in the SW 1/4 of the NW 1/4 of Section 12, T18N, R4E,
described as follows: To find the place of beginning of said parcel of land,
commence at the Northwest corner of Section 12, T18N, R4E; run thence South
along the West line of said section, said West line of said section being also
the center line of East City Limits Road 2642.15 feet to the W 1/4 post of said
section and the place of beginning of said parcel of land; running thence N 88
degrees 26’ 00” E along the East and West 1/4 line of said section, 660.0 feet;
thence North parallel with the West line of said section, 310.0 feet; thence S
88 degrees 26’ 00” W, 330.0 feet; thence South parallel with the West line of
said section, 260.0 feet; thence S 88 degrees 26’ 00” W, 330.0 feet to the West
line of said section and the center line of East City Limits Road; thence South
along the said West line of said section, 50.0 feet to the place of beginning.
BARRY COUNTY
Certain land in Johnstown Township, Barry County, Michigan described as:
     A strip of land 311 feet in width across the SW 1/4 of the NE 1/4 of
Section 31, T1N, R8W, described as follows: To find the place of beginning of
this description, commence at the E 1/4 post of said section; run thence N 00
degrees 55’ 00” E along the East line of said section, 555.84 feet; thence N 59
degrees 36’ 20” W, 1375.64 feet; thence N 88 degrees 30’ 00” W, 130 feet to a
point on the East 1/8 line of said section and the place of beginning of this
description; thence continuing N 88 degrees 30’ 00” W, 1327.46 feet to the North
and South 1/4 line of said section; thence S 00 degrees 39’35” W along said
North and South 1/4 line of said section, 311.03 feet to a point, which said
point is 952.72 feet distant N’ly from the East and West 1/4 line of said
section as measured along said North and South 1/4 line of said section; thence
S 88 degrees 30’ 00” E, 1326.76 feet to the East 1/8 line of said section;
thence N 00 degrees 47’ 20” E along said East 1/8 line of said section, 311.02
feet to the place of beginning.

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BAY COUNTY
Certain land in Frankenlust Township, Bay County, Michigan described as:
     The South 250 feet of the N 1/2 of the W 1/2 of the W 1/2 of the SE 1/4 of
Section 9, T13N, R4E.
BENZIE COUNTY
Certain land in Benzonia Township, Benzie County, Michigan described as:
     A parcel of land in the Northeast 1/4 of Section 7, Township 26 North,
Range 14 West, described as beginning at a point on the East line of said
Section 7, said point being 320 feet North measured along the East line of said
section from the East 1/4 post; running thence West 165 feet; thence North
parallel with the East line of said section 165 feet; thence East 165 feet to
the East line of said section; thence South 165 feet to the place of beginning.
BRANCH COUNTY
Certain land in Girard Township, Branch County, Michigan described as:
     A parcel of land in the NE 1/4 of Section 23 T5S, R6W, described as
beginning at a point on the North and South quarter line of said section at a
point 1278.27 feet distant South of the North quarter post of said section, said
distance being measured along the North and South quarter line of said section,
running thence S89 degrees21’E 250 feet, thence North along a line parallel with
the said North and South quarter line of said section 200 feet, thence N89
degrees21’W 250 feet to the North and South quarter line of said section, thence
South along said North and South quarter line of said section 200 feet to the
place of beginning.
CALHOUN COUNTY
Certain land in Convis Township, Calhoun County, Michigan described as:
     A parcel of land in the SE 1/4 of the SE 1/4 of Section 32, T1S, R6W,
described as follows: To find the place of beginning of this description,
commence at the Southeast corner of said section; run thence North along the
East line of said section 1034.32 feet to the place of beginning of this
description; running thence N 89 degrees 39’ 52” W, 333.0 feet; thence North
290.0 feet to the South 1/8 line of said section; thence S 89 degrees 39’ 52” E
along said South 1/8 line of said section 333.0 feet to the East line of said
section; thence South along said East line of said section 290.0 feet to the
place of beginning. (Bearings are

