Document:

<PAGE>
                                                                     EXHIBIT 4.3

                                                                  EXECUTION COPY
--------------------------------------------------------------------------------

                                  $150,000,000

                                CREDIT AGREEMENT

                           Dated as of July 12, 2002,

                                      Among

                             CMS ENTERPRISES COMPANY
                                   as Borrower

                                       and

                             CMS ENERGY CORPORATION
                                 as a Loan Party

                                       and

                             THE BANKS NAMED HEREIN
                                    as Banks

                                       and

                               CITICORP USA, INC.
                 as Administrative Agent and as Collateral Agent

                          ----------------------------

                            SALOMON SMITH BARNEY INC.
                        as Lead Arranger and Book Manager

--------------------------------------------------------------------------------

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE
<S>            <C>                                                                                             <C>

                                                     ARTICLE I
                                         DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01.  Certain Defined Terms..............................................................................1
SECTION 1.02.  Computation of Time Periods; Construction.........................................................19
SECTION 1.03.  Accounting Terms..................................................................................20

                                                    ARTICLE II
                                                   THE TERM LOAN

SECTION 2.01.  The Term Loan.....................................................................................20
SECTION 2.02.  Fees 20...........................................................................................20
SECTION 2.03.  Mandatory Prepayments.............................................................................20
SECTION 2.04.  Computations of Outstandings......................................................................21

                                                    ARTICLE III
                                                       LOANS

SECTION 3.01.  Loans.............................................................................................21
SECTION 3.02.  Conversion of Loans...............................................................................23
SECTION 3.03.  Interest Periods..................................................................................23
SECTION 3.04.  Other Terms Relating to the Making and Conversion of Loans........................................23
SECTION 3.05.  Repayment of Loans; Interest......................................................................25

                                                    ARTICLE IV
                                                    [RESERVED]

                                                     ARTICLE V
                                    PAYMENTS, COMPUTATIONS AND YIELD PROTECTION

SECTION 5.01.  Payments and Computations.........................................................................26
SECTION 5.02.  Interest Rate Determination.......................................................................28
SECTION 5.03.  Prepayments.......................................................................................28
SECTION 5.04.  Yield Protection..................................................................................28
SECTION 5.05.  Sharing of Payments, Etc..........................................................................30
SECTION 5.06.  Taxes.............................................................................................30
SECTION 5.07.  Apportionment of Payments.........................................................................31
SECTION 5.08.  Proceeds of Collateral............................................................................33
</TABLE>

                                       i
<PAGE>
                           TABLE OF CONTENTS (CONT'D)

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE
<S>            <C>                                                                                             <C>
                                                    ARTICLE VI
                                               CONDITIONS PRECEDENT

SECTION 6.01.  Conditions Precedent to the Effectiveness of this Agreement.......................................33
SECTION 6.02.  Conditions Precedent to Each Extension of Credit..................................................35
SECTION 6.03.  Conditions Precedent to the Initial Extension of Credit...........................................36
SECTION 6.04.  Reliance on Certificates..........................................................................36

                                                    ARTICLE VII
                                          REPRESENTATIONS AND WARRANTIES

SECTION 7.01.  Representations and Warranties of the Borrower....................................................37

                                                   ARTICLE VIII
                                             COVENANTS OF THE BORROWER

SECTION 8.01.  Affirmative Covenants.............................................................................40
SECTION 8.02.  Negative Covenants................................................................................42
SECTION 8.03.  Reporting Obligations.............................................................................50

                                                    ARTICLE IX
                                                     DEFAULTS

SECTION 9.01.  Events of Default.................................................................................53
SECTION 9.02.  Remedies..........................................................................................55

                                                     ARTICLE X
                                                    THE AGENTS

SECTION 10.01.  Authorization and Action.........................................................................56
SECTION 10.02.  Indemnification..................................................................................57
SECTION 10.03.  Concerning the Collateral and the Loan Documents.................................................58
SECTION 10.04.  Release of Guarantors............................................................................59

                                                    ARTICLE XI
                                                   MISCELLANEOUS

SECTION 11.01.  Amendments, Etc..................................................................................59
SECTION 11.02.  Notices, Etc.....................................................................................60
SECTION 11.03.  No Waiver of Remedies............................................................................60
SECTION 11.04.  Costs, Expenses and Indemnification..............................................................60
SECTION 11.05.  Right of Set-off.................................................................................61
SECTION 11.06.  Binding Effect...................................................................................62
SECTION 11.07.  Assignments and Participation....................................................................62
SECTION 11.08.  Confidentiality..................................................................................66
SECTION 11.09.  Waiver of Jury Trial.............................................................................67
</TABLE>

                                       ii
<PAGE>
                           TABLE OF CONTENTS (CONT'D)

<TABLE>
<CAPTION>
SECTION                                                                                                        PAGE
<S>            <C>                                                                                             <C>
SECTION 11.10.  GOVERNING LAW; SUBMISSION TO JURISDICTION........................................................67
SECTION 11.11.  Relation of the Parties; No Beneficiary..........................................................67
SECTION 11.12.  Execution in Counterparts........................................................................68
SECTION 11.13.  Survival of Agreement............................................................................68
</TABLE>

                                       iii
<PAGE>
Exhibits
--------

EXHIBIT A                 -   Form of Notice of Borrowing
EXHIBIT B                 -   Form of Notice of Conversion
EXHIBIT C                 -   Form of Opinion of Michael D. VanHemert, Esq.,
                              counsel to the Borrower
EXHIBIT D-1               -   Form of Opinion of Skadden, Arps, Slate, Meagher &
                              Flom LLP, special counsel to the Borrower
EXHIBIT D-2               -   Form of Opinion of Hughes Hubbard & Reed LLP,
                              special counsel to the Borrower
EXHIBIT E                 -   Form of Compliance Schedule
EXHIBIT F                 -   Form of Lender Assignment
EXHIBIT G                 -   Terms of Subordination (Junior Subordinated Debt)
EXHIBIT H                 -   Terms of Subordination (Guaranty of Hybrid
                              Preferred Securities)
EXHIBIT I                 -   Form of Guaranty (Grantors)
EXHIBIT J                 -   Form of Pledge and Security Agreement (CMS Energy
                              and Grantors)

Schedules
---------

COMMITMENT
SCHEDULE
SCHEDULE I                    Applicable Lending Offices
SCHEDULE II                   Certain Debt
SCHEDULE III                  Pledged Capital Stock

                                       iv
<PAGE>
                                CREDIT AGREEMENT

                            Dated as of July 12, 2002

         THIS CREDIT AGREEMENT (the "AGREEMENT") is made by and among:

         (i)      CMS Enterprises Company, a Michigan corporation (the
                  "BORROWER"),

         (ii)     CMS Energy Corporation, a Michigan corporation ("CMS ENERGY"),
                  as one of the Loan Parties (as hereinafter defined),

         (iii)    the banks (the "BANKS") listed on the signature pages hereof
                  and the other Lenders (as hereinafter defined) from time to
                  time party hereto, and

         (iv)     Citicorp USA, Inc. ("CUSA"), as administrative agent (the
                  "ADMINISTRATIVE AGENT") and as collateral agent (the
                  "COLLATERAL AGENT") for the Lenders hereunder.

                             PRELIMINARY STATEMENTS

         The Borrower has requested the Banks to provide the credit facility
hereinafter described in the amount and on the terms and conditions set forth
herein. The Banks have so agreed on the terms and conditions set forth herein,
and the Agents have agreed to act as agents for the Lenders on such terms and
conditions.

         The parties hereto acknowledge and agree that neither Consumers (as
hereinafter defined) nor any of its Subsidiaries (as hereinafter defined) will
be a party to, or will in any way be bound by any provision of, this Agreement
or any other Loan Document (as hereinafter defined), and that no Loan Document
will be enforceable against Consumers or any of its Subsidiaries or their
respective assets.

         Accordingly, the parties hereto agree as follows:

                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

                  "ABR", when used in reference to any Loan or Borrowing, refers
         to whether such Loan, or the Loans comprising such Borrowing, are
         bearing interest at a rate determined by reference to the Alternate
         Base Rate.

                  "ABR LOAN" means a Loan that bears interest as provided in
         Section 3.05(b)(i).

                                       1
<PAGE>
                  "ADJUSTED LIBO RATE" means, for each Interest Period for each
         Eurodollar Rate Loan made as part of the same Borrowing, an interest
         rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
         equal to (a) the LIBO Rate for such Interest Period multiplied by (b)
         the Statutory Reserve Rate.

                  "ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
         Questionnaire in a form supplied by the Administrative Agent.

                  "AFFILIATE" means, with respect to any Person, any other
         Person directly or indirectly controlling (including but not limited to
         all directors and officers of such Person), controlled by, or under
         direct or indirect common control with such Person. A Person shall be
         deemed to control another entity if such Person possesses, directly or
         indirectly, the power to direct or cause the direction of the
         management and policies of such entity, whether through the ownership
         of voting securities, by contract, or otherwise.

                  "AGENT" means, as the context may require, the Administrative
         Agent or the Collateral Agent, and "AGENTS" means any or all of the
         foregoing.

                  "ALTERNATE BASE RATE" means, for any day, a rate per annum
         equal to the greater of (a) the Prime Rate in effect on such day and
         (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of
         1%. Any change in the Alternate Base Rate due to a change in the Prime
         Rate or the Federal Funds Effective Rate shall be effective from and
         including the effective date of such change in the Prime Rate or the
         Federal Funds Effective Rate, respectively.

                  "APPLICABLE LENDING OFFICE" means, with respect to each
         Lender, (i) such Lender's Domestic Lending Office, in the case of an
         ABR Loan, and (ii) such Lender's Eurodollar Lending Office, in the case
         of a Eurodollar Rate Loan.

                  "APPLICABLE MARGIN" means, on any date of determination with
         respect to any Loans, the per annum rate specified in the table below
         for such Loans:

<TABLE>
<S>                                             <C>
                   ------------------------------------------
                          ABR Loans               2.00%
                   ------------------------------------------
                          Eurodollar
                          Rate Loans              3.00%
                   ------------------------------------------
</TABLE>
                  "APPLICABLE RATE" means:

                           (i) in the case of each ABR Loan, a rate per annum
                  equal at all times to the sum of the Alternate Base Rate in
                  effect from time to time plus the Applicable Margin; and

                           (ii) in the case of each Eurodollar Rate Loan
                  comprising part of the same Borrowing, a rate per annum during
                  each Interest Period equal at all times to the sum of the
                  Adjusted LIBO Rate for such Interest Period plus the
                  Applicable Margin.

                                       2
<PAGE>
                  "ARRANGER" means Salomon Smith Barney Inc.

                  "BOARD" means the Board of Governors of the Federal Reserve
         System of the United States of America.

                  "BORROWING" means a borrowing consisting of Loans of the same
         Type, having the same Interest Period and made or Converted on the same
         day by the Lenders, ratably in accordance with their respective
         Percentages. Any Borrowing consisting of Loans of a particular Type may
         be referred to as being a Borrowing of such "TYPE". All Loans of the
         same Type, having the same Interest Period and made or Converted on the
         same day shall be deemed a single Borrowing hereunder until repaid or
         next Converted.

                  "BUSINESS DAY" means a day of the year on which banks are not
         required or authorized to close in New York City and Detroit, Michigan,
         and, if the applicable Business Day relates to any Eurodollar Rate
         Loan, on which dealings are carried on in the London interbank market.

                  "CASH DIVIDEND INCOME" means, for any period, the amount of
         all cash dividends received by CMS Energy from its Subsidiaries during
         such period that are paid out of the net income or loss (without giving
         effect to: any extraordinary gains in excess of $25,000,000, the amount
         of any write-off or write-down of assets, including, without
         limitation, write-offs or write-downs related to the sale of assets,
         impairment of assets and loss on contracts, in each case in accordance
         with GAAP consistently applied, and up to $200,000,000 of other
         non-cash write-offs) of such Subsidiaries during such period.

                  "CHANGE OF CONTROL" means (a) any "person" or "group" within
         the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act shall
         become the "beneficial owner" (as defined in Rule 13d-3 under the
         Exchange Act) of more than 50% of the then outstanding voting capital
         stock of CMS Energy, or (b) the majority of the board of directors of
         CMS Energy shall fail to consist of Continuing Directors, or (c) a
         consolidation or merger of CMS Energy shall occur after which the
         holders of the outstanding voting capital stock of CMS Energy
         immediately prior thereto hold less than 50% of the outstanding voting
         capital stock of the surviving entity, or (d) more than 50% of the
         outstanding voting capital stock of CMS Energy shall be transferred to
         any entity of which CMS Energy owns less than 50% of the outstanding
         voting capital stock, or (e) CMS Energy shall cease to own, directly or
         indirectly, 80% of the then outstanding voting capital stock of the
         Borrower.

                  "CITIBANK" means Citibank, N.A., a national banking
         association.

                  "CLOSING DATE" means July 12, 2002.

                  "CMS ENERGY INTEREST EXPENSE" means at any date, the total
         interest expense in respect of Debt of CMS Energy for the four calendar
         quarters immediately preceding such date, including, without
         duplication, (i) interest expense attributable to capital leases, (ii)
         amortization of debt discount, (iii) capitalized interest, (iv) cash
         and noncash payments, (v) commissions, discounts and other fees and
         charges owed with respect to letters of credit and bankers' acceptance
         financing, (vi) net costs under interest rate swap,

                                       3
<PAGE>
         "cap", "collar" or other hedging agreements (including amortization of
         discount) and (vii) interest expense in respect of obligations of
         Persons deemed to be Debt of CMS Energy under clause (viii) of the
         definition of Debt, provided, however that CMS Energy Interest Expense
         shall exclude any costs otherwise included in interest expense
         recognized on early retirement of debt.

                  "COLLATERAL" means all property and interests in property now
         owned or hereafter acquired by any Loan Party upon which a Lien is
         granted under any of the Loan Documents.

                  "COMMITMENT" means, for each Lender, the obligation of such
         Lender to make Loans to the Borrower on July 15, 2002 in an aggregate
         amount no greater than the amount set forth opposite such Lender's name
         on the Commitment Schedule under the heading "Commitment".
         "COMMITMENTS" means the total of the Lenders' Commitments hereunder. On
         the Closing Date, the Commitments equal $150,000,000.

                  "COMMITMENT SCHEDULE" means the Schedule identifying each
         Lender's Commitment as of the Closing Date attached hereto and
         identified as such.

                  "CONFIDENTIAL INFORMATION" has the meaning assigned to that
         term in Section 11.08.

                  "CONSOLIDATED DEBT" means, without duplication, as determined
         on a consolidated basis in accordance with GAAP, at any date of
         determination, the sum of the aggregate Debt of CMS Energy plus the
         aggregate debt (as such term is construed in accordance with GAAP) of
         the Consolidated Subsidiaries; provided, however, that:

                           (a) Consolidated Debt shall not include any Support
                  Obligation described in clause (iv) or (v) of the definition
                  thereof if such Support Obligation or the primary obligation
                  so supported is not fixed or conclusively determined or is not
                  otherwise reasonably quantifiable as of the date of
                  determination;

                           (b) Consolidated Debt shall not include (i) any
                  Junior Subordinated Debt owned by any Hybrid Preferred
                  Securities Subsidiary or (ii) any guaranty by CMS Energy of
                  payments with respect to any Hybrid Preferred Securities,
                  provided that such guaranty is subordinated to the rights of
                  the Lenders hereunder and under the other Loan Documents
                  pursuant to terms of subordination substantially similar to
                  those set forth in Exhibit H, or pursuant to other terms and
                  conditions satisfactory to the Required Lenders;

                           (c) for purposes of this definition only, the
                  percentage of the Net Proceeds from any issuance of hybrid
                  debt/equity securities (other than Junior Subordinated Debt
                  and Hybrid Preferred Securities) by CMS Energy or any
                  Consolidated Subsidiary that shall be considered Consolidated
                  Debt shall be agreed by the Arranger and CMS Energy (and
                  consented to by the Required Lenders) and shall be based on,
                  among other things, the treatment (if any) given to such
                  hybrid securities by the rating agencies;

                                       4
<PAGE>
                           (d) with respect to any Support Obligations provided
                  by CMS Energy in connection with a purchase or sale by MS&T,
                  its Subsidiaries or PremStar Energy Canada Ltd. ("PREMSTAR")
                  of natural gas, natural gas liquids, gas condensates,
                  electricity, oil, propane, coal, any other commodity, weather
                  derivatives or any derivative instrument with respect to any
                  commodity with any other Person (a "COUNTERPARTY"),
                  Consolidated Debt shall include only the excess, if any, of
                  (A) the aggregate amount of any Support Obligations provided
                  by CMS Energy in respect of MS&T's, any of its Subsidiary's or
                  PremStar's obligations under any such purchase or sale
                  transaction (a "COVERING TRANSACTION") entered into by MS&T,
                  any of its Subsidiaries or PremStar in connection with such
                  purchase or sale over (B) the aggregate amount of (i) any
                  Support Obligations provided by the direct or indirect parent
                  company of such Counterparty (the "COUNTERPARTY GUARANTOR")
                  and (ii) any irrevocable letter of credit provided by any
                  financial institution for the account of such Counterparty or
                  Counterparty Guarantor, in each case for the benefit of MS&T,
                  any of its Subsidiaries or PremStar in support of such
                  Counterparty's payment obligations to MS&T, such Subsidiary or
                  PremStar arising from such purchase or sale, provided that (x)
                  the senior, unsecured, non-credit enhanced indebtedness of
                  such Counterparty Guarantor or such financial institution (as
                  the case may be) is rated BBB- (or its equivalent) or higher
                  by any two of S&P, Fitch and Moody's, provided that in the
                  event that such Counterparty Guarantor has no such rated
                  indebtedness, Dun & Bradstreet Inc. has rated such
                  Counterparty Guarantor at least investment grade, (y) no
                  default by such Counterparty Guarantor in respect of any such
                  Support Obligations provided by such Counterparty Guarantor
                  has occurred and is continuing and (z) such Counterparty
                  Guarantor is not CMS Energy or any Affiliate of CMS Energy or
                  any of its Subsidiaries;

                           (e) Consolidated Debt shall not include any Project
                  Finance Debt of CMS Energy or any Consolidated Subsidiary; and

                           (f) Consolidated Debt shall not include the principal
                  amount of any Securitized Bonds.

                  "CONSOLIDATED EBITDA" means, with reference to any period, the
         pretax operating income of CMS Energy and its Subsidiaries ("PRETAX
         OPERATING INCOME") for such period plus, to the extent deducted in
         determining Pretax Operating Income (without duplication), (i)
         depreciation, depletion and amortization, and (ii) any non-cash
         write-offs and write-downs contained in CMS Energy's Pretax Operating
         Income, including, without limitation, write-offs or write-downs
         related to the sale of assets, impairment of assets and loss on
         contracts, in each case in accordance with GAAP consistently applied,
         all calculated for CMS Energy and its Subsidiaries on a consolidated
         basis for such period; provided, however that Consolidated EBITDA shall
         not include any operating income attributable to that portion of the
         revenues of Consumers dedicated to the repayment of the Securitized
         Bonds.

                  "CONSOLIDATED SUBSIDIARY" means any Subsidiary whose accounts
         are or are required to be consolidated with the accounts of CMS Energy
         in accordance with GAAP.

                                       5
<PAGE>
                  "CONSUMERS" means Consumers Energy Company, a Michigan
         corporation, all of whose common stock is on the Closing Date owned by
         CMS Energy.

                  "CONSUMERS CREDIT FACILITY" is defined in Section 6.03(c).

                  "CONSUMERS DIVIDEND RESTRICTION" means any restriction enacted
         or imposed after October 1, 1992 upon the ability of Consumers to pay
         cash dividends to CMS Energy in respect of Consumers' capital stock,
         whether such restriction is imposed by statute, regulation, decisions
         or rulings by the Michigan Public Service Commission or the Federal
         Energy Regulatory Commission (or any successor agency or agencies),
         final judgments of any court of competent jurisdiction, indentures,
         agreements, contracts or restrictions to which Consumers is a party or
         by which it is bound or otherwise; provided, that no restriction on
         such dividends existing on October 1, 1992 shall be a Consumers
         Dividend Restriction at any time.

                  "CONTINUING DIRECTOR" means, as of any date of determination,
         any member of the board of directors of CMS Energy who (a) was a member
         of such board of directors on the Closing Date, or (b) was nominated
         for election or elected to such board of directors with the approval of
         the Continuing Directors who were members of such board of directors at
         the time of such nomination or election; provided that an individual
         who is so elected or nominated in connection with a merger,
         consolidation, acquisition or similar transaction shall not be a
         Continuing Director unless such individual was a Continuing Director
         prior thereto.

                  "CONVERSION", "CONVERT" or "CONVERTED" refers to a conversion
         of Loans of one Type into Loans of another Type, or to the selection of
         a new, or the renewal of the same, Interest Period for Loans, as the
         case may be, pursuant to Section 3.02 or 3.03.

                  "DEBT" means, for any Person, without duplication, any and all
         indebtedness, liabilities and other monetary obligations of such Person
         (whether for principal, interest, fees, costs, expenses or otherwise,
         and whether contingent or otherwise) (i) for borrowed money or
         evidenced by bonds, debentures, notes or other similar instruments,
         (ii) to pay the deferred purchase price of property or services (except
         trade accounts payable arising in the ordinary course of business which
         are not overdue), (iii) as lessee under leases which shall have been or
         should be, in accordance with GAAP, recorded as capital leases, (iv)
         under reimbursement or similar agreements with respect to letters of
         credit issued thereunder, (v) under any interest rate swap, "cap",
         "collar" or other hedging agreements; provided, however, for purposes
         of the calculation of Debt for this clause (v) only, the actual amount
         of Debt of such Person shall be determined on a net basis to the extent
         such agreements permit such amounts to be calculated on a net basis,
         (vi) to pay rent or other amounts under leases entered into in
         connection with sale and leaseback transactions involving assets of
         such Person being sold in connection therewith, (vii) arising from any
         accumulated funding deficiency (as defined in Section 412(a) of the
         Internal Revenue Code of 1986, as amended) for a Plan, (viii) arising
         in connection with any withdrawal liability under ERISA to any
         Multiemployer Plan and (ix) arising from (A) direct or indirect
         guaranties in respect of, and obligations to purchase or otherwise
         acquire, or otherwise to warrant or hold harmless, pursuant to a
         legally binding

                                       6
<PAGE>
         agreement, a creditor against loss in respect of, Debt of others
         referred to in clauses (i) through (viii) above and (B) other guaranty
         or similar financial obligations in respect of the performance of
         others, including Support Obligations. Notwithstanding the foregoing,
         solely for purposes of the calculation required under Section
         8.01(j)(ii), Debt shall not include any Junior Subordinated Debt issued
         by CMS Energy and owned by any Hybrid Preferred Securities Subsidiary.

                  "DEBT FOR BORROWED MONEY" means, for any Person, without
         duplication, the sum of (i) Debt of such Person described in clause (i)
         of the definition of "Debt", plus (ii) all obligations of such Person
         with respect to receivables sold or otherwise discounted with recourse,
         plus (iii) all Project Finance Debt entered into by such Person on or
         after the Closing Date (other than Project Finance Debt incurred
         substantially contemporaneously with the acquisition or construction of
         the assets securing such Project Finance Debt), but shall exclude (a)
         notes, bills and checks presented in the ordinary course of business by
         such Person to banks for collection or deposit, (b) with respect to CMS
         Energy and its Subsidiaries, all obligations of CMS Energy and its
         Subsidiaries of the character referred to in this definition to the
         extent owing to CMS Energy or any of its Subsidiaries, (c) with respect
         to Panhandle and its Subsidiaries, refinancings of Debt of Panhandle
         and its Subsidiaries existing as of the Closing Date, and Debt incurred
         or collateral delivered on or after the Closing Date with respect to
         any Support Obligations of Panhandle or its Subsidiaries existing as of
         the Closing Date, and (d) refinancings of Debt existing as of the
         Closing Date or incurred after the Closing Date in accordance with this
         Agreement, as applicable, to the extent such refinancing Debt is
         otherwise permitted under this Agreement.

                  "DEFAULT" means an event that, with the giving of notice or
         lapse of time or both, would constitute an Event of Default.

                  "DEFAULT RATE" means a rate per annum equal at all times to
         (i) in the case of any amount of principal of any Loan that is not paid
         when due, 2% per annum above the Applicable Rate required to be paid on
         such Loan immediately prior to the date on which such amount became
         due, and (ii) in the case of any amount of interest, fees or other
         amounts payable hereunder that is not paid when due, 2% per annum above
         the Applicable Rate for an ABR Loan in effect from time to time.

                  "DESIGNATED PREPAYMENT" means each mandatory prepayment
         required by clauses (a) and (b) of Section 2.03.

                  "DIVIDEND COVERAGE RATIO" means, at any date, the ratio of (i)
         Pro Forma Dividend Amounts to (ii) CMS Energy Interest Expense.

                  "DOLLARS" and the sign "$" each means lawful money of the
         United States.

                  "DOMESTIC LENDING OFFICE" means, with respect to any Lender,
         the office or affiliate of such Lender specified as its "Domestic
         Lending Office" opposite its name on Schedule I hereto or in the Lender
         Assignment pursuant to which it became a Lender, or

                                       7
<PAGE>
         such other office or affiliate of such Lender as such Lender may from
         time to time specify in writing to the Borrower and the Administrative
         Agent.

                  "ELIGIBLE ASSIGNEE" means (a) a commercial bank or trust
         company organized under the laws of the United States, or any State
         thereof; (b) a commercial bank organized under the laws of any other
         country that is a member of the OECD, or a political subdivision of any
         such country, provided that such bank is acting through a branch or
         agency located in the United States; (c) the central bank of any
         country that is a member of the OECD; and (d) any other commercial bank
         or other financial institution engaged generally in the business of
         extending credit or purchasing debt instruments; provided, however,
         that (A) any such Person shall also (i) have outstanding unsecured
         indebtedness that is rated A- or better by S&P or A3 or better by
         Moody's (or an equivalent rating by another nationally-recognized
         credit rating agency of similar standing if neither of such
         corporations is then in the business of rating unsecured indebtedness
         of entities engaged in such businesses) or (ii) have combined capital
         and surplus (as established in its most recent report of condition to
         its primary regulator) of not less than $250,000,000 (or its equivalent
         in foreign currency), (B) any Person described in clause (b), (c), or
         (d) above, shall, on the date on which it is to become a Lender
         hereunder, (1) be entitled to receive payments hereunder without
         deduction or withholding of any United States Federal income taxes (as
         contemplated by Section 5.06) and (2) not be incurring any losses,
         costs or expenses of the type for which such Person could demand
         payment under Section 5.04(a) or (c) (except to the extent that, in the
         absence of the making of an assignment to such Person, the assigning
         Lender would have incurred an equal or greater amount of such losses,
         costs or expenses and such losses, costs or expenses would have been
         payable by the Borrower to such assigning Lender hereunder), and (C)
         any Person described in clause (d) above shall, in addition, be
         acceptable to the Administrative Agent (which acceptance shall not be
         unreasonably withheld or delayed).

                  "ENTERPRISES SIGNIFICANT SUBSIDIARY" means CMS Oil and Gas
         Company, CMS Generation Co., CMS Gas Transmission Company, Panhandle,
         any direct or indirect subsidiary of Panhandle and any other direct
         subsidiary of the Borrower having a net worth in excess of $50,000,000.

                  "ENVIRONMENTAL LAWS" means all laws, rules, regulations,
         codes, ordinances, orders, decrees, judgments, injunctions, notices or
         binding agreements issued, promulgated or entered into by any
         governmental agency or authority, relating in any way to the
         environment, preservation or reclamation of natural resources, the
         management, release or threatened release of any Hazardous Substance or
         to health and safety matters.

                  "ENVIRONMENTAL LIABILITY" means any liability, contingent or
         otherwise (including any liability for damages, costs of environmental
         remediation, fines, penalties or indemnities), of CMS Energy or any of
         its Subsidiaries directly or indirectly resulting from or based upon
         (a) violation of any Environmental Law, (b) the generation, use,
         handling, transportation, storage, treatment or disposal of any
         Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the
         release or threatened release of any

                                       8
<PAGE>
         Hazardous Substances into the environment or (e) any contract,
         agreement or other consensual arrangement pursuant to which liability
         is assumed or imposed with respect to any of the foregoing.

                  "EQUITY DISTRIBUTIONS" means, for any period, the aggregate
         amount of cash received by CMS Energy from its Subsidiaries during such
         period that are paid out of proceeds from the sale of common equity of
         Subsidiaries of CMS Energy.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended from time to time.

                  "ERISA AFFILIATE" means, with respect to any Person, any trade
         or business (whether or not incorporated) that is a "commonly
         controlled entity" within the meaning of the regulations under Section
         414 of the Internal Revenue Code of 1986, as amended.

                  "EURODOLLAR", when used in reference to any Loan or Borrowing,
         refers to whether such Loan, or the Loans comprising such Borrowing,
         are bearing interest at a rate determined by reference to the Adjusted
         LIBO Rate.

                  "EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
         the office or affiliate of such Lender specified as its "Eurodollar
         Lending Office" opposite its name on Schedule I hereto or in the Lender
         Assignment pursuant to which it became a Lender (or, if no such office
         or affiliate is specified, its Domestic Lending Office), or such other
         office or affiliate of such Lender as such Lender may from time to time
         specify in writing to the Borrower and the Administrative Agent.

                  "EURODOLLAR RATE LOAN" means a Loan that bears interest as
         provided in Section 3.05(b)(ii).

                  "EVENT OF DEFAULT" is defined in Section 9.01.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
         amended.

                  "EXTENSION OF CREDIT" means the making of a Borrowing
         (including any Conversion).

                  "FAIR MARKET VALUE" means, with respect to any asset, the
         value of the consideration obtainable in a sale of such asset in the
         open market, assuming a sale by a willing seller to a willing purchaser
         dealing at arm's length and arranged in an orderly manner over a
         reasonable period of time, each having reasonable knowledge of the
         nature and characteristics of such asset, neither being under any
         compulsion to act, and, if in excess of $50,000,000, as determined in
         good faith by the Board of Directors of CMS Energy.

                  "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
         weighted average (rounded upwards, if necessary, to the next 1/100 of
         1%) of the rates on overnight Federal funds transactions with members
         of the Federal Reserve System arranged by Federal funds brokers, as
         published on the next succeeding Business Day by the Federal

                                       9
<PAGE>
         Reserve Bank of New York, or, if such rate is not so published for any
         day that is a Business Day, the average (rounded upwards, if necessary,
         to the next 1/100 of 1%) of the quotations for such day for such
         transactions received by the Administrative Agent from three Federal
         funds brokers of recognized standing selected by it.

                  "FEE LETTER" is defined in Section 2.02.

                  "FITCH" means Fitch, Inc. or any successor thereto.

                  "FOREIGN LENDER" means any Lender that is organized under the
         laws of a jurisdiction other than that in which the Borrower is
         located. For purposes of this definition, the United States of America,
         each State thereof and the District of Columbia shall be deemed to
         constitute a single jurisdiction.

                  "FOREIGN SUBSIDIARY" is defined in Section 8.01(l).

                  "GAAP" is defined in Section 1.03.

                  "GOVERNMENTAL APPROVAL" means any authorization, consent,
         approval, license, permit, certificate, exemption of, or filing or
         registration with, any governmental authority or other legal or
         regulatory body, required in connection with (i) the execution,
         delivery, or performance of any Loan Document by any Loan Party, (ii)
         the grant and perfection of any Lien in favor of the Collateral Agent
         contemplated by the Loan Documents, or (iii) the exercise by any Agent
         (on behalf of the Lenders) of any right or remedy provided for under
         the Loan Documents.

                  "GRANTOR(s)" means each Guarantor (other than CMS Energy) and
         each of the following Subsidiaries of the Borrower: CMS Capital,
         L.L.C., a Michigan limited liability company, CMS Electric and Gas
         Company, a Michigan corporation, CMS Oil and Gas Company, a Michigan
         corporation, MS&T, CMS International Ventures, L.L.C., a Michigan
         limited liability company, CMS Field Services, Inc., a Michigan
         corporation, Dearborn Industrial Energy, L.L.C., a Michigan limited
         liability company, Dearborn Industrial Generation, L.L.C., a Michigan
         limited liability company, CMS Generation Michigan Power L.L.C., a
         Michigan limited liability company, CMS Gas Processing, L.L.C., an
         Oklahoma limited liability company, and CMS Natural Gas Gathering,
         L.L.C., an Oklahoma limited liability company.

                  "GUARANTOR" means CMS Energy, CMS Generation Co., CMS Gas
         Transmission Company and each other Restricted Subsidiary (excluding
         Panhandle and its Subsidiaries) that has delivered, or shall be
         obligated to deliver, a guaranty under and pursuant to the terms of
         Section 8.01(l).

                  "GUARANTY" means that certain Guaranty (and any and all
         supplements thereto) executed from time to time by each Guarantor in
         favor of the Collateral Agent for the benefit of itself and the
         Lenders, in substantially the form of Exhibit I attached hereto, as
         amended, restated, supplemented or otherwise modified from time to
         time.

                                       10

<PAGE>

                  "HAZARDOUS SUBSTANCE" means any waste, substance, or material
         identified as hazardous, dangerous or toxic by any office, agency,
         department, commission, board, bureau, or instrumentality of the United
         States or of the State or locality in which the same is located having
         or exercising jurisdiction over such waste, substance or material.