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based on the East line of Section 32, T1S, R6W, from the Southeast corner of
said section to the Northeast corner of said section assumed as North.)
CASS COUNTY
     Certain easement rights located across land in Marcellus Township, Cass
County, Michigan described as:
The East 6 rods of the SW 1/4 of the SE 1/4 of Section 4, T5S, R13W.
CHARLEVOIX COUNTY
Certain land in South Arm Township, Charlevoix County, Michigan described as:
     A parcel of land in the SW 1/4 of Section 29, T32N, R7W, described as
follows: Beginning at the Southwest corner of said section and running thence
North along the West line of said section 788.25 feet to a point which is 528
feet distant South of the South 1/8 line of said section as measured along the
said West line of said section; thence N 89 degrees 30’ 19” E, parallel with
said South 1/8 line of said section 442.1 feet; thence South 788.15 feet to the
South line of said section; thence S 89 degrees 29’ 30” W, along said South line
of said section 442.1 feet to the place of beginning.
CHEBOYGAN COUNTY
Certain land in Inverness Township, Cheboygan County, Michigan described as:
     A parcel of land in the SW frl 1/4 of Section 31, T37N, R2W, described as
beginning at the Northwest corner of the SW frl 1/4, running thence East on the
East and West quarter line of said Section, 40 rods, thence South parallel to
the West line of said Section 40 rods, thence West 40 rods to the West line of
said Section, thence North 40 rods to the place of beginning.
CLARE COUNTY
Certain land in Frost Township, Clare County, Michigan described as:
     The East 150 feet of the North 225 feet of the NW 1/4 of the NW 1/4 of
Section 15, T20N, R4W.
CLINTON COUNTY
Certain land in Watertown Township, Clinton County, Michigan described as:
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     The NE 1/4 of the NE 1/4 of the SE 1/4 of Section 22, and the North 165
feet of the NW 1/4 of the NE 1/4 of the SE 1/4 of Section 22, T5N, R3W.
CRAWFORD COUNTY
Certain land in Lovells Township, Crawford County, Michigan described as:
     A parcel of land in Section 1, T28N, R1W, described as: Commencing at NW
corner said section; thence South 89 degrees53’30” East along North section line
105.78 feet to point of beginning; thence South 89 degrees53’30” East along
North section line 649.64 feet; thence South 55 degrees 42’30” East 340.24 feet;
thence South 55 degrees 44’ 37” “East 5,061.81 feet to the East section line;
thence South 00 degrees 00’ 08” “West along East section line 441.59 feet;
thence North 55 degrees 44’ 37” West 5,310.48 feet; thence North 55 degrees
42’30” West 877.76 feet to point of beginning.
EATON COUNTY
Certain land in Eaton Township, Eaton County, Michigan described as:
     A parcel of land in the SW 1/4 of Section 6, T2N, R4W, described as
follows: To find the place of beginning of this description commence at the
Southwest corner of said section; run thence N 89 degrees 51’ 30” E along the
South line of said section 400 feet to the place of beginning of this
description; thence continuing N 89 degrees 51’ 30” E, 500 feet; thence N 00
degrees 50’ 00” W, 600 feet; thence S 89 degrees 51’ 30” W parallel with the
South line of said section 500 feet; thence S 00 degrees 50’ 00” E, 600 feet to
the place of beginning.
EMMET COUNTY
Certain land in Wawatam Township, Emmet County, Michigan described as:
     The West 1/2 of the Northeast 1/4 of the Northeast 1/4 of Section 23, T39N,
R4W.
GENESEE COUNTY
Certain land in Argentine Township, Genesee County, Michigan described as:
     A parcel of land of part of the SW 1/4 of Section 8, T5N, R5E, being more
particularly described as follows:
     Beginning at a point of the West line of Duffield Road, 100 feet wide, (as
now established) distant 829.46 feet measured N01
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degrees42’56”W and 50 feet measured S88 degrees14’04”W from the South quarter
corner, Section 8, T5N, R5E; thence S88 degrees14’04”W a distance of 550 feet;
thence N01 degrees42’56”W a distance of 500 feet to a point on the North line of
the South half of the Southwest quarter of said Section 8; thence N88
degrees14’04”E along the North line of South half of the Southwest quarter of
said Section 8 a distance 550 feet to a point on the West line of Duffield Road,
100 feet wide (as now established); thence S01 degrees42’56”E along the West
line of said Duffield Road a distance of 500 feet to the point of beginning.
GLADWIN COUNTY
Certain land in Secord Township, Gladwin County, Michigan described as:
     The East 400 feet of the South 450 feet of Section 2, T19N, R1E.
GRAND TRAVERSE COUNTY
Certain land in Mayfield Township, Grand Traverse County, Michigan described as:
     A parcel of land in the Northwest 1/4 of Section 3, T25N, R11W, described
as follows: Commencing at the Northwest corner of said section, running thence S
89 degrees19’15” E along the North line of said section and the center line of
Clouss Road 225 feet, thence South 400 feet, thence N 89 degrees19’15” W 225
feet to the West line of said section and the center line of Hannah Road, thence
North along the West line of said section and the center line of Hannah Road 400
feet to the place of beginning for this description.
GRATIOT COUNTY
Certain land in Fulton Township, Gratiot County, Michigan described as:
     A parcel of land in the NE 1/4 of Section 7, Township 9 North, Range 3
West, described as beginning at a point on the North line of George Street in
the Village of Middleton, which is 542 feet East of the North and South
one-quarter (1/4) line of said Section 7; thence North 100 feet; thence East 100
feet; thence South 100 feet to the North line of George Street; thence West
along the North line of George Street 100 feet to place of beginning.
HILLSDALE COUNTY
Certain land in Litchfield Village, Hillsdale County, Michigan described as:
     Lot 238 of Assessors Plat of the Village of Litchfield.
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HURON COUNTY
     Certain easement rights located across land in Sebewaing Township, Huron
County, Michigan described as:
     The North 1/2 of the Northwest 1/4 of Section 15, T15N, R9E.
INGHAM COUNTY
Certain land in Vevay Township, Ingham County, Michigan described as:
     A parcel of land 660 feet wide in the Southwest 1/4 of Section 7 lying
South of the centerline of Sitts Road as extended to the North-South 1/4 line of
said Section 7, T2N, R1W, more particularly described as follows: Commence at