                  "HYBRID PREFERRED SECURITIES" means any preferred securities
         issued by a Hybrid Preferred Securities Subsidiary, where such
         preferred securities have the following characteristics:

                           (i) such Hybrid Preferred Securities Subsidiary lends
                  substantially all of the proceeds from the issuance of such
                  preferred securities to CMS Energy or a wholly-owned direct or
                  indirect Subsidiary of CMS Energy in exchange for Junior
                  Subordinated Debt issued by CMS Energy or such wholly-owned
                  direct or indirect Subsidiary, respectively;

                           (ii) such preferred securities contain terms
                  providing for the deferral of interest payments corresponding
                  to provisions providing for the deferral of interest payments
                  on the Junior Subordinated Debt; and

                           (iii) CMS Energy or a wholly-owned direct or indirect
                  Subsidiary of CMS Energy (as the case may be) makes periodic
                  interest payments on the Junior Subordinated Debt, which
                  interest payments are in turn used by the Hybrid Preferred
                  Securities Subsidiary to make corresponding payments to the
                  holders of the preferred securities.

                  "HYBRID PREFERRED SECURITIES SUBSIDIARY" means any Delaware
         business trust (or similar entity) (i) all of the common equity
         interest of which is owned (either directly or indirectly through one
         or more wholly-owned Subsidiaries of CMS Energy or Consumers) at all
         times by CMS Energy or a wholly-owned direct or indirect Subsidiary of
         CMS Energy, (ii) that has been formed for the purpose of issuing Hybrid
         Preferred Securities and (iii) substantially all of the assets of which
         consist at all times solely of Junior Subordinated Debt issued by CMS
         Energy or a wholly-owned direct or indirect Subsidiary of CMS Energy
         (as the case may be) and payments made from time to time on such Junior
         Subordinated Debt.

                  "INDEMNIFIED PERSON" is defined in Section 11.04(b).

                  "INDENTURE" means that certain Indenture, dated as of
         September 15, 1992, between CMS Energy and the Trustee, as supplemented
         by the First Supplemental Indenture, dated as of October 1, 1992, the
         Second Supplemental Indenture, dated as of October 1, 1992, the Third
         Supplemental Indenture, dated as of May 6, 1997, the Fourth
         Supplemental Indenture, dated as of September 26, 1997, the Fifth
         Supplemental Indenture, dated as of November 4, 1997, the Sixth
         Supplemental Indenture, dated as of January 13, 1998, the Seventh
         Supplemental Indenture, dated as of January 25, 1999, the Eighth
         Supplemental Indenture, dated as of February 3, 1999, the Ninth
         Supplemental Indenture, dated as of June 22, 1999, the Tenth
         Supplemental Indenture, dated as of October 12, 2000, the Eleventh
         Supplemental Indenture, dated as of March 29, 2001, and

                                       11
<PAGE>

         the Twelfth Supplemental Indenture, dated as of July 2, 2001,as said
         Indenture may be further amended or otherwise modified from time to
         time in accordance with its terms.

                  "INTEREST PERIOD" is defined in Section 3.03.

                  "JUNIOR SUBORDINATED DEBT" means any unsecured Debt of CMS
         Energy or a Subsidiary of CMS Energy (i) issued in exchange for the
         proceeds of Hybrid Preferred Securities and (ii) subordinated to the
         rights of the Lenders hereunder and under the other Loan Documents
         pursuant to terms of subordination substantially similar to those set
         forth in Exhibit G, or pursuant to other terms and conditions
         satisfactory to the Required Lenders.

                  "LENDER ASSIGNMENT" means an assignment and agreement entered
         into by a Lender and an Eligible Assignee, and accepted by the
         Administrative Agent, in substantially the form of Exhibit F.

                  "LENDERS" means the Banks listed on the signature pages hereof
         and each Eligible Assignee that shall become a party hereto pursuant to
         Section 11.07.

                  "LIBO RATE" means, with respect to any Eurodollar Borrowing
         for any Interest Period, the rate appearing on Page 3750 of the
         Telerate Service (or on any successor or substitute page of such
         Service, or any successor to or substitute for such Service, providing
         rate quotations comparable to those currently provided on such page of
         such Service, as determined by the Administrative Agent from time to
         time for purposes of providing quotations of interest rates applicable
         to dollar deposits in the London interbank market) at approximately
         11:00 a.m., London time, two Business Days prior to the commencement of
         such Interest Period, as the rate for dollar deposits with a maturity
         comparable to such Interest Period. In the event that such rate is not
         available at such time for any reason, then the "LIBO RATE" with
         respect to such Eurodollar Borrowing for such Interest Period shall be
         the rate at which dollar deposits of $5,000,000 and for a maturity
         comparable to such Interest Period are offered by the principal London
         office of the Administrative Agent in immediately available funds in
         the London interbank market at approximately 11:00 a.m., London time,
         two Business Days prior to the commencement of such Interest Period.

                  "LIEN" is defined in Section 8.02(a).

                  "LOAN" means a loan by a Lender to the Borrower, and refers to
         an ABR Loan or a Eurodollar Rate Loan (each of which shall be a "TYPE"
         of Loan). All Loans by a Lender of the same Type having the same
         Interest Period and made or Converted on the same day shall be deemed
         to be a single Loan by such Lender until repaid or next Converted.

                  "LOAN DOCUMENTS" means this Agreement, any Promissory Notes,
         the Fee Letter, the Guaranty, the Pledge Agreement, and all other
         agreements, instruments and documents now or hereafter executed and/or
         delivered pursuant hereto or thereto.

                  "LOAN PARTY" is defined in Section 6.01(a)(i).

                                       12
<PAGE>

                  "MATERIAL ADVERSE CHANGE" means any event, development or
         circumstance that has had or could reasonably be expected to have a
         material adverse effect on (a) the business, assets, property,
         financial condition, results of operations or prospects of CMS Energy
         and its Subsidiaries, considered as a whole, (b) the Borrower's and the
         Guarantors' ability, taken as a whole, to perform their obligations
         under this Agreement or any other Loan Document to which it is or will
         be a party or (c) the validity or enforceability of any Loan Document
         or the rights or remedies of any Agent or the Lenders thereunder.

                  "MEASUREMENT QUARTER" is defined in Section 8.01(i).

                  "MOODY'S" means Moody's Investors Service, Inc. or any
         successor thereto.

                  "MS&T" means CMS Marketing, Services and Trading Company, a
         Michigan corporation, all of whose capital stock is on the Closing Date
         owned by the Borrower.

                  "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
         Section 4001(a)(3) of ERISA.

                  "NET PROCEEDS" means, with respect to any sale, assignment or
         other disposition of (but not the lease or license of) any property, or
         with respect to any sale or issuance of securities or incurrence of
         Debt, by any Person, gross cash proceeds received by such Person or any
         Subsidiary of such Person from such sale, assignment, disposition,
         issuance or incurrence (including cash received as consideration for
         the assumption or incurrence of liabilities incurred in connection with
         or in anticipation of such transaction) after (i) provision for all
         income or other taxes measured by or resulting from such transaction,
         (ii) payment of all customary underwriting commissions, auditing and
         legal fees, printing costs, rating agency fees and other customary and
         reasonable fees and expenses incurred by such Person in connection with
         such transaction, (iii) all amounts used to repay Debt (and any premium
         or penalty thereon) secured by a Lien on any asset disposed of in such
         sale, assignment or other disposition or which is or may be required
         (by the express terms of the instrument governing such Debt or by
         applicable law) to be repaid in connection with such sale, assignment,
         or other disposition, and (iv) deduction of appropriate amounts to be
         provided by such Person or a Subsidiary of such Person as a reserve, in
         accordance with GAAP consistently applied, against any liabilities
         associated with the assets sold, transferred or disposed of in such
         transaction and retained by such Person or a Subsidiary of such Person
         after such transaction, provided that "Net Proceeds" shall include on a
         dollar-for-dollar basis all amounts remaining in such reserve after
         such liability shall have been satisfied in full or terminated;
         provided, however, that notwithstanding the foregoing, "Net Proceeds"
         shall exclude any amounts received or deemed to be received by CMS
         Energy for the purchase of CMS Energy's capital stock in connection
         with CMS Energy's dividend reinvestment program.

                  "NET WORTH" means, with respect to any Person, the excess of
         such Person's total assets over its total liabilities, total assets and
         total liabilities each to be determined in accordance with GAAP
         consistently applied, excluding, however, from the determination of
         total assets (i) goodwill, organizational expenses, research and
         development expenses,

                                       13
<PAGE>

         trademarks, trade names, copyrights, patents, patent applications,
         licenses and rights in any thereof, and other similar intangibles, (ii)
         cash held in a sinking or other analogous fund established for the
         purpose of redemption, retirement or prepayment of capital stock or
         Debt, and (iii) any items not included in clauses (i) or (ii) above,
         that are treated as intangibles in conformity with GAAP.

                  "NOTICE OF BORROWING" is defined in Section 3.01(a).

                  "NOTICE OF CONVERSION" is defined in Section 3.02.

                  "OBLIGATIONS" means all unpaid principal of and accrued and
         unpaid interest on the Loans, all accrued and unpaid fees and all
         expenses, reimbursements, indemnities and other obligations of the
         Borrower and other Loan Parties to any of the Agents, the Arranger, the
         Lenders or any other indemnified party arising under the Loan
         Documents.

                  "OECD" means the Organization for Economic Cooperation and
         Development.

                  "OFF-BALANCE SHEET LIABILITY" of a Person shall mean any of
         the following obligations not appearing on such Person's consolidated
         balance sheet: (i) all lease obligations, leveraged leases, sale and
         leasebacks and other similar lease arrangements of such Person, (ii)
         any liability under any so called "synthetic lease" or "tax ownership
         operating lease" transaction entered into by such Person, and (iii) any
         obligation arising with respect to any other transaction if and to the
         extent that such obligation is the functional equivalent of borrowing
         but that does not constitute a liability on the consolidated balance
         sheet of such Person.

                  "OWNERSHIP INTEREST" of CMS Energy in any Consolidated
         Subsidiary means, at any date of determination, the percentage
         determined by dividing (i) the aggregate amount of Project Finance
         Equity in such Consolidated Subsidiary owned or controlled, directly or
         indirectly, by CMS Energy and any other Consolidated Subsidiary on such
         date, by (ii) the aggregate amount of Project Finance Equity in such
         Consolidated Subsidiary owned or controlled, directly or indirectly, by
         all Persons (including CMS Energy and the Consolidated Subsidiaries) on
         such date. Notwithstanding anything to the contrary set forth above, if
         the "Ownership Interest," calculated as set forth above, is 50% or
         less, such percentage shall be deemed to equal 0%.

                  "PANHANDLE" means Panhandle Eastern Pipe Line Company, a
         Delaware corporation, all of whose capital stock is on the Closing Date
         owned indirectly by the Borrower.

                  "PARTICIPANT" is defined in Section 11.07(e).

                  "PBGC" means the Pension Benefit Guaranty Corporation (or any
         successor entity) established under ERISA.

                  "PERCENTAGE" means, for any Lender on any date of
         determination, the percentage obtained by dividing the aggregate
         outstanding principal amount of such Lender's Loans

                                       14
<PAGE>

         on such day by the total aggregate outstanding principal amount of the
         Lenders' Loans on such date, and multiplying the quotient so obtained
         by 100%.

                  "PERMITTED INVESTMENTS" means each of the following so long as
         no such Permitted Investment shall have a final maturity later than six
         months from the date of investment therein:

                           (i) direct obligations of the United States, or of
                  any agency thereof, or obligations guaranteed as to principal
                  and interest by the United States or any agency thereof;

                           (ii) certificates of deposit or bankers' acceptances
                  issued, or time deposits held, or investment contracts
                  guaranteed, by any Lender, any nationally-recognized
                  securities dealer or any other commercial bank, trust company,
                  savings and loan association or savings bank organized under
                  the laws of the United States, or any State thereof, or of any
                  other country which is a member of the OECD, or a political
                  subdivision of any such country, and in each case having
                  outstanding unsecured indebtedness that (on the date of
                  acquisition thereof) is rated AA- or better by S&P or Aa3 or
                  better by Moody's (or an equivalent rating by another
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating unsecured bank indebtedness);

                           (iii) obligations with any Lender, any other bank or
                  trust company described in clause (ii), above, or any
                  nationally-recognized securities dealer, in respect of the
                  repurchase of obligations of the type described in clause (i),
                  above, provided that such repurchase obligations shall be
                  fully secured by obligations of the type described in said
                  clause (i) and the possession of such obligations shall be
                  transferred to, and segregated from other obligations owned
                  by, such Lender, such other bank or trust company or such
                  securities dealer;

                           (iv) commercial paper rated (on the date of
                  acquisition thereof) A-1 or P-1 or better by S&P or Moody's,
                  respectively (or an equivalent rating by another
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating commercial paper); and

                           (v) any eurodollar certificate of deposit issued by
                  any Lender or any other commercial bank, trust company,
                  savings and loan association or savings bank organized under
                  the laws of the United States, or any State thereof, or of any
                  country which is a member of the OECD, or a political
                  subdivision of any such country, and in each case having
                  outstanding unsecured indebtedness that (on the date of
                  acquisition thereof) is rated AA- or better by S&P or Aa3 or
                  better by Moody's (or an equivalent rating by another
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating unsecured bank indebtedness).

                                       15
<PAGE>

                  "PERSON" means an individual, partnership, corporation
         (including a business trust), joint stock company, limited liability
         company, trust, unincorporated association, joint venture or other
         entity, or a government or any political subdivision or agency thereof.

                  "PLAN" means, with respect to any Person, an employee benefit
         plan (other than a Multiemployer Plan) maintained for employees of such
         Person or any ERISA Affiliate of such Person and covered by Title IV of
         ERISA.

                  "PLAN TERMINATION EVENT" means, with respect to any Person,
         (i) a Reportable Event described in Section 4043 of ERISA and the
         regulations issued thereunder (other than a Reportable Event not
         subject to the provision for 30-day notice to the PBGC under such
         regulations), or (ii) the withdrawal of such Person or any of its ERISA
         Affiliates from a Plan during a plan year in which it was a
         "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
         (iii) the filing of a notice of intent to terminate a Plan or the
         treatment of a Plan under Section 4041 of ERISA, or (iv) the
         institution of proceedings to terminate a Plan by the PBGC, or (v) any
         other event or condition which is reasonably likely to constitute
         grounds under Section 4042 of ERISA for the termination of, or the
         appointment of a trustee to administer, any Plan.

                  "PLEDGE AGREEMENT" means that certain Pledge and Security
         Agreement, dated as of July 12, 2002, by and among the Borrower, the
         Grantors and the Collateral Agent in substantially the form of Exhibit
         J hereto, pursuant to which such Grantors shall grant a security
         interest in the capital stock (or comparable interest) of each of the
         Subsidiaries of the Borrower identified as owned by it on Schedule III
         hereto and a security interest in accounts receivable and notes owed by
         CMS Energy or the Borrower or any Subsidiary of the Borrower to such
         Grantor, as the same may be amended, restated, supplemented or
         otherwise modified from time to time.

                  "PRIME RATE" means the rate of interest per annum publicly
         announced from time to time by Citibank as its base rate in effect at
         its principal office in New York City; each change in the Prime Rate
         shall be effective from and including the date such change is publicly
         announced as being effective.

                  "PRO FORMA DIVIDEND AMOUNT" means, from and after any date of
         any Consumers Dividend Restriction, the sum of (a) the aggregate amount
         which Consumers could have paid to CMS Energy during the four calendar
         quarters immediately preceding such date had such Consumers Dividend
         Restriction been in effect during such quarters plus (b) cash dividends
         received by CMS Energy from any other Subsidiary during such quarters.

                  "PROJECT FINANCE DEBT" means Debt of any Person that is
         non-recourse to such Person (unless such Person is a special-purpose
         entity) and any Affiliate of such Person, other than with respect to
         the interest of the holder of such Debt in the collateral, if any,
         securing such Debt.

                                       16
<PAGE>

                  "PROJECT FINANCE EQUITY" means, at any date of determination,
         consolidated equity of the common, preference and preferred
         stockholders of CMS Energy and the Consolidated Subsidiaries relating
         to any obligor with respect to Project Finance Debt.

                  "PROMISSORY NOTE" means any promissory note of the Borrower
         payable to the order of a Lender (and, if requested, its registered
         assigns) issued pursuant to Section 3.01(d); and "PROMISSORY NOTES"
         means any or all of the foregoing.

                  "RECIPIENT" is defined in Section 11.08.

                  "REGISTER" is defined in Section 11.07(c).

                  "RELATED PARTIES" means, with respect to any specified Person,
         such Person's Affiliates and the respective directors, officers,
         employees, agents and advisors of such Person and such Person's
         Affiliates.

                  "REQUIRED LENDERS" means, on any date of determination,
         Lenders that, collectively, on such date hold at least 51% of the then
         aggregate unpaid principal amount of the Loans owing to Lenders. Any
         determination of those Lenders constituting the Required Lenders shall
         be made by the Administrative Agent and shall be conclusive and binding
         on all parties absent manifest error.

                  "RESTRICTED SUBSIDIARY" means (i) the Borrower and (ii) any
         other Subsidiary of CMS Energy (other than Consumers and its
         Subsidiaries) that, on a consolidated basis with any of its
         Subsidiaries as of any date of determination, accounts for more than
         10% of the consolidated assets of CMS Energy and its Consolidated
         Subsidiaries.

                  "S&P" means Standard & Poor's Ratings Group, a division of The
         McGraw Hill Companies, Inc., or any successor thereto.

                  "SECURITIZED BONDS" means any nonrecourse bonds or similar
         asset-backed securities issued by a special-purpose subsidiary of
         Consumers which are payable solely from specialized charges authorized
         by the utility commission of the relevant state in connection with the
         recovery of regulatory assets or other stranded costs.

                  "SOLVENT", when used with respect to any Person, means that at
         the time of determination:

                           (i) the fair market value of its assets is in excess
                  of the total amount of its liabilities (including, without
                  limitation, net contingent liabilities); and

                           (ii) it is then able and expects to be able to pay
                  its debts (including, without limitation, contingent debts and
                  other commitments) as they mature; and

                           (iii) it has capital sufficient to carry on its
                  business as conducted and as proposed to be conducted.

                                       17
<PAGE>

         For purposes of this definition, the amount of contingent liabilities
         at any time shall be computed as the amount that, in light of all the
         facts and circumstances known to such Person at such time, represents
         the amount that can reasonably be expected to become an actual or
         matured liability.

                  "STATUTORY RESERVE RATE" means a fraction (expressed as a
         decimal), the numerator of which is the number one and the denominator
         of which is the number one minus the aggregate of the maximum reserve
         percentages (including any marginal, special, emergency or supplemental
         reserves) expressed as a decimal established by the Board to which the
         Administrative Agent is subject for eurocurrency funding (currently
         referred to as "Eurocurrency Liabilities" in Regulation D of the
         Board). Such reserve percentages shall include those imposed pursuant
         to such Regulation D. Eurodollar Rate Loans shall be deemed to
         constitute eurocurrency funding and to be subject to such reserve
         requirements without benefit of or credit for proration, exemptions or
         offsets that may be available from time to time to any Lender under
         such Regulation D or any comparable regulation. The Statutory Reserve
         Rate shall be adjusted automatically on and as of the effective date of
         any change in any reserve percentage.

                  "SUBSIDIARY" means, with respect to any Person, any
         corporation or unincorporated entity of which more than 50% of the
         outstanding capital stock (or comparable interest) having ordinary
         voting power (irrespective of whether at the time capital stock (or
         comparable interest) of any other class or classes of such corporation
         or entity shall or might have voting power upon the occurrence of any
         contingency) is at the time directly or indirectly owned by said Person
         (whether directly or through one or more other Subsidiaries). In the
         case of an unincorporated entity, a Person shall be deemed to have more
         than 50% of interests having ordinary voting power only if such
         Person's vote in respect of such interests comprises more than 50% of
         the total voting power of all such interests in the unincorporated
         entity.

                  "SUPPORT OBLIGATIONS" means, for any Person, without
         duplication, any financial obligation, contingent or otherwise, of such
         Person guaranteeing or otherwise supporting any Debt or other
         obligation of any other Person in any manner, whether directly or
         indirectly, and including any obligation of such Person, direct or
         indirect, (i) to purchase or pay (or advance or supply funds for the
         purchase or payment of) such Debt or to purchase (or to advance or
         supply funds for the purchase of) any security for the payment of such
         Debt, (ii) to purchase property, securities or services for the purpose
         of assuring the owner of such Debt of the payment of such Debt, (iii)
         to maintain working capital, equity capital, available cash or other
         financial statement condition of the primary obligor so as to enable
         the primary obligor to pay such Debt, (iv) to provide equity capital
         under or in respect of equity subscription arrangements (to the extent
         that such obligation to provide equity capital does not otherwise
         constitute Debt), or (v) to perform, or arrange for the performance of,
         any non-monetary obligations or non-funded debt payment obligations of
         the primary obligor.

                  "TAX SHARING AGREEMENT" means the Amended and Restated
         Agreement for the Allocation of Income Tax Liabilities and Benefits,
         dated as of January 1, 1994, by and

                                       18
<PAGE>

         among CMS Energy, each of the members of the Consolidated Group (as
         defined therein), and each of the corporations that become members of
         the Consolidated Group.

                  "TERMINATION DATE" means the earlier to occur of (i) December
         13, 2002 and (ii) the date of termination or reduction in whole of the
         Commitments pursuant to Section 2.03 or 9.02.

                  "364 DAY FACILITY" means that certain $295,800,000 Amended and
         Restated Credit Agreement dated as of July 12, 2002, by and among CMS
         Energy, the Banks and the Agents, as the same may amended, restated,
         supplemented or otherwise modified from time to time.

                  "THREE YEAR FACILITY" means that certain $300,000,000 Amended
         and Restated Credit Agreement dated as of July 12, 2002, by and among
         CMS Energy, the Banks and the Agents, as the same may amended,
         restated, supplemented or otherwise modified from time to time.

                  "TRUSTEE" has the meaning assigned to that term in the
         Indenture.

                  "TYPE" has the meaning assigned to such term (i) in the
         definition of "Loan" when used in such context and (ii) in the
         definition of "Borrowing" when used in such context.

         SECTION 1.02. COMPUTATION OF TIME PERIODS; CONSTRUCTION.

                  (a) Unless otherwise indicated, each reference in this
Agreement to a specific time of day is a reference to New York City time. In the
computation of periods of time under this Agreement, any period of a specified
number of days or months shall be computed by including the first day or month
occurring during such period and excluding the last such day or month. In the
case of a period of time "from" a specified date "to" or "until" a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding".

                  (b) The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes", and "including" shall be deemed
to be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (iv) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (v)
the words "asset" and "property" shall

                                       19
<PAGE>

be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

         SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 7.01(e) ("GAAP"). If any changes in
generally accepted accounting principles are hereafter required or permitted and
are adopted by CMS Energy or any of its Subsidiaries, or CMS Energy or any of
its Subsidiaries shall change its application of generally accepted accounting
principles with respect to any Off-Balance Sheet Liabilities, in each case, with
the agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the financial
covenants, tests, restrictions or standards herein or in the related definitions
or terms used therein ("ACCOUNTING CHANGES"), the parties hereto agree, at the
Borrower's request, to enter into negotiations, in good faith, in order to amend
such provisions in a credit neutral manner so as to reflect equitably such
changes with the desired result that the criteria for evaluating CMS Energy's
and its Subsidiaries' financial condition shall be the same after such changes
as if such changes had not been made; provided, however, until such provisions
are amended in a manner reasonably satisfactory to the Agents, the Arranger and
the Required Lenders, no Accounting Change shall be given effect in such
calculations. In the event such amendment is entered into, all references in
this Agreement to GAAP shall mean generally accepted accounting principles as of
the date of such amendment. Notwithstanding the foregoing, all financial
statements to be delivered by the Borrower pursuant to Section 8.03 shall be
prepared in accordance with generally accepted accounting principles in effect
at such time.

                                   ARTICLE II
                                  THE TERM LOAN

         SECTION 2.01. THE TERM LOAN. Subject to the terms and conditions set
forth in this Agreement, each Lender severally and not jointly agrees to make on
July 15, 2002, a term loan, in Dollars, to the Borrower in an aggregate amount
equal to such Lender's Commitment (each individually, a "Loan" and,
collectively, the "Loans"). All Loans shall be made by the Lenders on July 15,
2002 simultaneously and proportionately to their respective Percentages, it
being understood that no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any Loan hereunder nor shall the
Commitment of any Lender be increased or decreased as a result of any such
failure.

         SECTION 2.02. FEES. The Borrower shall pay to the Administrative Agent,
for the account of CUSA and the other Persons entitled thereto, such other fees
as are provided for in that certain letter agreement, dated July 12, 2002 among
the Borrower, the Arranger and CUSA (the "FEE LETTER"), in the amounts and at
the times specified therein.

         SECTION 2.03. MANDATORY PREPAYMENTS. The Borrower shall make the
following mandatory prepayments:

                  (a) Promptly and in any event within 3 Business Days after CMS
Energy's or any of its Subsidiaries' receipt of any Net Proceeds from the sale,
assignment or other disposition of (but not the lease or license of) any
property, including, without limitation, any sale of capital

                                       20
<PAGE>

stock or other equity interest in any of CMS Energy's direct or indirect
Subsidiaries, in an amount, when combined with the Net Proceeds of all other
such transactions since the Closing Date that have not been applied to the
prepayment of the Obligations in accordance herewith, in excess of $5,000,000,
the Borrower shall make or cause to be made a mandatory prepayment of the
Obligations in an amount equal to one hundred percent (100%) of such aggregate
Net Proceeds, provided that such amount shall exclude Net Proceeds arising from
(A) any sale, assignment or other disposition of property by Consumers or any
Subsidiary of Consumers and (B) any sale or other disposition by CMS Energy or
any of its Subsidiaries in the ordinary course of business consistent with past
practice; and

                  (b) Promptly and in any event within 3 Business Days after CMS
Energy's or any of its Subsidiaries' receipt of any Net Proceeds from the sale
or issuance of equity securities or incurrence of Debt For Borrowed Money, other
than securities issued by or Debt incurred by Consumers or any Subsidiary of
Consumers, the Borrower shall make or cause to be made a mandatory prepayment of
the Obligations in an amount equal to one hundred percent (100%) of such Net
Proceeds.

Nothing in this Section 2.03 shall be construed to constitute the Lenders'
consent to any transaction referenced in clauses (a) and (b) above which is not
expressly permitted by Article VIII. The Borrower shall give the Administrative
Agent prior written notice or telephonic notice promptly confirmed in writing
(each of which the Administrative Agent shall promptly transmit to each Lender),
when a Designated Prepayment will be made (which date of prepayment shall be no
later than the date on which such Designated Payment becomes due and payable
pursuant to this Section 2.03). Designated Prepayments shall be allocated and
applied to the outstanding Loans and shall permanently reduce on a ratable basis
the Commitment of each Lender. All Designated Prepayments shall be applied first
to repay outstanding ABR Loans and then to repay outstanding Eurodollar Rate
Loans with those Eurodollar Rate Loans which have earlier expiring Interest
Periods being repaid prior to those which have later expiring Interest Periods.

         SECTION 2.04. COMPUTATIONS OF OUTSTANDINGS. Whenever reference is made
in this Agreement to the principal amount outstanding on any date under this
Agreement, such reference shall refer to the aggregate principal amount of all
Loans outstanding on such date under this Agreement after giving effect to all
Extensions of Credit to be made on such date.

                                   ARTICLE III
                                      LOANS

         SECTION 3.01. LOANS.

                  (a) The Borrower shall request the initial Borrowing by
delivering a notice (a "NOTICE OF BORROWING") to the Administrative Agent no
later than 12:00 noon (New York City time) on the Closing Date. The
Administrative Agent shall give each Lender prompt notice of such Notice of
Borrowing. Such Notice of Borrowing shall be in substantially the form of
Exhibit A and shall specify the requested (i) date of such Borrowing, and (ii)
amount of such Borrowing. The initial Borrowing shall be ABR Loans. Each
proposed Borrowing shall conform to the requirements of Sections 3.03 and 3.04.

                                       21
<PAGE>

                  (b) Each Lender shall, before 2:00 p.m. (New York City time)
on the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's offices
at 2 Penns Way, Suite 200, New Castle, DE 19270, in same day funds, such
Lender's Percentage of such Borrowing. After the Administrative Agent's receipt
of such funds and upon fulfillment of the applicable conditions set forth in
Article VI, the Administrative Agent will make such funds available to the
Borrower at the Administrative Agent's aforesaid address. Notwithstanding the
foregoing, unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's Percentage of such
Borrowing, the Administrative Agent may assume that such Lender has made such
Percentage available to the Administrative Agent on the date of such Borrowing
in accordance with the first sentence of this subsection (b), and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount.

                  (c) If and to the extent that any Lender (a "NON-PERFORMING
LENDER") shall not have made available to the Administrative Agent, in
accordance with subsection (b) above, such Lender's Percentage of any Borrowing,
the non-performing Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand corresponding amounts, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(i) in the case of the Borrower, the interest rate applicable at the time to
Loans made in connection with such Borrowing and (ii) in the case of such
Lender, the Federal Funds Effective Rate. If a non-performing Lender shall repay
to the Administrative Agent such corresponding amount in full (with interest as
above provided), (x) the Administrative Agent shall apply such corresponding
amount and interest to the repayment to the Administrative Agent (or repayment
of Loans made to fund such repayment to the Administrative Agent), and shall
make any remainder available to the Borrower and (y) such amount so repaid shall
be deemed to constitute such Lender's Loan, made as part of such Borrowing for
purposes of this Agreement as if funded concurrently with the other Loans made
as part of such Borrowing, and such Lender shall forthwith cease to be deemed a
non-performing Lender; if and so long as such non-performing Lender shall not
repay such amount, and unless and until an Eligible Assignee shall have assumed
and performed the obligations of such non-performing Lender, all computations by
the Administrative Agent of Percentages, Commitments and payments hereunder
shall be made without regard to the Commitment, or outstanding Loans, of such
non-performing Lender, and any amounts paid to the Administrative Agent for the
account of such non-performing Lender shall be held by the Administrative Agent
in trust for such non-performing Lender in a non-interest-bearing special
purpose account. Nothing herein shall in any way limit, waive or otherwise
reduce any claims that any party hereto may have against any non-performing
Lender. The failure of any Lender to make the Loan to be made by it as part of
any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on the date of such Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on the date of any Borrowing.

                  (d) Any Lender may request that Loans made by it be evidenced
by a Promissory Note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a Promissory Note payable to the order of such Lender
(or, if requested by such Lender, to such

                                       22
<PAGE>

Lender and its registered assigns) and in a form approved by the Administrative
Agent. Thereafter, the Loans evidenced by such Promissory Note and interest
thereon shall at all times (including after assignment pursuant to Section
11.07) be represented by one or more Promissory Notes in such form payable to
the order of the payee named therein (or, if such Promissory Note is a
registered note, to such payee and its registered assigns).

         SECTION 3.02. CONVERSION OF LOANS. The Borrower may from time to time
Convert any Loan (or portion thereof) of any Type to one or more Loans of the
same or any other Type by delivering a notice of such Conversion (a "NOTICE OF
CONVERSION") to the Administrative Agent no later than 12:00 noon on (x) the
third Business Day prior to the date of any proposed Conversion into a
Eurodollar Rate Loan and (y) the first Business Day prior to the date of any
proposed Conversion into an ABR Loan. The Administrative Agent shall give each
Lender prompt notice of each Notice of Conversion. Each Notice of Conversion
shall be in substantially the form of Exhibit B and shall specify (i) the
requested date of such Conversion, (ii) the Type of, and Interest Period, if
any, applicable to, the Loans (or portions thereof) proposed to be Converted,
(iii) the requested Type of Loans to which such Loans (or portions thereof) are
proposed to be Converted, (iv) the requested initial Interest Period, if any, to
be applicable to the Loans resulting from such Conversion and (v) the aggregate
amount of Loans (or portions thereof) proposed to be Converted. Each proposed
Conversion shall be subject to the provisions of Sections 3.03 and 3.04.

         SECTION 3.03. INTEREST PERIODS. The period between the date of each
Eurodollar Rate Loan and the date of payment in full of such Loan shall be
divided into successive periods of months ("INTEREST PERIODS") for purposes of
computing interest applicable thereto. The initial Interest Period for each such
Loan shall begin on the day such Loan is made, and each subsequent Interest
Period shall begin on the last day of the immediately preceding Interest Period
for such Loan. The duration of each Interest Period shall be 1, 2, 3, or 6
months, as the Borrower may, in accordance with Section 3.01 or 3.02, select;
provided, however, that:

                  (i) the Borrower may not select any Interest Period for a
         Eurodollar Rate Loan that ends after the Termination Date;

                  (ii) whenever the last day of any Interest Period would
         otherwise occur on a day other than a Business Day, the last day of
         such Interest Period shall occur on the next succeeding Business Day,
         provided that if such extension would cause the last day of such
         Interest Period to occur in the next following calendar month, the last
         day of such Interest Period shall occur on the next preceding Business
         Day; and

                  (iii) any Interest Period that commences on the last Business
         Day of a calendar month (or on a day for which there is no numerically
         corresponding day in the last calendar month of such Interest Period)
         shall end on the last Business Day of the last calendar month of such
         Interest Period.

         SECTION 3.04. OTHER TERMS RELATING TO THE MAKING AND CONVERSION OF
         LOANS.

                  (a) Notwithstanding anything in Section 3.01 or 3.02 to the
         contrary:

                                       23
<PAGE>

                  (i) each Borrowing shall consist of Loans of the same Type,
         having the same Interest Period (if applicable) and made or Converted
         on the same day by the Lenders ratably according to their respective
         Percentages;

                  (ii) at no time shall the number of Borrowings comprising
         Eurodollar Rate Loans outstanding hereunder be greater than seven (7);

                  (iii) no Eurodollar Rate Loan may be Converted on a date other
         than the last day of the Interest Period applicable to such Loan unless
         the corresponding amounts, if any, payable to the Lenders pursuant to
         Section 5.04(b) are paid contemporaneously with such Conversion;

                  (iv) if the Borrower shall either fail to give a timely Notice
         of Conversion pursuant to Section 3.02 in respect of any Loans or fail,
         in any Notice of Conversion that has been timely given, to select the
         duration of any Interest Period for Loans to be Converted into
         Eurodollar Rate Loans in accordance with Section 3.03, such Loans
         shall, on the last day of the then existing Interest Period therefor,
         automatically Convert into, or remain as, as the case may be, ABR
         Loans; and

                  (v) if, on the date of any proposed Conversion, any Event of
         Default or Default shall have occurred and be continuing, all Loans
         then outstanding shall, on such date, automatically Convert into, or
         remain as, as the case may be, ABR Loans.