the Southwest corner of said Section 7, thence North along the West line of said
Section 2502.71 feet to the centerline of Sitts Road; thence South 89
degrees54’45” East along said centerline 2282.38 feet to the place of beginning
of this description; thence continuing South 89 degrees54’45” East along said
centerline and said centerline extended 660.00 feet to the North-South 1/4 line
of said section; thence South 00 degrees07’20” West 1461.71 feet; thence North
89 degrees34’58” West 660.00 feet; thence North 00 degrees07’20” East 1457.91
feet to the centerline of Sitts Road and the place of beginning.
IONIA COUNTY
Certain land in Sebewa Township, Ionia County, Michigan described as:
     A strip of land 280 feet wide across that part of the SW 1/4 of the NE 1/4
of Section 15, T5N, R6W, described as follows:
     To find the place of beginning of this description commence at the E 1/4
corner of said section; run thence N 00 degrees 05’ 38” W along the East line of
said section, 1218.43 feet; thence S 67 degrees 18’ 24” W, 1424.45 feet to the
East 1/8 line of said section and the place of beginning of this description;
thence continuing S 67 degrees 18’ 24” W, 1426.28 feet to the North and South
1/4 line of said section at a point which said point is 105.82 feet distant N’ly
of the center of said section as measured along said North and South 1/4 line of
said section; thence N 00 degrees 04’ 47” E along said North and South 1/4 line
of said section, 303.67 feet; thence N 67 degrees 18’ 24” E, 1425.78 feet to the
East 1/8 line of said section; thence S 00 degrees 00’ 26” E along said East 1/8
line of said section, 303.48 feet to the place of beginning. (Bearings are based
on the East line of Section 15, T5N, R6W, from the E 1/4 corner of said section
to the Northeast corner of said section assumed as N 00 degrees 05’ 38” W.)
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IOSCO COUNTY
Certain land in Alabaster Township, Iosco County, Michigan described as:
     A parcel of land in the NW 1/4 of Section 34, T21N, R7E, described as
follows: To find the place of beginning of this description commence at the N
1/4 post of said section; run thence South along the North and South 1/4 line of
said section, 1354.40 feet to the place of beginning of this description; thence
continuing South along the said North and South 1/4 line of said section, 165.00
feet to a point on the said North and South 1/4 line of said section which said
point is 1089.00 feet distant North of the center of said section; thence West
440.00 feet; thence North 165.00 feet; thence East 440.00 feet to the said North
and South 1/4 line of said section and the place of beginning.
ISABELLA COUNTY
Certain land in Chippewa Township, Isabella County, Michigan described as:
     The North 8 rods of the NE 1/4 of the SE 1/4 of Section 29, T14N, R3W.
JACKSON COUNTY
Certain land in Waterloo Township, Jackson County, Michigan described as:
     A parcel of land in the North fractional part of the N fractional 1/2 of
Section 2, T1S, R2E, described as follows: To find the place of beginning of
this description commence at the E 1/4 post of said section; run thence N 01
degrees 03’ 40” E along the East line of said section 1335.45 feet to the North
1/8 line of said section and the place of beginning of this description; thence
N 89 degrees 32’ 00” W, 2677.7 feet to the North and South 1/4 line of said
section; thence S 00 degrees 59’ 25” W along the North and South 1/4 line of
said section 22.38 feet to the North 1/8 line of said section; thence S 89
degrees 59’ 10” W along the North 1/8 line of said section 2339.4 feet to the
center line of State Trunkline Highway M-52; thence N 53 degrees 46’ 00” W along
the center line of said State Trunkline Highway 414.22 feet to the West line of
said section; thence N 00 degrees 55’ 10” E along the West line of said section
74.35 feet; thence S 89 degrees 32’ 00” E, 5356.02 feet to the East line of said
section; thence S 01 degrees 03’ 40” W along the East line of said section 250
feet to the place of beginning.
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KALAMAZOO COUNTY
Certain land in Alamo Township, Kalamazoo County, Michigan described as:
     The South 350 feet of the NW 1/4 of the NW 1/4 of Section 16, T1S, R12W,
being more particularly described as follows: To find the place of beginning of
this description, commence at the Northwest corner of said section; run thence S
00 degrees 36’ 55” W along the West line of said section 971.02 feet to the
place of beginning of this description; thence continuing S 00 degrees 36’ 55” W
along said West line of said section 350.18 feet to the North 1/8 line of said
section; thence S 87 degrees 33’ 40” E along the said North 1/8 line of said
section 1325.1 feet to the West 1/8 line of said section; thence N 00 degrees
38’ 25” E along the said West 1/8 line of said section 350.17 feet; thence N 87
degrees 33’ 40” W, 1325.25 feet to the place of beginning.
KALKASKA COUNTY
Certain land in Kalkaska Township, Kalkaska County, Michigan described as:
     The NW 1/4 of the SW 1/4 of Section 4, T27N, R7W, excepting therefrom all
mineral, coal, oil and gas and such other rights as were reserved unto the State
of Michigan in that certain deed running from the Department of Conservation for
the State of Michigan to George Welker and Mary Welker, his wife, dated
October 9, 1934 and recorded December 28, 1934 in Liber 39 on page 291 of
Kalkaska County Records, and subject to easement for pipeline purposes as
granted to Michigan Consolidated Gas Company by first party herein on April 4,
1963 and recorded June 21, 1963 in Liber 91 on page 631 of Kalkaska County
Records.
KENT COUNTY
Certain land in Caledonia Township, Kent County, Michigan described as:
     A parcel of land in the Northwest fractional 1/4 of Section 15, T5N, R10W,
described as follows: To find the place of beginning of this description
commence at the North 1/4 corner of said section, run thence S 0 degrees 59’ 26”
E along the North and South 1/4 line of said section 2046.25 feet to the place
of beginning of this description, thence continuing S 0 degrees 59’ 26” E along
said North and South 1/4 line of said section 332.88 feet, thence S 88 degrees
58’ 30” W 2510.90 feet to a point herein designated “Point A” on the East bank
of the Thornapple River, thence continuing S 88 degrees 53’ 30” W to the center
thread of the Thornapple River, thence NW’ly along the center thread of said
Thornapple River to a point which said point is S 88 degrees 58’ 30” W of a
point on the East bank of the Thornapple River herein designated “Point
A-27