                  (b) If any Lender shall notify the Administrative Agent that
the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Applicable Lending
Office to perform its obligations hereunder to make, or to fund or maintain,
Eurodollar Rate Loans hereunder, (i) the obligation of such Lender to make, or
to Convert Loans into, Eurodollar Rate Loans for such Borrowing or any
subsequent Borrowing from such Lender shall be forthwith suspended until the
earlier to occur of the date upon which (A) such Lender shall cease to be a
party hereto and (B) it is no longer unlawful for such Lender to make, fund or
maintain Eurodollar Rate Loans, and (ii) if the maintenance of Eurodollar Rate
Loans then outstanding through the last day of the Interest Period therefor
would cause such Lender to be in violation of such law, regulation or assertion,
the Borrower shall either prepay or Convert all Eurodollar Rate Loans from such
Lender within five days after such notice. Promptly upon becoming aware that the
circumstances that caused such Lender to deliver such notice no longer exist,
such Lender shall deliver notice thereof to the Administrative Agent (but the
failure to do so shall impose no liability upon such Lender). Promptly upon
receipt of such notice from such Lender (or upon such Lender's assigning all of
its Commitment, Loans, participation and other rights and obligations hereunder
to an Eligible Assignee), the Administrative Agent shall deliver notice thereof
to the Borrower and the Lenders and such suspension shall terminate.

                  (c) If the Required Lenders shall, at least one Business Day
before the date of any requested Borrowing, notify the Administrative Agent that
the Adjusted LIBO Rate for Eurodollar Rate Loans to be made in connection with
such Borrowing will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Loans for such
Borrowing, or that they are unable to acquire funding in a reasonable

                                       24
<PAGE>

manner so as to make available Eurodollar Rate Loans in the amount and for the
Interest Period requested, or if the Administrative Agent shall determine that
adequate and reasonable means do not exist to be able to determine the Adjusted
LIBO Rate, then the right of the Borrower to select Eurodollar Rate Loans for
such Borrowing and any subsequent Borrowing shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and each Loan to be made
or Converted in connection with such Borrowing shall be an ABR Loan.

                  (d) If any Lender shall have delivered a notice to the
Administrative Agent described in Section 3.04(b), or shall become a
non-performing Lender under Section 3.01(c), and if and so long as such Lender
shall not have withdrawn such notice or corrected such non-performance in
accordance with said Section 3.04(b) or Section 3.01(c), the Borrower or the
Administrative Agent may demand that such Lender assign in accordance with
Section 11.07, to one or more Eligible Assignees designated by the Borrower or
the Administrative Agent, all (but not less than all) of such Lender's
Commitment, Loans, participation and other rights and obligations hereunder;
provided that any such demand by the Borrower during the continuance of an Event
of Default or Default shall be ineffective without the consent of the Required
Lenders. If, within 30 days following any such demand by the Administrative
Agent or the Borrower, any such Eligible Assignee so designated shall fail to
consummate such assignment on terms reasonably satisfactory to such Lender, or
the Borrower and the Administrative Agent shall have failed to designate any
such Eligible Assignee, then such demand by the Borrower or the Administrative
Agent shall become ineffective, it being understood for purposes of this
provision that such assignment shall be conclusively deemed to be on terms
reasonably satisfactory to such Lender, and such Lender shall be compelled to
consummate such assignment forthwith, if such Eligible Assignee (i) shall agree
to such assignment in substantially the form of the Lender Assignment attached
hereto as Exhibit F and (ii) shall tender payment to such Lender in an amount
equal to the full outstanding dollar amount accrued in favor of such Lender
hereunder (as computed in accordance with the records of the Administrative
Agent), including, without limitation, all accrued interest and fees and, to the
extent not paid by the Borrower, any payments required pursuant to Section
5.04(b).

                  (e) Each Notice of Borrowing and Notice of Conversion shall be
irrevocable and binding on the Borrower. In the case of any Borrowing which the
related Notice of Borrowing or Notice of Conversion specifies is to be comprised
of Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill, on or before the date specified in such Notice of Borrowing or Notice
of Conversion for such Borrowing, the applicable conditions (if any) set forth
in this Article III (other than failure pursuant to the provisions of Section
3.04(b) or (c) hereof) or in Article VI, including any such loss (including loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to fund the
Loan to be made by such Lender when such Loan, as a result of such failure, is
not made on such date.

         SECTION 3.05. REPAYMENT OF LOANS; INTEREST

                                       25
<PAGE>

                  (a) Principal. The Borrower shall repay the outstanding
principal amount of the Loans on the Termination Date (or such earlier date as
may be required pursuant to Section 2.03).

                  (b) Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan owing to each Lender from the date of such Loan
until such principal amount shall be paid in full, at the Applicable Rate for
such Loan (except as otherwise provided in this subsection (b)), payable as
follows:

                  (i) ABR Loans. If such Loan is an ABR Loan, interest thereon
         shall be payable quarterly in arrears on the last day of each January,
         April, July and October, on the date of any Conversion of such ABR Loan
         and on the date such ABR Loan shall become due and payable or shall
         otherwise be paid in full; provided that any amount of principal that
         is not paid when due (whether at stated maturity, by acceleration or
         otherwise) shall bear interest, from the date on which such amount is
         due until such amount is paid in full, payable on demand, at a rate per
         annum equal at all times to the Default Rate.

                  (ii) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate
         Loan, interest thereon shall be payable on the last day of such
         Interest Period and, if the Interest Period for such Loan has a
         duration of more than three months, on that day of each third month
         during such Interest Period that corresponds to the first day of such
         Interest Period (or, if any such month does not have a corresponding
         day, then on the last day of such month); provided that any amount of
         principal that is not paid when due (whether at stated maturity, by
         acceleration or otherwise) shall bear interest, from the date on which
         such amount is due until such amount is paid in full, payable on
         demand, at a rate per annum equal at all times to the Default Rate.

                                   ARTICLE IV
                                   [RESERVED]

                                    ARTICLE V
                   PAYMENTS, COMPUTATIONS AND YIELD PROTECTION

         SECTION 5.01. PAYMENTS AND COMPUTATIONS.

                  (a) The Borrower shall make each payment hereunder and under
the other Loan Documents not later than 2:00 P.M. on the day when due in Dollars
to the Administrative Agent at its offices at 2 Penns Way, Suite 200, New
Castle, DE 19270, in same day funds; any payment received after 3:00 P.M. shall
be deemed to have been received at the start of business on the next succeeding
Business Day, unless the Administrative Agent shall have received from, or on
behalf of, the Borrower a Federal Reserve reference number with respect to such
payment before 4:00 P.M. The Administrative Agent will promptly thereafter cause
to be distributed like funds relating to the payment of principal, interest,
fees or other amounts payable to the Lenders, to the respective Lenders to which
the same are payable, for the account of their respective Applicable Lending
Offices, in each case to be applied in accordance with the terms of this
Agreement. If and to the extent that any distribution of any payment from the
Borrower required

                                       26
<PAGE>

to be made to any Lender pursuant to the preceding sentence shall not be made in
full by the Administrative Agent on the date such payment was received by the
Administrative Agent, the Administrative Agent shall pay to such Lender, upon
demand, interest on the unpaid amount of such distribution, at a rate per annum
equal to the Federal Funds Effective Rate, from the date of such payment by the
Borrower to the Administrative Agent to the date of payment in full by the
Administrative Agent to such Lender of such unpaid amount. Upon the
Administrative Agent's acceptance of a Lender Assignment and recording of the
information contained therein in the Register pursuant to Section 11.07, from
and after the effective date specified in such Lender Assignment, the
Administrative Agent shall make all payments hereunder and under any Promissory
Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Lender Assignment shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.

                  (b) The Borrower hereby authorizes the Administrative Agent
and each Lender, if and to the extent payment owed to the Administrative Agent
or such Lender, as the case may be, is not made when due hereunder (or, in the
case of a Lender, under any Promissory Note held by such Lender), to charge from
time to time against any or all of the Borrower's accounts with the
Administrative Agent or such Lender, as the case may be, any amount so due.

                  (c) All computations of interest based on the Alternate Base
Rate (when the Alternate Base Rate is based on the Prime Rate) shall be made by
the Administrative Agent on the basis of a year of 365 or 366 days, as the case
may be. All other computations of interest and fees hereunder (including
computations of interest based on the Adjusted LIBO Rate and the Federal Funds
Effective Rate) shall be made by the Administrative Agent on the basis of a year
of 360 days. In each such case, such computation shall be made for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest or fees are payable. Each such determination
by the Administrative Agent or a Lender shall be conclusive and binding for all
purposes, absent manifest error.

                  (d) Whenever any payment hereunder or under any other Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest
and fees hereunder; provided, however, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Loans to be made in the
next following calendar month, such payment shall be made on the next preceding
Business Day and such reduction of time shall in such case be included in the
computation of payment of interest hereunder.

                  (e) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date, and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, such Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender, together with
interest thereon, for each day from the date such

                                       27
<PAGE>

amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Effective Rate.

                  (f) Any amount payable by the Borrower hereunder or under any
of the Promissory Notes that is not paid when due (whether at stated maturity,
by acceleration or otherwise) shall (to the fullest extent permitted by law)
bear interest, from the date when due until paid in full, at a rate per annum
equal at all times to the Default Rate, payable on demand.

                  (g) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
interest and fees then due hereunder, such funds shall be applied, subject to
Section 5.07, (i) first, toward payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, toward payment of
principal then due hereunder, ratably among the parties entitled thereto.

         SECTION 5.02. INTEREST RATE DETERMINATION. The Administrative Agent
shall give prompt notice to the Borrower and the Lenders of the applicable
interest rate determined by the Administrative Agent for purposes of Section
3.05(b)(i) or (ii).

         SECTION 5.03. PREPAYMENTS. The Borrower shall have no right to prepay
any principal amount of any Loans other than as follows: The Borrower may (and
shall provide notice thereof to the Administrative Agent not later than 10:00
a.m. (New York City time) on the date of prepayment, and the Administrative
Agent shall promptly distribute copies thereof to the Lenders), and if such
notice is given, the Borrower shall, prepay the outstanding principal amounts of
Loans made as part of the same Borrowing, in whole or ratably in part, together
with (i) accrued interest to the date of such prepayment on the principal amount
prepaid and (ii) in the case of Eurodollar Rate Loans, any amount payable to the
Lenders pursuant to Section 5.04(b); provided, however, that each partial
prepayment shall be in an aggregate principal amount of not less than $5,000,000
or an integral multiple of $1,000,000 in excess thereof.

         SECTION 5.04. YIELD PROTECTION.

                  (a) Increased Costs. If, due to either (i) the introduction of
or any change in or in the interpretation of any law or regulation after the
Closing Date, or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) issued or made after the Closing Date, there shall be reasonably incurred
any increase in the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Loans, then the Borrower shall from time to time,
upon demand by such Lender (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost.
A certificate as to the amount of such increased cost and giving a reasonable
explanation thereof, submitted to the Borrower and the Administrative Agent by
such Lender shall constitute such demand and shall be conclusive and binding for
all purposes, absent manifest error.

                  (b) Breakage. If, due to any prepayment pursuant to Section
5.03, an acceleration of maturity of the Loans pursuant to Section 9.02, or any
other reason, any Lender

                                       28
<PAGE>

receives payments of principal of any Eurodollar Rate Loan other than on the
last day of the Interest Period relating to such Loan or if the Borrower shall
Convert any Eurodollar Rate Loans on any day other than the last day of the
Interest Period therefor, or if the Borrower shall fail to prepay a Eurodollar
Rate Loan on the date specified in a notice of prepayment, the Borrower shall,
promptly after demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender any amounts required to compensate such Lender for additional losses,
costs, or expenses (including anticipated lost profits) that such Lender may
reasonably incur as a result of such payment, Conversion or failure to prepay,
including any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Loan. For purposes of this subsection (b), a certificate setting
forth the amount of such additional losses, costs, or expenses and giving a
reasonable explanation thereof, submitted to the Borrower and the Administrative
Agent by such Lender, shall constitute such demand and shall be conclusive and
binding for all purposes, absent manifest error.

                  (c) Capital. If any Lender determines that (i) compliance with
any law or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender, whether directly, or indirectly as a result of commitments of any
corporation controlling such Lender (but without duplication), and (ii) the
amount of such capital is increased by or based upon (A) the existence of such
Lender's commitment to lend hereunder, or (B) the participation in or
maintenance of any Loan and (C) other similar such commitments, then, upon
demand by such Lender, the Borrower shall immediately pay to the Administrative
Agent for the account of such Lender from time to time as specified by such
Lender additional amounts sufficient to compensate such Lender in the light of
such circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the transactions contemplated hereby. A
certificate as to such amounts and giving a reasonable explanation thereof (to
the extent permitted by law), submitted to the Borrower and the Administrative
Agent by such Lender, shall be conclusive and binding for all purposes, absent
manifest error.

                  (d) Notices. Each Lender hereby agrees to use its best efforts
to notify the Borrower of the occurrence of any event referred to in subsection
(a), (b) or (c) of this Section 5.04 promptly after becoming aware of the
occurrence thereof. The failure of any Lender to provide such notice or to make
demand for payment under said subsection shall not constitute a waiver of such
Lender's rights hereunder; provided that, notwithstanding any provision to the
contrary contained in this Section 5.04, the Borrower shall not be required to
reimburse any Lender for any amounts or costs incurred under subsection (a), (b)
or (c) above, more than 90 days prior to the date that such Lender notifies the
Borrower in writing thereof, in each case unless, and to the extent that, any
such amounts or costs so incurred shall relate to the retroactive application of
any event notified to the Borrower which entitles such Lender to such
compensation. If any Lender shall subsequently determine that any amount
demanded and collected under this Section 5.04 was done so in error, such Lender
will promptly return such amount to the Borrower.

                  (e) Survival of Obligations. Subject to subsection (d) above,
the Borrower's obligations under this Section 5.04 shall survive the repayment
of all other amounts owing to the

                                       29
<PAGE>

Lenders and the Agents under the Loan Documents and the termination of the
Commitments. If and to the extent that the obligations of the Borrower under
this Section 5.04 are unenforceable for any reason, the Borrower agrees to make
the maximum contribution to the payment and satisfaction thereof which is
permissible under applicable law.

         SECTION 5.05. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans owing to it (other than pursuant
to Section 5.04 or Section 5.06) in excess of its ratable share of payments
obtained by all the Lenders on account of the Loans of such Lenders, such Lender
shall forthwith purchase from the other Lenders such participation in the Loans
owing to them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 5.05 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
Notwithstanding the foregoing, if any Lender shall obtain any such excess
payment involuntarily, such Lender may, in lieu of purchasing participations
from the other Lenders in accordance with this Section 5.05, on the date of
receipt of such excess payment, return such excess payment to the Administrative
Agent for distribution in accordance with Section 5.01(a).

         SECTION 5.06. TAXES.

                  (a) All payments by the Borrower hereunder and under the other
Loan Documents shall be made in accordance with Section 5.01, free and clear of
and without deduction for all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and each Agent, taxes imposed on its
overall net income, and franchise taxes imposed on it by the jurisdiction under
the laws of which such Lender or Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes imposed on
its overall net income, and franchise taxes imposed on it by the jurisdiction of
such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "TAXES"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any other Loan Document to any Lender or Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.06) such Lender or Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.

                                       30
<PAGE>

                  (b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under any other
Loan Document or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "OTHER TAXES").

                  (c) The Borrower will indemnify each Lender and Agent for the
full amount of Taxes and Other Taxes (including any Taxes and any Other Taxes
imposed by any jurisdiction on amounts payable under this Section 5.06) paid by
such Lender or Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within thirty (30) days from the date such
Lender or Agent (as the case may be) makes written demand therefor; provided,
that such Lender or Agent (as the case may be) shall not be entitled to demand
payment under this Section 5.06 for an amount if such demand is not made within
one year following the date upon which such Lender or Agent (as the case may be)
shall have been required to pay such amount.

                  (d) Within thirty (30) days after the date of any payment of
Taxes, the Borrower will furnish to the Administrative Agent, at its address
referred to in Section 11.02, the original or a certified copy of a receipt
evidencing payment thereof.