 

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B”, said “Point B” being N 23 degrees 41’ 35” W 360.75 feet from said
above-described “Point A”, thence N 88 degrees 58’ 30” E to said “Point B”,
thence continuing N 88 degrees 58’ 30” E 2650.13 feet to the place of beginning.
(Bearings are based on the East line of Section 15, T5N, R10W between the East
1/4 corner of said section and the Northeast corner of said section assumed as N
0 degrees 59’ 55” W.)
LAKE COUNTY
Certain land in Pinora and Cherry Valley Townships, Lake County, Michigan
described as:
     A strip of land 50 feet wide East and West along and adjoining the West
line of highway on the East side of the North 1/2 of Section 13 T18N, R12W. Also
a strip of land 100 feet wide East and West along and adjoining the East line of
the highway on the West side of following described land: The South 1/2 of NW
1/4, and the South 1/2 of the NW 1/4 of the SW 1/4, all in Section 6, T18N,
R11W.
LAPEER COUNTY
Certain land in Hadley Township, Lapeer County, Michigan described as:
     The South 825 feet of the W 1/2 of the SW 1/4 of Section 24, T6N, R9E,
except the West 1064 feet thereof.
LEELANAU COUNTY
Certain land in Cleveland Township, Leelanau County, Michigan described as:
     The North 200 feet of the West 180 feet of the SW 1/4 of the SE 1/4 of
Section 35, T29N, R13W.
LENAWEE COUNTY
Certain land in Madison Township, Lenawee County, Michigan described as:
     A strip of land 165 feet wide off the West side of the following described
premises: The E 1/2 of the SE 1/4 of Section 12. The E 1/2 of the NE 1/4 and the
NE 1/4 of the SE 1/4 of Section 13, being all in T7S, R3E, excepting therefrom a
parcel of land in the E 1/2 of the SE 1/4 of Section 12, T7S, R3E, beginning at
the Northwest corner of said E 1/2 of the SE 1/4 of Section 12, running thence
East 4 rods, thence South 6 rods, thence West 4 rods, thence North 6 rods to the
place of beginning.
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LIVINGSTON COUNTY
Certain land in Cohoctah Township, Livingston County, Michigan described as:
     Parcel 1
     The East 390 feet of the East 50 rods of the SW 1/4 of Section 30, T4N,
R4E.
     Parcel 2
     A parcel of land in the NW 1/4 of Section 31, T4N, R4E, described as
follows: To find the place of beginning of this description commence at the N
1/4 post of said section; run thence N 89 degrees 13’ 06” W along the North line
of said section, 330 feet to the place of beginning of this description; running
thence S 00 degrees 52’ 49” W, 2167.87 feet; thence N 88 degrees 59’ 49” W, 60
feet; thence N 00 degrees 52’ 49” E, 2167.66 feet to the North line of said
section; thence S 89 degrees 13’ 06” E along said North line of said section, 60
feet to the place of beginning.
MACOMB COUNTY
Certain land in Macomb Township, Macomb County, Michigan described as:
     A parcel of land commencing on the West line of the E 1/2 of the NW 1/4 of
fractional Section 6, 20 chains South of the NW corner of said E 1/2 of the NW
1/4 of Section 6; thence South on said West line and the East line of A. Henry
Kotner’s Hayes Road Subdivision #15, according to the recorded plat thereof, as
recorded in Liber 24 of Plats, on page 7, 24.36 chains to the East and West 1/4
line of said Section 6; thence East on said East and West 1/4 line 8.93 chains;
thence North parallel with the said West line of the E 1/2 of the NW 1/4 of
Section 6, 24.36 chains; thence West 8.93 chains to the place of beginning, all
in T3N, R13E.
MANISTEE COUNTY
Certain land in Manistee Township, Manistee County, Michigan described as:
     A parcel of land in the SW 1/4 of Section 20, T22N, R16W, described as
follows: To find the place of beginning of this description, commence at the
Southwest corner of said section; run thence East along the South line of said
section 832.2 feet to the place of beginning of this description; thence
continuing East along said South line of said section 132 feet; thence North 198
feet; thence West 132 feet; thence South 198 feet to the place of beginning,
excepting therefrom the South 2 rods thereof which was conveyed to Manistee
Township for highway purposes
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by a Quitclaim Deed dated June 13, 1919 and recorded July 11, 1919 in Liber 88
of Deeds on page 638 of Manistee County Records.
MASON COUNTY
Certain land in Riverton Township, Mason County, Michigan described as:
     Parcel 1
     The South 10 acres of the West 20 acres of the S 1/2 of the NE 1/4 of
Section 22, T17N, R17W.
     Parcel 2
     A parcel of land containing 4 acres of the West side of highway, said
parcel of land being described as commencing 16 rods South of the Northwest
corner of the NW 1/4 of the SW 1/4 of Section 22, T17N, R17W, running thence
South 64 rods, thence NE’ly and N’ly and NW’ly along the W’ly line of said
highway to the place of beginning, together with any and all right, title, and
interest of Howard C. Wicklund and Katherine E. Wicklund in and to that portion
of the hereinbefore mentioned highway lying adjacent to the E’ly line of said
above described land.
MECOSTA COUNTY
Certain land in Wheatland Township, Mecosta County, Michigan described as:
     A parcel of land in the SW 1/4 of the SW 1/4 of Section 16, T14N, R7W,
described as beginning at the Southwest corner of said section; thence East
along the South line of Section 133 feet; thence North parallel to the West
section line 133 feet; thence West 133 feet to the West line of said Section;
thence South 133 feet to the place of beginning.
MIDLAND COUNTY
Certain land in Ingersoll Township, Midland County, Michigan described as:
     The West 200 feet of the W 1/2 of the NE 1/4 of Section 4, T13N, R2E.
MISSAUKEE COUNTY
Certain land in Norwich Township, Missaukee County, Michigan described as:
     A parcel of land in the NW 1/4 of the NW 1/4 of Section 16, T24N, R6W,
described as follows: Commencing at the Northwest corner of said section,
running thence N 89 degrees 01’ 45” E along the North