                  (e) Each Bank represents and warrants that either (i) it is
organized under the laws of a jurisdiction within the United States or (ii) it
has delivered to the Borrower or the Administrative Agent duly completed copies
of such form or forms prescribed by the United States Internal Revenue Service
indicating that such Bank is entitled to receive payments without deduction or
withholding of any United States federal income taxes, as permitted by the
Internal Revenue Code of 1986, as amended. Each other Lender agrees that, on or
prior to the date upon which it shall become a party hereto, and upon the
reasonable request from time to time of the Borrower or the Administrative
Agent, such Lender will deliver to the Borrower and the Administrative Agent (to
the extent that it is not prohibited by law from doing so) either (A) a
statement that it is organized under the laws of a jurisdiction within the
United States or (B) duly completed copies of such form or forms as may from
time to time be prescribed by the United States Internal Revenue Service,
indicating that such Lender is entitled to receive payments without deduction or
withholding of any United States federal income taxes, as permitted by the
Internal Revenue Code of 1986, as amended. Each Bank that has delivered, and
each other Lender that hereafter delivers, to the Borrower and the
Administrative Agent the form or forms referred to in the two preceding
sentences further undertakes to deliver to the Borrower and the Administrative
Agent, to the extent that it is not prohibited by law from doing so, further
copies of such form or forms, or successor applicable form or forms, as the case
may be, as and when any previous form filed by it hereunder shall expire or
shall become incomplete or inaccurate in any respect. Each Lender represents and
warrants that each such form supplied by it to the Administrative Agent and the
Borrower pursuant to this subsection (e), and not superseded by another form
supplied by it, is or will be, as the case may be, complete and accurate.

         SECTION 5.07.     APPORTIONMENT OF PAYMENTS.

                                       31
<PAGE>

                  (a) Subject to the provisions of Section 2.03 and Section
5.07(b), all payments of principal and interest in respect of outstanding Loans,
all payments of fees and all other payments in respect of any other Obligations
hereunder, shall be allocated among such of the Lenders as are entitled thereto,
ratably or otherwise as expressly provided herein. Except as provided in Section
5.07(b) with respect to payments and proceeds of Collateral received after the
occurrence of an Event of Default, all such payments and any other amounts
received by the Administrative Agent from or for the benefit of the Borrower
shall be applied

                  (i) first, to pay principal of and interest on any portion of
         the Loans which the Administrative Agent may have advanced on behalf of
         any Lender other than CUSA for which the Administrative Agent has not
         then been reimbursed by such Lender or the Borrower,

                  (ii) second, to pay interest on and then the principal of the
         Loans then due and payable (in the order described hereinbelow),

                  (iii) third, to pay all other Obligations of any Loan Party
         under any Loan Document then due and payable, ratably, and

                  (iv)  fourth, as the Borrower so designates.

All such principal and interest payments in respect of the Loans shall be
applied first to repay outstanding ABR Loans and then to repay outstanding
Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier
expiring Interest Periods being repaid prior to those which have later expiring
Interest Periods

                  (b) During the continuance of an Event of Default and after
declaration thereof by written notice from the Administrative Agent to the
Borrower, the Administrative Agent shall apply all payments in respect of any
Loans, and the Collateral Agent shall deliver all proceeds of Collateral to the
Administrative Agent for application, in the following order:

                  (i) first, to pay principal of and interest on any portion of
         the Loans which the Administrative Agent may have advanced on behalf of
         any Lender other than CUSA for which the Administrative Agent has not
         then been reimbursed by such Lender or the Borrower;

                  (ii) second, to pay any fees, expense reimbursements or
         indemnities then due to the Agents under any of the Loan Documents;

                  (iii) third, to pay any fees, expense reimbursements or
         indemnities then due to the Lenders under any of the Loan Documents;

                  (iv) fourth, to pay interest due in respect of the Loans,
         ratably, in accordance with the Lenders' respective Percentages;

                  (v) fifth, to the payment or prepayment of principal
         outstanding on all Loans;

                                       32
<PAGE>

                  (vi) sixth, to the ratable payment of all other Obligations of
         the Loan Parties then outstanding under the Loan Documents.

The order of priority set forth in this Section 5.07(b) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agents and the Lenders as among themselves.

         SECTION 5.08. PROCEEDS OF COLLATERAL. During the continuance of an
Event of Default and after declaration thereof by written notice from the
Administrative Agent to the Borrower, the Borrower shall cause all proceeds of
Collateral to be deposited pursuant to arrangements for the collection of such
amounts established by the Borrower and the Administrative Agent (or the
Collateral Agent, as applicable) for application pursuant to Section 5.07. All
collections of proceeds of Collateral which are received directly by the
Borrower or any Subsidiary of the Borrower shall be deemed to have been received
by the Borrower or such Subsidiary of the Borrower as the Collateral Agent's
trustee and, during the continuance of an Event of Default and after declaration
thereof by written notice from the Administrative Agent to the Borrower, upon
the Borrower's or such Subsidiary's receipt thereof, the Borrower shall
immediately transfer or cause to be transferred all such amounts to the
Administrative Agent for application pursuant to Section 5.07. All other
proceeds of Collateral received by the Collateral Agent and/or the
Administrative Agent, whether through direct payment or otherwise, will be
deemed received by such Agent, will be the sole property of such Agent, and will
be held by such Agent, for the benefit of the Lenders for application pursuant
to Section 5.07.

                                   ARTICLE VI
                              CONDITIONS PRECEDENT

         SECTION 6.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AGREEMENT. The effectiveness of this Agreement is subject to the fulfillment of
the following conditions precedent:

                  (a) The Administrative Agent shall have received, on or before
the Closing Date, the following, in form and substance satisfactory to each
Lender (except where otherwise specified below) and (except for any Promissory
Notes) in sufficient copies for each Lender:

                  (i) Certified copies of the resolutions of the Board of
         Directors, or of the Executive Committee of the Board of Directors, of
         the Borrower, each Guarantor and each other Grantor (each a "LOAN
         PARTY") authorizing each such Loan Party to enter into each Loan
         Document to which it is, or is to be, a party, and of all documents
         evidencing other necessary corporate action and Governmental Approvals,
         if any, with respect to each such Loan Document.

                  (ii) A certificate of the Secretary or an Assistant Secretary
         of each Loan Party certifying the names, true signatures and incumbency
         of (A) the officers of such Loan Party authorized to sign the Loan
         Documents to which it is, or is to be, a party, and the other documents
         to be delivered hereunder and thereunder and (B) the representatives of
         such Loan Party authorized to sign notices to be provided under the
         Loan Documents to

                                       33
<PAGE>

         which it is, or is to be, a party, which representatives shall be
         acceptable to the Administrative Agent.

                  (iii) Copies of the Certificate of Incorporation (or
         comparable charter document) and by-laws of each Loan Party, together
         with all amendments thereto, certified by the Secretary or an Assistant
         Secretary of each such Loan Party.

                  (iv) Good Standing Certificates (or other similar certificate)
         for each of the Loan Parties, issued by the Secretary of State of the
         jurisdiction of organization of each such Loan Party as of a recent
         date.

                  (v)  The Guaranty, duly executed by each Guarantor.

                  (vi) The Pledge Agreement, duly executed by each Grantor.

                  (vii) A certified copy of Schedule II hereto, in form and
         substance reasonably satisfactory to the Administrative Agent setting
         forth:

                           (A) all Project Finance Debt of the Consolidated
                  Subsidiaries, together with CMS Energy's Ownership Interest in
                  each such Consolidated Subsidiary, as of June 30, 2002; and

                           (B) debt (as such term is construed in accordance
                  with GAAP) of the Loan Parties as of June 30, 2002.

                  (viii) A certificate, executed by a duly authorized officer of
         the Borrower, confirming that attached thereto are true, correct and
         complete copies of the Three Year Facility and the 364 Day Facility, as
         in effect on the Closing Date.

                  (ix) Favorable opinions of:

                           (A) Michael D. VanHemert, Esq., Deputy General
                  Counsel of CMS Energy and counsel for the other Loan Parties,
                  in substantially the form of Exhibit C and as to such other
                  matters as the Required Lenders, through the Administrative
                  Agent, may reasonably request; and

                           (B) Skadden, Arps, Slate, Meagher & Flom LLP, special
                  counsel to the Loan Parties in substantially the form of
                  Exhibit D-1 and as to such other matters as the Administrative
                  Agent may reasonably request; and

                           (C) Hughes Hubbard & Reed LLP, special counsel to the
                  Loan Parties in substantially the form of Exhibit D-2 and as
                  to such other matters as the Administrative Agent may
                  reasonably request.

                  (b) The following statements shall be true and the
Administrative Agent shall have received a certificate of a duly authorized
officer of the Borrower, dated the Closing Date and in sufficient copies for
each Lender stating that:

                                       34
<PAGE>

                  (i) the representations and warranties set forth in Section
         7.01 of this Agreement are true and correct on and as of the Closing
         Date as though made on and as of such date,

                  (ii) no event has occurred and is continuing that constitutes
         a Default or an Event of Default, and

                  (iii) all Governmental Approvals necessary in connection with
         the Loan Documents and the transactions contemplated thereby have been
         obtained and are in full force and effect, and all third party
         approvals necessary or advisable in connection with the Loan Documents
         and the transactions contemplated thereby have been obtained and are in
         full force and effect, other than filings necessary to create or
         perfect security interests in the Collateral or as may be required
         under applicable energy, antitrust or securities laws in connection
         with the exercise of remedies with respect to certain Collateral.

                  (c) The Borrower shall have paid all fees under or referenced
in Section 2.02 and all expenses referenced in Section 11.04(a), in each case to
the extent then due and payable.

                  (d) The Administrative Agent shall have received evidence
satisfactory to it that all financing statements relating to the Collateral have
been completed for filing or recording, and all certificates representing
capital stock included in the Collateral have been delivered to the Collateral
Agent (with duly executed stock powers).

         SECTION 6.02. CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The
obligation of each Lender to make an Extension of Credit (including the initial
Extension of Credit, but excluding the Conversion of a Eurodollar Rate Loan into
an ABR Loan) shall be subject to the further conditions precedent that, on the
date of such Extension of Credit and after giving effect thereto:

                  (a) The following statements shall be true (and each of the
giving of the applicable notice or request with respect thereto and the making
of such Extension of Credit without prior correction by the Borrower shall (to
the extent that such correction has been previously consented to by the Lenders)
constitute a representation and warranty by the Borrower that, on the date of
such Extension of Credit, such statements are true):

                  (i) the representations and warranties contained in Section
         7.01 of this Agreement (other than those contained in subsections
         (e)(ii) and (f) thereof) are correct on and as of the date of such
         Extension of Credit, before and after giving effect to such Extension
         of Credit and to the application of the proceeds thereof, as though
         made on and as of such date; and

                  (ii) no Default or Event of Default has occurred and is
         continuing, or would result from such Extension of Credit or the
         application of the proceeds thereof.

                  (b) The Administrative Agent shall have received such other
approvals, opinions and documents as any Lender, through the Administrative
Agent, may reasonably request as to the legality, validity, binding effect or
enforceability of the Loan Documents or the

                                       35
<PAGE>
business, assets, property, financial condition, results of operations or
prospects of CMS Energy and its Consolidated Subsidiaries.

         SECTION 6.03. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of each Lender to make the initial Extension of Credit hereunder
shall be subject to the further conditions precedent that, on the date of such
Extension of Credit and after giving effect thereto:

                  (a) the following statements shall be true (and each of the
giving of the applicable notice or request with respect thereto and the making
of such Extension of Credit without prior correction by the Borrower shall (to
the extent that such correction has been previously consented to by the Lenders)
constitute a representation and warranty by the Borrower that, on the date of
such Extension of Credit, such statements are true):

                  (i) the representations and warranties contained in
         subsections (e)(ii) and (f) of Section 7.01 of this Agreement are
         correct on and as of the date of such Extension of Credit, before and
         after giving effect to such Extension of Credit and to the application
         of the proceeds thereof, as though made on and as of such date; and

                  (ii) no Default or Event of Default has occurred and is
         continuing, or would result from such Extension of Credit or the
         application of the proceeds thereof; and

                  (b) the Administrative Agent shall have received such other
approvals, opinions and documents as any Lender, through the Administrative
Agent, may reasonably request; and

                  (c) the Administrative Agent shall have received, on or before
the day of the initial Extension of Credit, in form and substance satisfactory
to it, a certificate, executed by a duly authorized officer of the Borrower,
confirming that attached thereto is a true, correct and complete copy of the
credit agreements and other instruments evidencing the refinancing and/or
replacement of Consumer's existing $300,000,000 senior credit facilities (such
refinancing and/or replacement, as amended, restated, refunded, replaced,
supplemented or otherwise modified from time to time being the "CONSUMERS CREDIT
FACILITY"), as in effect on the date of such certificate.

         SECTION 6.04. RELIANCE ON CERTIFICATES. The Lenders and each Agent
shall be entitled to rely conclusively upon the certificates delivered from time
to time by officers of the Borrower as to the names, incumbency, authority and
signatures of the respective persons named therein until such time as the
Administrative Agent may receive a replacement certificate, in form acceptable
to the Administrative Agent, from an officer of such Person identified to the
Administrative Agent as having authority to deliver such certificate, setting
forth the names and true signatures of the officers and other representatives of
such Person thereafter authorized to act on behalf of such Person.

                                   ARTICLE VII
                         REPRESENTATIONS AND WARRANTIES

                                       36
<PAGE>

         SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:

                  (a) Each of CMS Energy, Consumers and each of the Restricted
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is duly qualified
to do business in, and is in good standing in, all other jurisdictions where the
nature of its business or the nature of property owned or used by it makes such
qualification necessary.

                  (b) The execution, delivery and performance by Loan Party of
each Loan Document to which it is or will be a party (i) are within such Loan
Party's powers, (ii) have been duly authorized by all necessary corporate or
other organizational action or proceedings and (iii) do not and will not (A)
require any consent or approval of the stockholders (or other applicable holder
of equity) of such Loan Party (other than such consents and approvals which have
been obtained and are in full force and effect), (B) violate any provision of
the charter or by-laws (or other comparable constitutive documents) of such Loan
Party or of law, (C) violate any legal restriction binding on or affecting such
Loan Party, (D) result in a breach of, or constitute a default under, any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Loan Party is a party or by which it or its properties
may be bound or affected, or (E) result in or require the creation of any Lien
(other than pursuant to the Loan Documents and pursuant to the "Loan Documents"
as defined in each of the Three Year Facility and the 364 Day Facility) upon or
with respect to any of its respective properties.

                  (c) No Governmental Approval is required, other than filings
necessary to create or perfect security interests in the Collateral or as may be
required under applicable energy, antitrust or securities laws in connection
with the exercise of remedies with respect to certain Collateral.

                  (d) Each Loan Document executed on the Closing Date is, and
each other Loan Document to which any Loan Party will be a party when executed
and delivered hereunder will (i) where applicable, create valid and, upon filing
of the financing statements delivered on the Closing Date and described in
Section 6.01(d), perfected Liens in the Collateral covered thereby securing the
payment of all of the Loans purported to be secured thereby, which Liens shall
be first perfected Liens, and (ii) be, legal, valid and binding obligations of
such Loan Party enforceable against such Loan Party in accordance with their
respective terms; subject to the qualification, however, that the enforcement of
the rights and remedies herein and therein is subject to bankruptcy and other
similar laws of general application affecting rights and remedies of creditors
and the application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law).

                  (e) (i) The consolidated balance sheet of CMS Energy and its
Consolidated Subsidiaries as at December 31, 2001, and the related consolidated
statements of income, retained earnings and cash flows of CMS Energy and its
Consolidated Subsidiaries for the fiscal year then ended, included in CMS
Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 2001,
and the unaudited consolidated balance sheet of CMS Energy and its Consolidated
Subsidiaries as at March 31, 2002, and the related unaudited consolidated
statements of income, retained earnings and cash flows for the three-month
period then ended, in

                                       37

<PAGE>

each case as such financial statements are proposed to be restated as disclosed
in CMS Energy's Forms 8-K filed with the Securities and Exchange Commission on
May 29, 2002 and June 11, 2002, copies of each of which have been furnished to
each Lender, fairly present (subject, in the case of such balance sheet and
statement of income for the three months ended March 31, 2002, to year-end
adjustments) the financial condition of CMS Energy and its Consolidated
Subsidiaries as at such dates and the results of operations of CMS Energy and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with generally accepted accounting principles consistently applied;
(ii) since March 31, 2002, except as disclosed in the CMS Energy's Quarterly
Report on Form 10-Q for the period ended March 31, 2002 and in the Current
Reports on Form 8-K filed by CMS Energy on May 29, 2002 and June 11, 2002, there
has been no Material Adverse Change; and (iii) no Loan Party has any material
liabilities or obligations except as reflected in the foregoing financial
statements and in Schedule II, as evidenced by the Loan Documents and as may be
incurred, in accordance with the terms of this Agreement, in the ordinary course
of business (as presently conducted) following the Closing Date.

                  (f) Except (i) as disclosed in CMS Energy's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, CMS Energy's Quarterly
Report on Form 10-Q for the period ended March 31, 2002, and the Current Report
on Form 8-K filed by CMS Energy on May 29, 2002, and (ii) such other similar
actions, suits and proceedings predicated on the occurrence of the same events
giving rise to any actions, suits and proceedings described in the Reports filed
with the Securities and Exchange Commission set forth in clause (i) hereof,
there are no pending or threatened actions, suits or proceedings against or, to
the knowledge of CMS Energy, affecting CMS Energy or any of its Subsidiaries or
the properties of CMS Energy or any of its Subsidiaries before any court,
governmental agency or arbitrator, that would, if adversely determined,
reasonably be expected to materially adversely affect the financial condition,
properties, business or operations of CMS Energy and its Subsidiaries,
considered as a whole, or affect the legality, validity or enforceability of
this Agreement or any other Loan Document.

                  (g) All insurance required by Section 8.01(b) is in full force
and effect.

                  (h) No Plan Termination Event has occurred nor is reasonably
expected to occur with respect to any Plan of CMS Energy or any of its ERISA
Affiliates which would result in a material liability to CMS Energy, except as
disclosed and consented to by the Required Lenders in writing from time to time.
Since the date of the most recent Schedule B (Actuarial Information) to the
annual report of CMS Energy (Form 5500 Series), if any, there has been no
material adverse change in the funding status of the Plans referred therein and
no "prohibited transaction" has occurred with respect thereto which is
reasonably expected to result in a material liability to CMS Energy. Neither CMS
Energy nor any of its ERISA Affiliates has incurred nor reasonably expects to
incur any material withdrawal liability under ERISA to any Multiemployer Plan,
except as disclosed and consented to by the Required Lenders in writing from
time to time.

                  (i) No fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the
public enemy or other casualty (except for any such circumstance, if any, which
is covered by insurance which coverage has been confirmed and not disputed by
the relevant insurer) affecting the properties, business or

                                       38
<PAGE>

operations of CMS Energy, Consumers or any Restricted Subsidiary has occurred
that could reasonably be expected to have a material adverse effect on the
business, assets, property, financial condition, results of operations or
prospects of (A) CMS Energy and its Subsidiaries, considered as a whole, or (B)
Consumers and its Subsidiaries, considered as a whole.

                  (j) CMS Energy and its Subsidiaries have filed all tax returns
(Federal, state and local) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, or, to the extent CMS Energy or any
of its Subsidiaries is contesting in good faith an assertion of liability based
on such returns, has provided adequate reserves for payment thereof in
accordance with GAAP.

                  (k) No extraordinary judicial, regulatory or other legal
constraints exist which limit or restrict Consumers' ability to declare or pay
cash dividends with respect to its capital stock, other than pursuant to the
Consumers Credit Facility.

                  (l) CMS Energy owns not less than 80% of the outstanding
shares of common stock of the Borrower.

                  (m) CMS Energy owns not less than 80% of the outstanding
shares of common stock of Consumers.

                  (n) The Consolidated 2002-2006 Projections of Consumers, CMS
Energy and the Borrower (the "PROJECTIONS"), copies of which have been
distributed to the Banks in the Confidential Information Memorandum dated June
2002 (the "CONFIDENTIAL INFORMATION MEMORANDUM"), are based upon assumptions
that the Borrower believed were reasonable at the time the Projections were
delivered, and all other financial information contained in the Confidential
Information Memorandum or otherwise delivered by the Borrower to the
Administrative Agent and the Banks on and after June 11, 2002 is true and
correct in all material respects as at the dates and for the periods indicated
therein.

                  (o) No Loan Party is engaged in the business of extending
credit for the purpose of buying or carrying margin stock (within the meaning of
Regulation U issued by the Board), and no proceeds of any Loan will be used to
buy or carry any margin stock or to extend credit to others for the purpose of
buying or carrying any margin stock.

                  (p) No Loan Party is an investment company (within the meaning
of the Investment Company Act of 1940, as amended).

                  (q) No proceeds of any Extension of Credit will be used to
acquire any security in any transaction without the approval of the board of
directors of the Person issuing such security if (i) the acquisition of such
security would cause CMS Energy to own, directly or indirectly, 5.0% or more of
any outstanding class of securities issued by such Person, or (ii) such security
is being acquired in connection with a tender offer.

                  (r) Following application of the proceeds of each Extension of
Credit, not more than 25 percent of the value of the assets of the Borrower and
its Subsidiaries on a consolidated basis will be margin stock (within the
meaning of Regulation U issued by the Board).

                                       39
<PAGE>

                  (s) Borrower, each Guarantor and Consumers are exempt from the
registration requirements of the Public Utility Holding Company Act of 1935, as
amended, 15 USC 79 et seq.

                  (t) The Borrower has not withheld any fact from the
Administrative Agent or the Lenders in regard to the occurrence of any Material
Adverse Change.

                  (u) After giving effect to the Loans to be made on the Closing
Date or such other date as Loans requested hereunder are made, and the
disbursement of the proceeds of such Loans pursuant to the Borrower's
instructions, CMS Energy and its Subsidiaries, taken as a whole, are Solvent.

                  (v) Schedule II sets forth as of June 30, 2002 (i) all Project
Finance Debt of the Consolidated Subsidiaries, and (ii) debt (as such term is
construed in accordance with GAAP) of the Loan Parties, and, as of the Closing
Date, there are no defaults in the payment of principal or interest on any such
Debt and no payments thereunder have been deferred or extended beyond their
stated maturity (except as disclosed on such Schedule).

                                  ARTICLE VIII
                            COVENANTS OF THE BORROWER

         SECTION 8.01. AFFIRMATIVE COVENANTS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid or any
Lender shall have any Commitment:

                  (a) Payment of Taxes, Etc. CMS Energy shall pay and discharge,
and each of its Subsidiaries shall pay and discharge, before the same shall
become delinquent, all taxes, assessments and governmental charges, royalties or
levies imposed upon it or upon its property except, in the case of taxes, to the
extent CMS Energy or any Subsidiary, as the case may be, is contesting the same
in good faith and by appropriate proceedings and has set aside adequate reserves
for the payment thereof in accordance with GAAP.

                  (b) Maintenance of Insurance. CMS Energy shall maintain, and
each of its Restricted Subsidiaries and Consumers shall maintain, insurance
covering CMS Energy, each of its Restricted Subsidiaries, Consumers and their
respective properties in effect at all times in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general geographical area in which CMS
Energy, its Restricted Subsidiaries and Consumers operates, either with
reputable insurance companies or, in whole or in part, by establishing reserves
of one or more insurance funds, either alone or with other corporations or
associations.

                  (c) Preservation of Existence, Etc. CMS Energy shall preserve
and maintain, and each of its Restricted Subsidiaries and Consumers shall
preserve and maintain, its corporate existence, material rights (statutory and
otherwise) and franchises, and take such other action as may be necessary or
advisable to preserve and maintain its right to conduct its business in the
states where it shall be conducting its business.

                                       40

<PAGE>
                  (d) Compliance with Laws, Etc. CMS Energy shall comply, and
each of its Restricted Subsidiaries and Consumers shall comply, in all material
respects with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, including any such laws, rules,
regulations and orders relating to zoning, environmental protection, use and
disposal of Hazardous Substances, land use, construction and building
restrictions, and employee safety and health matters relating to business
operations.

                  (e) Inspection Rights. Subject to the requirements of laws or
regulations applicable to CMS Energy or its Subsidiaries, as the case may be,
and in effect at the time, at any time and from time to time upon reasonable
notice, CMS Energy shall permit (i) each Agent and its agents and
representatives to examine and make copies of and abstracts from the records and
books of account of, and the properties of, CMS Energy or any of its
Subsidiaries and (ii) each Agent, each of the Lenders, and their respective
agents and representatives to discuss the affairs, finances and accounts of CMS
Energy and its Subsidiaries with CMS Energy and its Subsidiaries and their
respective officers, directors and accountants. Each such visitation and
inspection described in the preceding sentence (i) by or on behalf of any Lender
shall, unless occurring at a time when a Default or Event of Default shall be
continuing, be at such Lender's expense and (ii) by or on behalf of the
Administrative Agent, other than the first two visitations and inspections
occurring during any calendar year or any visitations and inspections occurring
at a time when a Default or Event of Default shall be continuing, shall be at
the Administrative Agent's expense; all other such inspections and visitations
shall be at the Borrower's expense.

                  (f) Keeping of Books. CMS Energy shall keep, and each of its
Subsidiaries shall keep, proper records and books of account, in which full and
correct entries shall be made of all financial transactions of CMS Energy and
its Subsidiaries and the assets and business of CMS Energy and its Subsidiaries,
in accordance with GAAP.

                  (g) Maintenance of Properties, Etc. CMS Energy shall maintain,
and each of its Restricted Subsidiaries shall maintain, in substantial
conformity with all laws and material contractual obligations, good and
marketable title to all of its properties which are used or useful in the
conduct of its business; provided, however, that the foregoing shall not
restrict the sale of any asset of CMS Energy or any Restricted Subsidiary to the
extent not prohibited by Section 8.02(i). In addition, CMS Energy shall
preserve, maintain, develop, and operate, and each of its Subsidiaries shall
preserve, maintain, develop and operate, in substantial conformity with all laws
and material contractual obligations, all of its material properties which are
used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.

                  (h) Use of Proceeds. The Borrower shall use all Extensions of
Credit for general corporate purposes (subject to the terms and conditions of
this Agreement).

                  (i) Consolidated Leverage Ratio. CMS Energy shall maintain, as
of the last day of each fiscal quarter (in each case, the "MEASUREMENT
QUARTER"), a maximum ratio of (i) Consolidated Debt for the immediately
preceding four-fiscal-quarter period ending on the last day of such Measurement
Quarter, to (ii) Consolidated EBITDA for such period, of not more than 5.75 to
1.00, commencing with the period ending June 30, 2002.

                                       41
<PAGE>
                  (j) Cash Dividend Coverage Ratio. CMS Energy shall maintain,
as of the last day of each Measurement Quarter, a minimum ratio of (i) the sum
of (A) Cash Dividend Income for the four-fiscal-quarter period ending on such
day (except that, with respect to each Measurement Quarter ending in 2002, such
ratio shall be calculated for the period from January 1, 2002 through and
including the last day of such Measurement Quarter), plus (B) 25% of the amount
of Equity Distributions received by CMS Energy during such period but in no
event in excess of $10,000,000, plus (C) all amounts received by CMS Energy from
its Subsidiaries and Affiliates during such period constituting reimbursement of
interest expense and commitment, guaranty and letter of credit charges of CMS
Energy to such Subsidiary or Affiliate to (ii) interest expense (including
commitment, guaranty and letter of credit fees) accrued by CMS Energy in respect
of all Debt during such period of not less than 1.25 to 1.00, commencing with
the Measurement Quarter ending on June 30, 2002; provided, that CMS Energy shall
be deemed not to be in breach of the foregoing covenant if, during the
Measurement Quarter, it has permanently reduced the "Commitments" and the
principal amount outstanding under either of the Three Year Facility and/or the
364 Day Facility and the "Promissory Notes" thereunder (and as such terms are
defined therein) such that the amount determined pursuant to clause (ii) above,
when recalculated on a pro forma basis assuming that the amount of such reduced
commitments and principal amount outstanding under such agreements and
promissory notes were in effect at all times during such four-fiscal-quarter
period, would result in CMS Energy being in compliance with such ratio.

                  (k) Further Assurances. The Borrower shall promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that any Lender through the Administrative Agent may
reasonably request in order to give effect to the transactions contemplated by
this Agreement and the other Loan Documents. In addition, the Borrower will use
all reasonable efforts to duly obtain or make Governmental Approvals required
from time to time on or prior to such date as the same may become legally
required.

                  (l) Subsidiary Guarantees. CMS Energy will (i) with respect to
each Person that becomes a Restricted Subsidiary after the Closing Date (other
than (a) any Subsidiary of CMS Energy organized under the laws of a jurisdiction
located other than in the United States (each a "FOREIGN SUBSIDIARY") if the
execution of the Guaranty by such Subsidiary would result in any materially
adverse tax consequences to CMS Energy, (b) Panhandle and its Subsidiaries, and
(c) MS&T), subject to any limitations under contractual restrictions as in
effect as of the Closing Date or applicable law with respect to each Foreign
Subsidiary, cause each such Restricted Subsidiary to execute the Guaranty
pursuant to which it agrees to be bound by the terms and provisions of the
Guaranty, and (ii) cause such Persons identified in clause (i) above to deliver
corporate resolutions, opinions of counsel and such other corporate
documentation as the Administrative Agent may reasonably request, all in form
and substance reasonably satisfactory to the Administrative Agent.

         SECTION 8.02. NEGATIVE COVENANTS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid or any
Lender shall have any Commitment, CMS Energy shall not, without the written
consent of the Required Lenders:

                  (a) Liens, Etc. (1) Create, incur, assume or suffer to exist,
or permit any of the other Loan Parties to create, incur, assume or suffer to
exist, any lien, security interest, or

                                       42
<PAGE>
other charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any kind, or any other type of arrangement intended or
having the effect of conferring upon a creditor a preferential interest upon or
with respect to any of its properties of any character (including capital stock
of Consumers, the Borrower, CMS Oil and Gas Company and any of CMS Energy's
other directly-owned Subsidiaries, intercompany obligations and accounts) (any
of the foregoing being referred to herein as a "LIEN"), whether now owned or
hereafter acquired, or (2) file, or permit any of the other Loan Parties to
file, under the Uniform Commercial Code of any jurisdiction a financing
statement which names CMS Energy or any other Loan Party as debtor (other than
financing statements that do not evidence a Lien), or (3) sign, or permit any of
the other Loan Parties to sign, any security agreement authorizing any secured
party thereunder to file such financing statement, or (4) assign, or permit any
of the other Loan Parties to assign, accounts, excluding, however, from the
operation of the foregoing restrictions the Liens created under the Loan
Documents and the following:

                  (i) Liens for taxes, assessments or governmental charges or
         levies to the extent not past due;

                  (ii) cash pledges or deposits to secure (A) obligations under
         workmen's compensation laws or similar legislation, (B) public or
         statutory obligations of CMS Energy or any of the other Loan Parties,
         (C) Support Obligations of CMS Energy or any Loan Party, or (D)
         obligations of MS&T in respect of hedging arrangements and commodity
         purchases and sales (including any cash margins with respect thereto);
         provided that the aggregate amount of pledges or deposits securing such
         Support Obligations and obligations of MS&T shall not exceed
         $125,000,000 at any one time outstanding;

                  (iii) Liens imposed by law, such as materialmen's, mechanics',
         carriers', workmen's and repairmen's liens and other similar Liens
         arising in the ordinary course of business securing obligations which
         are not overdue or which have been fully bonded and are being contested
         in good faith;

                  (iv) Liens securing the obligations under the Loan Documents
         and under the "Loan Documents" as defined in each of the Three Year
         Facility and the 364 Day Facility;

                  (v) Liens securing Off-Balance Sheet Liabilities (and all
         refinancings and recharacterizations thereof permitted under Section
         8.02(b)(iv)) in an aggregate amount not to exceed $725,000,000;

                  (vi) purchase money Liens or purchase money security interests
         upon or in property acquired or held by CMS Energy or any of the other
         Loan Parties in the ordinary course of business to secure the purchase
         price of such property or to secure indebtedness incurred solely for
         the purpose of financing the acquisition of any such property to be
         subject to such Liens or security interests, or Liens or security
         interests existing on any such property at the time of acquisition, or
         extensions, renewals or replacements of any of the foregoing for the
         same or a lesser amount, provided that no such Lien or security
         interest shall extend to or cover any property other than the property
         being acquired and

                                       43
<PAGE>
         no such extension, renewal or replacement shall extend to or cover
         property not theretofore subject to the Lien or security interest being
         extended, renewed or replaced, and provided, further, that the
         aggregate principal amount of the Debt at any one time outstanding
         secured by Liens permitted by this clause (vi) shall not exceed
         $10,000,000;

                  (vii) Utility easements, building restrictions and such other
         encumbrances or charges against real property as are of a nature
         generally existing with respect to properties of a similar character
         and which do not in any material way affect the marketability of the
         same or interfere with the use thereof in the business of CMS Energy or
         any other Loan Party;

                  (viii) Liens existing on any capital asset of any Person at
         the time such Person is merged or consolidated with or into, or
         otherwise acquired by, CMS Energy or any other Loan Party and not
         created in contemplation of such event, provided that such Liens do not
         encumber any other property or assets and such merger, consolidation or
         acquisition is otherwise permitted under this Agreement;

                  (ix) Liens existing on any capital asset prior to the
         acquisition thereof by CMS Energy or any other Loan Party and not
         created in contemplation thereof; provided that such Liens do not
         encumber any other property or assets;

                  (x)  Liens existing as of the Closing Date;

                  (xi) Liens securing Project Finance Debt otherwise permitted
         under this Agreement;

                  (xii) Liens arising out of the refinancing, extension, renewal
         or refunding of any Debt secured by any Lien permitted by any of the
         foregoing clauses (v), (viii), (ix), (x) or (xi); provided that (a)
         such Debt is not secured by any additional assets, and (b) the amount
         of such Debt secured by any such Lien is otherwise permitted under this
         Agreement; and

                  (xiii) Liens on accounts receivable (other than intercompany
         receivables) and other contract rights of MS&T and its Subsidiaries
         arising on or after the Closing Date in favor of any Person (other than
         an Affiliate of CMS Energy or any of its Subsidiaries) that facilitates
         the origination of such accounts receivable or other contract rights.