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line of said section 233.00 feet; thence South 233.00 feet; thence S 89 degrees
01’ 45” W, 233.00 feet to the West line of said section; thence North along said
West line of said section 233.00 feet to the place of beginning. (Bearings are
based on the West line of Section 16, T24N, R6W, between the Southwest and
Northwest corners of said section assumed as North.)
MONROE COUNTY
Certain land in Whiteford Township, Monroe County, Michigan described as:
     A parcel of land in the SW1/4 of Section 20, T8S, R6E, described as
follows: To find the place of beginning of this description commence at the S
1/4 post of said section; run thence West along the South line of said section
1269.89 feet to the place of beginning of this description; thence continuing
West along said South line of said section 100 feet; thence N 00 degrees 50’ 35”
E, 250 feet; thence East 100 feet; thence S 00 degrees 50’ 35” W parallel with
and 16.5 feet distant W’ly of as measured perpendicular to the West 1/8 line of
said section, as occupied, a distance of 250 feet to the place of beginning.
MONTCALM COUNTY
Certain land in Crystal Township, Montcalm County, Michigan described as:
     The N 1/2 of the S 1/2 of the SE 1/4 of Section 35, T10N, R5W.
MONTMORENCY COUNTY
Certain land in the Village of Hillman, Montmorency County, Michigan described
as:
     Lot 14 of Hillman Industrial Park, being a subdivision in the South 1/2 of
the Northwest 1/4 of Section 24, T31N, R4E, according to the plat thereof
recorded in Liber 4 of Plats on Pages 32-34, Montmorency County Records.
MUSKEGON COUNTY
Certain land in Casnovia Township, Muskegon County, Michigan described as:
     The West 433 feet of the North 180 feet of the South 425 feet of the SW 1/4
of Section 3, T10N, R13W.
NEWAYGO COUNTY
Certain land in Ashland Township, Newaygo County, Michigan described as:
     The West 250 feet of the NE 1/4 of Section 23, T11N, R13W.

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OAKLAND COUNTY
Certain land in Wixcom City, Oakland County, Michigan described as:
     The E 75 feet of the N 160 feet of the N 330 feet of the W 526.84 feet of
the NW 1/4 of the NW 1/4 of Section 8, T1N, R8E, more particularly described as
follows: Commence at the NW corner of said Section 8, thence N 87 degrees 14’
29” E along the North line of said Section 8 a distance of 451.84 feet to the
place of beginning for this description; thence continuing N 87 degrees 14’ 29”
E along said North section line a distance of 75.0 feet to the East line of the
West 526.84 feet of the NW 1/4 of the NW 1/4 of said Section 8; thence S 02
degrees 37’ 09” E along said East line a distance of 160.0 feet; thence S 87
degrees 14’ 29” W a distance of 75.0 feet; thence N 02 degrees 37’ 09” W a
distance of 160.0 feet to the place of beginning.
OCEANA COUNTY
Certain land in Crystal Township, Oceana County, Michigan described as:
     The East 290 feet of the SE 1/4 of the NW 1/4 and the East 290 feet of the
NE 1/4 of the SW 1/4, all in Section 20, T16N, R16W.
OGEMAW COUNTY
Certain land in West Branch Township, Ogemaw County, Michigan described as:
     The South 660 feet of the East 660 feet of the NE 1/4 of the NE 1/4 of
Section 33, T22N, R2E.
OSCEOLA COUNTY
Certain land in Hersey Township, Osceola County, Michigan described as:
     A parcel of land in the North 1/2 of the Northeast 1/4 of Section 13, T17N,
R9W, described as commencing at the Northeast corner of said Section; thence
West along the North Section line 999 feet to the point of beginning of this
description; thence S 01 degrees 54’ 20” E 1327.12 feet to the North 1/8 line;
thence S 89 degrees 17’ 05” W along the North 1/8 line 330.89 feet; thence N 01
degrees 54’ 20” W 1331.26 feet to the North Section line; thence East along the
North Section line 331 feet to the point of beginning.
OSCODA COUNTY
Certain land in Comins Township, Oscoda County, Michigan described as:

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     The East 400 feet of the South 580 feet of the W 1/2 of the SW 1/4 of
Section 15, T27N, R3E.
OTSEGO COUNTY
Certain land in Corwith Township, Otsego County, Michigan described as:
     Part of the NW 1/4 of the NE 1/4 of Section 28, T32N, R3W, described as:
Beginning at the N 1/4 corner of said section; running thence S 89 degrees 04’
06” E along the North line of said section, 330.00 feet; thence S 00 degrees 28’
43” E, 400.00 feet; thence N 89 degrees 04’ 06” W, 330.00 feet to the North and
South 1/4 line of said section; thence N 00 degrees 28’ 43” W along the said
North and South 1/4 line of said section, 400.00 feet to the point of beginning;
subject to the use of the N’ly 33.00 feet thereof for highway purposes.
OTTAWA COUNTY
Certain land in Robinson Township, Ottawa County, Michigan described as:
     The North 660 feet of the West 660 feet of the NE 1/4 of the NW 1/4 of
Section 26, T7N, R15W.
PRESQUE ISLE COUNTY
     Certain land in Belknap and Pulawski Townships, Presque Isle County,
Michigan described as:
     Part of the South half of the Northeast quarter, Section 24, T34N, R5E, and
part of the Northwest quarter, Section 19, T34N, R6E, more fully described as:
Commencing at the East 1/4 corner of said Section 24; thence N 00 degrees15’47”
E, 507.42 feet, along the East line of said Section 24 to the point of
beginning; thence S 88 degrees15’36” W, 400.00 feet, parallel with the North 1/8
line of said Section 24; thence N 00 degrees15’47” E, 800.00 feet, parallel with
said East line of Section 24; thence N 88 degrees15’36”E, 800.00 feet, along
said North 1/8 line of Section 24 and said line extended; thence S 00
degrees15’47” W, 800.00 feet, parallel with said East line of Section 24; thence
S 88 degrees15’36” W, 400.00 feet, parallel with said North 1/8 line of
Section 24 to the point of beginning.
     Together with a 33 foot easement along the West 33 feet of the Northwest
quarter lying North of the North 1/8 line of Section 24, Belknap Township,
extended, in Section 19, T34N, R6E.

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ROSCOMMON COUNTY
Certain land in Gerrish Township, Roscommon County, Michigan described as:
     A parcel of land in the NW 1/4 of Section 19, T24N, R3W, described as
follows: To find the place of beginning of this description commence at the
Northwest corner of said section, run thence East along the North line of said
section 1,163.2 feet to the place of beginning of this description (said point
also being the place of intersection of the West 1/8 line of said section with
the North line of said section), thence S 01 degrees 01’ E along said West 1/8
line 132 feet, thence West parallel with the North line of said section 132
feet, thence N 01 degrees 01’ W parallel with said West 1/8 line of said section
132 feet to the North line of said section, thence East along the North line of
said section 132 feet to the place of beginning.
SAGINAW COUNTY
Certain land in Chapin Township, Saginaw County, Michigan described as:
     A parcel of land in the SW 1/4 of Section 13, T9N, R1E, described as
follows: To find the place of beginning of this description commence at the
Southwest corner of said section; run thence North along the West line of said
section 1581.4 feet to the place of beginning of this description; thence
continuing North along said West line of said section 230 feet to the center
line of a creek; thence S 70 degrees 07’ 00” E along said center line of said
creek 196.78 feet; thence South 163.13 feet; thence West 185 feet to the West
line of said section and the place of beginning.
SANILAC COUNTY
     Certain easement rights located across land in Minden Township, Sanilac
County, Michigan described as:
     The Southeast 1/4 of the Southeast 1/4 of Section 1, T14N, R14E, excepting
therefrom the South 83 feet of the East 83 feet thereof.
SHIAWASSEE COUNTY
Certain land in Burns Township, Shiawassee County, Michigan described as:
     The South 330 feet of the E 1/2 of the NE 1/4 of Section 36, T5N, R4E.
ST. CLAIR COUNTY
Certain land in Ira Township, St. Clair County, Michigan described as:

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     The N 1/2 of the NW 1/4 of the NE 1/4 of Section 6, T3N, R15E.
ST. JOSEPH COUNTY
Certain land in Mendon Township, St. Joseph County, Michigan described as:
     The North 660 feet of the West 660 feet of the NW 1/4 of SW 1/4,
Section 35, T5S, R10W.
TUSCOLA COUNTY
Certain land in Millington Township, Tuscola County, Michigan described as:
     A strip of land 280 feet wide across the East 96 rods of the South 20 rods
of the N 1/2 of the SE 1/4 of Section 34, T10N, R8E, more particularly described
as commencing at the Northeast corner of Section 3, T9N, R8E, thence S 89
degrees 55’ 35” W along the South line of said Section 34 a distance of 329.65
feet, thence N 18 degrees 11’ 50” W a distance of 1398.67 feet to the South 1/8
line of said Section 34 and the place of beginning for this description; thence
continuing N 18 degrees 11’ 50” W a distance of 349.91 feet; thence N 89 degrees
57’ 01” W a distance of 294.80 feet; thence S 18 degrees 11’ 50” E a distance of
350.04 feet to the South 1/8 line of said Section 34; thence S 89 degrees 58’
29” E along the South 1/8 line of said section a distance of 294.76 feet to the
place of beginning.
VAN BUREN COUNTY
Certain land in Covert Township, Van Buren County, Michigan described as:
     All that part of the West 20 acres of the N 1/2 of the NE fractional 1/4 of
Section 1, T2S, R17W, except the West 17 rods of the North 80 rods, being more
particularly described as follows: To find the place of beginning of this
description commence at the N 1/4 post of said section; run thence N 89 degrees
29’ 20” E along the North line of said section 280.5 feet to the place of
beginning of this description; thence continuing N 89 degrees 29’ 20” E along
said North line of said section 288.29 feet; thence S 00 degrees 44’ 00” E,
1531.92 feet; thence S 89 degrees 33’ 30” W, 568.79 feet to the North and South
1/4 line of said section; thence N 00 degrees 44’ 00” W along said North and
South 1/4 line of said section 211.4 feet; thence N 89 degrees 29’ 20” E, 280.5
feet; thence N 00 degrees 44’ 00” W, 1320 feet to the North line of said section
and the place of beginning.
WASHTENAW COUNTY
Certain land in Manchester Township, Washtenaw County, Michigan described as:

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     A parcel of land in the NE 1/4 of the NW 1/4 of Section 1, T4S, R3E,
described as follows: To find the place of beginning of this description
commence at the Northwest corner of said section; run thence East along the
North line of said section 1355.07 feet to the West 1/8 line of said section;
thence S 00 degrees 22’ 20” E along said West 1/8 line of said section 927.66
feet to the place of beginning of this description; thence continuing S 00
degrees 22’ 20” E along said West 1/8 line of said section 660 feet to the North
1/8 line of said section; thence N 86 degrees 36’ 57” E along said North 1/8
line of said section 660.91 feet; thence N 00 degrees22’ 20” W, 660 feet; thence
S 86 degrees 36’ 57” W, 660.91 feet to the place of beginning.
WAYNE COUNTY
     Certain land in Livonia City, Wayne County, Michigan described as:
     Commencing at the Southeast corner of Section 6, T1S, R9E; thence North
along the East line of Section 6 a distance of 253 feet to the point of
beginning; thence continuing North along the East line of Section 6 a distance
of 50 feet; thence Westerly parallel to the South line of Section 6, a distance
of 215 feet; thence Southerly parallel to the East line of Section 6 a distance
of 50 feet; thence easterly parallel with the South line of Section 6 a distance
of 215 feet to the point of beginning.
WEXFORD COUNTY
     Certain land in Selma Township, Wexford County, Michigan described as:
     A parcel of land in the NW 1/4 of Section 7, T22N, R10W, described as
beginning on the North line of said section at a point 200 feet East of the West
line of said section, running thence East along said North section line 450
feet, thence South parallel with said West section line 350 feet, thence West
parallel with said North section line 450 feet, thence North parallel with said
West section line 350 feet to the place of beginning.
     SECTION 12. The Company is a transmitting utility under Section 9501(2) of
the Michigan Uniform Commercial Code (M.C.L. 440.9501(2)) as defined in M.C.L.
440.9102(1)(aaaa).
     IN WITNESS WHEREOF, said Consumers Energy Company has caused this
Supplemental Indenture to be executed in its corporate name by its Chairman of
the Board, President, a Vice President or its Treasurer and its corporate seal
to be hereunto affixed and to be attested by its Secretary or an Assistant
Secretary, and The Bank of New York, as Trustee as aforesaid, to evidence its
acceptance hereof, has caused this Supplemental Indenture to be executed in its
corporate name by a Vice President and its corporate seal to be hereunto affixed

A-36

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and to be attested by an Assistant Treasurer, in several counterparts, all as of
the day and year first above written.

A-37

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                  CONSUMERS ENERGY COMPANY    
 
           
(SEAL)
  By        
 
           
 
  Name        
 
           
Attest:
  Title        
 
           
 
                         
Joyce H. Norkey
           
Assistant Secretary
           
 
           
Signed, sealed and delivered
           
by CONSUMERS ENERGY COMPANY
           
in the presence of
           
 
           
 
                         
Kimberly C. Wilson
           
 
           
 
                         
Sammie B. Dalton
           

         
STATE OF MICHIGAN
  )    
 
  ss.    
COUNTY OF JACKSON
  )    

     The foregoing instrument was acknowledged before me this ___day of
                    , 2007, by                                         ,
                                         of CONSUMERS ENERGY COMPANY, a Michigan
corporation, on behalf of the corporation.

         
 
       
 
       
 
  Margaret Hillman, Notary Public    
[SEAL]
  Jackson County, Michigan    
 
  My Commission Expires:                                              

S-1

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                  THE BANK OF NEW YORK, AS TRUSTEE
 
           
(SEAL)
  By        
 
           
 
      L. O’Brien    
Attest:
      Vice President    

     
 
Assistant Treasurer
   
 
   
Signed, sealed and delivered
   
by THE BANK OF NEW YORK
   
in the presence of
   
 
   
 
   
 
   
 
   

     
STATE OF NEW YORK
  ) 
 
    ss.
COUNTY OF NEW YORK
  ) 

          The foregoing instrument was acknowledged before me this       day of
                    , 2007, by L. O’Brien, a Vice President of THE BANK OF NEW
YORK, a New York banking corporation, on behalf of the bank, as trustee.

         
 
       
 
  Notary Public       
 
       
[Seal]
  New York County, New York    
 
  My Commission Expires:    
 
       
Prepared by:
  When recorded, return to:    
Kimberly C. Wilson
  Consumers Energy Company    
One Energy Plaza
  Business Services Real Estate Dept.    
Jackson, MI 49201
  Attn: Nancy Fisher EP7-439    
 
  One Energy Plaza    
 
  Jackson, MI 4920    

S-2

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SCHEDULE 1
FEES
     The Commitment Fee Rate and the LC Commission Fee Rate shall be determined
pursuant to the table below.

                                      Commitment Fee Rate   LC Commission Fee
Rate     Specified Rating   (per annum)   (per annum)  
Level 1
  A-/A-/A3   6.0 bps   25.0 bps
Level 2
  BBB+/BBB+Baa1   7.0 bps   30.0 bps
Level 3
  BBB/BBB/Baa2   9.0 bps   37.5 bps
Level 4
  BBB-/BBB-/Baa3   12.5 bps     55.0 bps
Level 5
  BB+/BB+/Ba1   17.5 bps     82.5 bps
Level 6
  £BB/BB/Ba2   22.5 bps     122.5 bps  

     The “Rating” from S&P, Fitch or Moody’s shall mean (a) at any time prior to
the FMB Release Date, the rating issued by such rating agency and then in effect
with respect to the Senior Debt, and (b) at any time thereafter, the rating
issued by such rating agency and then in effect with respect to the Company’s
senior unsecured long-term debt (without credit enhancement).
     (a) If each of S&P, Fitch and Moody’s shall issue a Rating, the Specified
Rating shall be (i) if two of such Ratings are the same, such Ratings; and
(ii) if all such Ratings are different, the middle of such Ratings.
     (b) If only two of S&P, Fitch and Moody’s shall issue a Rating, the
Specified Rating shall be the higher of such Ratings; provided that if a split
of greater than one ratings category occurs between such Ratings, the Specified
Rating shall be the ratings category that is one category below the higher of
such Ratings.
     (c) If only one of S&P, Fitch and Moody’s shall issue a Rating, the
Specified Rating shall be such Rating.
     (d) If none of S&P, Fitch and Moody’s shall issue a Rating, the Specified
Rating shall be BB/BB/Ba2.

 

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EXHIBIT A
FORM OF SUPPLEMENTAL INDENTURE

 

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EXHIBIT B
FORM OF BOND DELIVERY AGREEMENT
BOND DELIVERY AGREEMENT
CONSUMERS ENERGY COMPANY
to
THE BANK OF NOVA SCOTIA
Dated as of November 30, 2007
 
Relating to
First Mortgage Bonds,
2007-2 Collateral Series (Interest Bearing)
 

 

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     THIS BOND DELIVERY AGREEMENT (this “Agreement”), dated as of November 30,
2007, is entered into between Consumers Energy Company (the “Company”) and The
Bank of Nova Scotia (the “Bank”) pursuant to the Letter of Credit Reimbursement
Agreement (as amended, supplemented or otherwise modified from time to time, the
“Reimbursement Agreement”) dated as of November 30, 2007 between the Company and
the Bank. Capitalized terms used but not otherwise defined herein have the
respective meanings assigned to such terms in the Reimbursement Agreement.
     Whereas, the Company has entered into the Reimbursement Agreement and may
from time to time make borrowings thereunder in accordance with the provisions
thereof;
     Whereas, the Company has established its First Mortgage Bonds, 2007-2
Collateral Series (Interest Bearing) in the aggregate principal amount of
$200,000,000 (the “Bonds”), to be issued under and in accordance with the One
Hundred Sixth Supplemental Indenture dated as of November 30, 2007 (the
“Supplemental Indenture”) to the Indenture of the Company to The Bank of New
York dated as of September 1, 1945 (as amended and supplemented, the
“Indenture”); and
     Whereas, the Company proposes to issue and deliver to the Bank the Bonds in
order to provide the Bonds as evidence of (and the benefit of the lien of the
Indenture with respect to the Bonds for) the Liabilities of the Company arising
under the Reimbursement Agreement.
     Now, therefore, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the Company and the Bank hereby agree as follows:
ARTICLE I
The Bonds
Section 1.1 Delivery of Bonds.
     In order to provide the Bonds as evidence of (and through the Bonds the
benefit of the Lien of the Indenture for) the Liabilities of the Company under
the Reimbursement Agreement as aforesaid, the Company hereby delivers to the
Bank the Bonds in the aggregate principal amount of $200,000,000, maturing on
the earlier of (a) November 28, 2008 or such later date as may be fixed as the
“Termination Date” under and as defined in the Reimbursement Agreement and
(b) the “FMB Release Date” (as defined by reference to the Reimbursement
Agreement) and bearing interest as provided in the Supplemental Indenture. The
obligation of the Company to pay the principal of and interest on the Bonds
shall be deemed to have been satisfied and discharged in full or in part, as the
case may be, to the extent of payment by the Company of the Liabilities, all as
set forth in the Bonds and in Section 1 of the Supplemental Indenture.
     The Bonds are registered in the name of the Bank and shall be owned and
held by the Bank, and the Company shall have no interest therein. The Bank shall
be entitled to exercise all rights of bondholders under the Indenture with
respect to the Bonds.
     The Bank hereby acknowledges receipt of the Bonds.
Section 1.2 Payments on the Bonds.

2

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     Any payments received by the Bank on account of the principal of or
interest on the Bonds shall be deemed to be and treated in all respects as
payments of the Liabilities.
ARTICLE II
No Transfer of Bonds; Surrender of Bonds
Section 2.1 No Transfer of the Bonds.
     The Bank shall not sell, assign or otherwise transfer any Bonds delivered
to it under this Agreement except to a successor letter of credit issuer under
the Reimbursement Agreement. The Company may take such actions as it shall deem
necessary, desirable or appropriate to effect compliance with such restrictions
on transfer, including the issuance of stop-transfer instructions to the trustee
under the Indenture or any other transfer agent thereunder.
Section 2.2 Surrender of Bonds.
     (a) The Bank shall forthwith surrender to or upon the order of the Company
all Bonds held by it at the first time at which the Commitment shall have been
terminated, all Letters of Credit have been terminated or expired and all
Liabilities shall have been paid in full.
     (b) Upon any permanent reduction in the Commitment pursuant to the terms of
the Reimbursement Agreement, the Bank shall forthwith surrender to or upon the
order of the Company Bonds in an aggregate principal amount equal to the excess
of the aggregate principal amount of Bonds held by the Bank over the Commitment.
ARTICLE III
Governing Law
     This Agreement shall construed in accordance with and governed by the
internal laws (without regard to the conflict of laws provisions) of the State
of New York, but giving effect to Federal laws applicable to national banks.
[SIGNATURE PAGE FOLLOWS]

3

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     IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to
be executed and delivered as of the date first above written.

     
CONSUMERS ENERGY COMPANY
   
 
   
 
Name:
   
Title:
   
 
   
THE BANK OF NOVA SCOTIA
   
 
 
Name:
   
Title:
   

4