                  (b) Borrower Debt. Permit the Borrower or any Subsidiary of
the Borrower (other than Panhandle and its Subsidiaries) to create, incur,
assume or suffer to exist any debt (as such term is construed in accordance with
GAAP) other than:

                  (i) debt arising by reason of the endorsement of negotiable
         instruments for deposit or collection or similar transactions in the
         ordinary course of the Borrower's or its Subsidiaries' business;

                  (ii) in the form of indemnities in respect of unfiled
         mechanics' liens and Liens affecting the Borrower's or its
         Subsidiaries' properties permitted under Section 8.02(a)(iii);

                                       44
<PAGE>
                  (iii) debt arising under the Loan Documents and under the
         "Loan Documents" as defined in each of the Three Year Facility and the
         364 Day Facility;

                  (iv) debt constituting Off-Balance Sheet Liabilities
         (including any recharacterization thereof as debt pursuant to any
         changes in generally accepted accounting principles hereafter required
         or permitted and which are adopted by CMS Energy or any of its
         Subsidiaries with the agreement of its independent certified public
         accountants) to the extent permitted by Section 8.02(o), and any
         extensions, renewals, refundings or replacements thereof, provided that
         any such extension, renewal, refunding or replacement is in an
         aggregate principal amount not greater than the principal amount of, is
         an obligation of the same Person that is the obligor in respect of, and
         has a weighted average life to maturity not less than the weighted
         average life to maturity of, the debt so extended, renewed, refunded or
         replaced;

                  (v) other debt of the Borrower and its Subsidiaries
         outstanding on the Closing Date (including the debt of the Loan Parties
         as of June 30, 2002 as set forth on Schedule II), and any extensions,
         renewals, refundings or replacements thereof, provided that any such
         extension, renewal, refunding or replacement is in an aggregate
         principal amount not greater than the principal amount of, is an
         obligation of the same Person that is the obligor in respect of, and
         has a weighted average life to maturity not less than the weighted
         average life to maturity of, the debt so extended, renewed, refunded or
         replaced;

                  (vi) (a) unsecured, subordinated debt owed (i) to CMS Energy
         by the Borrower, (ii) to the Borrower or CMS Capital, L.L.C. (or any
         successor by merger to CMS Capital, L.L.C.) and (iii) to any Grantor by
         any Loan Party, and (b) unsecured debt owed to any Subsidiary of the
         Borrower (other than a Grantor) by CMS Capital, L.L.C. (or any
         successor by merger to CMS Capital, L.L.C.), and (c) unsecured debt of
         any Foreign Subsidiary of the Borrower owed to another Foreign
         Subsidiary of the Borrower provided that the proceeds of any repayment
         of such debt are remitted to a Loan Party;

                  (vii) Project Finance Debt of any Loan Party or any of its
         Subsidiaries incurred on or after the Closing Date, provided that the
         Net Proceeds thereof shall be applied in accordance with Section 2.03
         if required to be so applied; and

                  (viii) capital lease obligations and other Debt secured by
         purchase money Liens to the extent such Liens shall be permitted under
         Section 8.02(a)(vi).

                  (c) Lease Obligations. Create, incur, assume or suffer to
exist, or permit any of the other Loan Parties to create, incur, assume or
suffer to exist, any obligations as lessee for the rental or hire of real or
personal property of any kind under leases or agreements to lease (other than
leases which constitute Debt) having an original term of one year or more which
would cause the aggregate direct or contingent liabilities of CMS Energy and the
other Loan Parties in respect of all such obligations payable in any period of
12 consecutive calendar months to exceed $50,000,000.

                  (d) Investments in Other Persons. Make, or permit any of the
other Loan Parties to make, any loan or advance to any Person or purchase or
otherwise acquire any capital

                                       45
<PAGE>
stock, obligations or other securities of, make any capital contribution to, or
otherwise invest in, any Person, other than (i) Permitted Investments, (ii)
pursuant to the contractual obligations of CMS Energy or any other Loan Party as
in effect as of the Closing Date, (iii) investments by any Loan Party in the
capital of any Subsidiary of CMS Energy that is a Loan Party, (iv) investments
in the capital stock of any of CMS Energy's Subsidiaries arising from the
conversion of intercompany indebtedness to equity, (v) loans and advances by any
Loan Party to another Loan Party to the extent permitted under Section
8.02(b)(vi), (vi) investments constituting non-cash consideration received in
connection with the sale of any asset permitted under Section 8.02(i), and (vii)
additional loans, advances, purchases, contributions and other investments in an
amount not to exceed $150,000,000 in the aggregate at any time; provided,
however, that investments described in clauses (iv) (solely with respect to
investments made in any Subsidiary that is not a Loan Party) and (vii) above
shall not be permitted to be made at a time when either a Default or an Event of
Default shall be continuing or would result therefrom.

                  (e) Restricted Payments. Declare or pay, or permit any other
Loan Party to declare or pay, directly or indirectly, any dividend, payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any share of any class of capital stock of CMS Energy
or any of the other Loan Parties (other than (1) stock splits and dividends
payable solely in nonconvertible equity securities of CMS Energy and (2)
distributions made to CMS Energy or a Loan Party), or purchase, redeem, retire,
or otherwise acquire for value, or permit any of the other Loan Parties to
purchase, redeem, retire, or otherwise acquire for value, any shares of any
class of capital stock of CMS Energy or any of the other Loan Parties or any
warrants, rights, or options to acquire any such shares, now or hereafter
outstanding, or make, or permit any of the other Loan Parties to make, any
distribution of assets to any of its shareholders (other than distributions to
CMS Energy or any other Loan Party) (any such dividend, payment, distribution,
purchase, redemption, retirement or acquisition being hereinafter referred to as
a "RESTRICTED PAYMENT"), unless (i) no Default or Event of Default has occurred
and is continuing or would occur as a result of such Restricted Payment, (ii)
after giving effect thereto, the aggregate amount of all such Restricted
Payments made by CMS Energy during any fiscal quarter shall not exceed an amount
in the aggregate equal to $0.1825 multiplied by the aggregate number of issued
and outstanding shares of common stock of CMS Energy (exclusive of any common
stock held by CMS Energy or any of its Subsidiaries, other than common stock
held by Consumers and the Borrower as of the Closing Date) as of the record date
for such fiscal quarter, and (iii) with respect to any Restricted Payment to be
made on or after January 1, 2003, on or prior to December 31, 2002 CMS Energy
shall have received not less than $250,000,000 of Net Proceeds from the issuance
of equity or equity-linked securities of CMS Energy and shall have applied such
Net Proceeds in accordance with Section 2.03; provided, however, that the
foregoing shall not prohibit (1) pursuant to the terms of any class of capital
stock of CMS Energy issued and outstanding (and as in effect on) the Closing
Date, any purchase or redemption of capital stock of CMS Energy made by exchange
for, or out of the proceeds of the substantially concurrent sale of, capital
stock of CMS Energy (other than Redeemable Stock or Exchangeable Stock (as such
terms are defined in the Indenture on the Closing Date)), provided that such
purchase or redemption shall be excluded from the calculation of the amount of
Restricted Payments permitted by this subsection (e); (2) Restricted Payments
made within 60 days after the date of declaration thereof if at such date of
declaration such Restricted Payment would have complied with this subsection
(e), provided that at the time of payment of such Restricted Payment, no Default
or Event of Default shall have occurred and be continuing (or result

                                       46
<PAGE>
therefrom), and provided further that such Restricted Payments shall be included
(without duplication) in the calculation of the amount of Restricted Payments
permitted by this subsection (e), and provided further that with respect to any
Restricted Payment to be paid after December 31, 2002, CMS Energy shall have
received not less than $250,000,000 of Net Proceeds from the issuance of equity
or equity-linked securities of CMS Energy and shall have applied such Net
Proceeds in accordance with Section 2.03 on or prior to the date of declaration
thereof; or (3) payments made by CMS Energy or any other Loan Party pursuant to
the Tax Sharing Agreement. For purposes of this subsection (e), the amount of
any Restricted Payment not in the form of cash shall be the fair market value of
such Restricted Payment as determined in good faith by the Board of Directors of
CMS Energy, provided that if the value of the non-cash portion of such
Restricted Payment as determined by CMS Energy's Board of Directors is in excess
of $25,000,000, such value shall be based on an opinion from a
nationally-recognized firm acceptable to the Administrative Agent experienced in
the appraisal of similar types of property or transactions.

                  (f) Compliance with ERISA. (i) Permit to exist any
"accumulated funding deficiency" (as defined in Section 412(a) of the Internal
Revenue Code of 1986, as amended), (ii) terminate, or permit any ERISA Affiliate
to terminate, any Plan or withdraw from, or permit any ERISA Affiliate to
withdraw from, any Multiemployer Plan, so as to result in any material (in the
opinion of the Required Lenders) liability of CMS Energy, any other Loan Party
or Consumers to the PBGC, or (iii) permit to exist any occurrence of any
Reportable Event (as defined in Title IV of ERISA), or any other event or
condition, which presents a material (in the opinion of the Required Lenders)
risk of such a termination by the PBGC of any Plan or withdrawal from any
Multiemployer Plan and such a material liability to CMS Energy, any other Loan
Party or Consumers.

                  (g) Transactions with Affiliates. Enter into, or permit any of
its Subsidiaries to enter into, any transaction with any of its Affiliates
unless such transaction is on terms no less favorable to CMS Energy or such
Subsidiary than if the transaction had been negotiated in good faith on an
arm's-length basis with a non-Affiliate.

                  (h) Mergers, Etc. Merge with or into or consolidate with or
into, or permit any of the other Loan Parties or Consumers to merge with or into
or consolidate with or into, any other Person, except that (i) any Loan Party
may merge with or into any other Loan Party (other than CMS Energy), provided
that (a) no Default or Event of Default shall be continuing or result therefrom
and (b) such Loan Party shall not be liable with respect to any Debt or allow
its property to be subject to any Lien which it could not become liable with
respect to or allow its property to become subject to under this Agreement or
any other Loan Document on the date of such transaction, and (ii) any Loan Party
may merge with or into any other Person (other than CMS Energy), provided that
(a) the Loan Party is the survivor thereof, (b) no Default or Event of Default
shall be continuing or result therefrom, (c) such Loan Party shall not be liable
with respect to any Debt or allow its property to be subject to any Lien which
it could not become liable with respect to or allow its property to become
subject to under this Agreement or any other Loan Document on the date of such
transaction, and (d) immediately after giving effect to such merger, the Net
Worth of such Loan Party shall be equal to or greater than the Net Worth of such
Loan Party as of the last day of the fiscal quarter immediately preceding the
date of such merger.

                                       47
<PAGE>
                  (i) Sales, Etc., of Assets. Sell, lease, transfer, assign, or
otherwise dispose of all or any substantial part of its assets, or permit any of
the other Loan Parties to sell, lease, transfer, or otherwise dispose of all or
any substantial part of its assets, except to give effect to a transaction
permitted by subsection (h) above or subsection (j) below; provided, further,
that neither CMS Energy nor any of the other Loan Parties shall sell, assign,
transfer, lease, convey or otherwise dispose of any property, whether now owned
or hereafter acquired, or any income or profits therefrom, or enter into any
agreement to do so, except:

                  (A) the sale of property for consideration not less than the
         Fair Market Value thereof so long as (i) any non-cash consideration
         resulting from such sale shall be pledged or assigned to the Collateral
         Agent, for the benefit of the Lenders, pursuant to an instrument in
         form and substance reasonably acceptable to the Collateral Agent and
         (ii) the Borrower complies with the mandatory prepayment provisions set
         forth in Section 2.03;

                  (B) the transfer of property from a Loan Party to any other
         Loan Party;

                  (C) the transfer of property constituting an investment
         otherwise permitted under Section 8.02(d);

                  (D) the sale of electricity and natural gas and other property
         in the ordinary course of Borrower's and its Subsidiaries respective
         businesses consistent with past practice;

                  (E) any transfer of an interest in receivables and related
         security, accounts or notes receivable on a limited recourse basis in
         connection with the incurrence of Off-Balance Sheet Liabilities,
         provided that such transfer qualifies as a legal sale and as a sale
         under GAAP and the incurrence of such Off-Balance Sheet Liabilities is
         permitted under Section 8.02(o);

                  (F) the transfer of property constituting not more than two
         percent (2%) of the ownership interests held by CMS Energy and its
         Subsidiaries as of the Closing Date in CMS International Ventures,
         L.L.C. to CMS Energy Foundation and/or Consumers Foundation; and

                  (G) the disposition of equipment if such equipment is obsolete
         or no longer useful in the ordinary course of CMS Energy's or such
         Subsidiary's business.

                  (j) Maintenance of Ownership of Subsidiaries. Sell, transfer,
assign or otherwise dispose of any shares of capital stock of any of the Loan
Parties or Consumers (other than preferred or preference stock of Consumers) or
any warrants, rights or options to acquire such capital stock, or permit any
other Loan Party or Consumers to issue, sell, transfer, assign or otherwise
dispose of any shares of its capital stock (other than preferred or preference
stock of Consumers) or the capital stock of any other Loan Party or any
warrants, rights or options to acquire such capital stock, except to give effect
to a transaction permitted by subsection (h) above and in connection with the
foreclosure of any Liens permitted under Section 8.02(a)(iv); provided, however,
that subject to the requirements of Section 2.03, (i) CMS Energy may sell,
transfer, assign or otherwise dispose of not more than 20% of the common stock
of Consumers,

                                       48
<PAGE>
provided that after giving effect to each such transaction CMS Energy shall be
in compliance with Section 8.01(i), (ii) CMS Energy may sell, transfer, assign
or otherwise dispose of not more than 20% of the common stock of the Borrower;
provided, that after giving effect to each such transaction CMS Energy shall be
in compliance with Section 8.01(i), (iii) the Borrower may, and CMS Energy may
permit the Borrower to, sell, transfer, assign or otherwise dispose of not more
than 49% of the common stock of any Enterprises Significant Subsidiary other
than CMS Oil and Gas Company, provided that after giving effect to each such
transaction CMS Energy shall be in compliance with Section 8.01(i), and (iv) the
Borrower and its Subsidiaries may, and CMS Energy may permit the Borrower and
its Subsidiaries to, sell, transfer, assign or otherwise dispose of all of the
capital stock (or other equity interests) of CMS Oil and Gas Company and CMS
Electric and Gas Company owned by the Borrower or any of its Subsidiaries,
provided that after giving effect to such transaction the Borrower shall be in
compliance with Section 8.01(i).

                  (k) Amendment of Tax Sharing Agreement. Directly or
indirectly, amend, modify, supplement, waive compliance with, seek a waiver
under, or assent to noncompliance with, any term, provision or condition of the
Tax Sharing Agreement if the effect of such amendment, modification, supplement,
waiver or assent is to (i) reduce materially any amounts otherwise payable to,
or increase materially any amounts otherwise owing or payable by, CMS Energy
thereunder, or (ii) change materially the timing of any payments made by or to
CMS Energy thereunder.

                  (l) Prepayments of Indebtedness. Make or agree to pay or make,
or permit any of the other Loan Parties to make or agree to pay or make,
directly or indirectly, any payment or other distribution (whether in cash
securities or other property) of or in respect of principal of or interest on
any Debt, or any payment or other distribution (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement acquisition, cancellation or termination of
any Debt (other than the obligations of the Loan Parties under the Loan
Documents and under the "Loan Documents" as defined in each of the Three Year
Facility and the 364 Day Facility), other than any payments on account of (i)
any Debt when and as such payment was due pursuant to the mandatory payment
provisions applicable to such Debt at the time it was incurred (including,
without limitation, regularly scheduled payment dates for principal, interest,
fees and other amounts due thereon) or any extension thereof thereafter granted
by the holder of such Debt, (ii) refinancings of Debt otherwise permitted under
this Agreement, and (iii) any Debt owed to CMS Energy or any of its
Subsidiaries.

                  (m) Conduct of Business. Engage, or permit any Restricted
Subsidiary to engage, in any business other than (a) the business engaged in by
CMS Energy and its Subsidiaries on the date hereof, and (b) any business or
activities which are substantially similar, related or incidental thereto.

                  (n) Organizational Documents. Amend, modify or otherwise
change, or permit any Restricted Subsidiary to amend, modify or otherwise change
any of the terms or provisions in any of their respective certificate of
incorporation (or comparable charter document) and by-laws as in effect on the
Closing Date in any manner adverse to the interests of the Lenders.

                                       49
<PAGE>
                  (o) Off-Balance Sheet Liabilities. Create, incur, assume or
suffer to exist, or permit any Subsidiary (other than Consumers and its
Subsidiaries) to create, incur, assume or suffer to exist, Off-Balance Sheet
Liabilities (exclusive of lease obligations otherwise permitted under Section
8.02(c)) in the aggregate in excess of $725,000,000 at any time.

         SECTION 8.03. REPORTING OBLIGATIONS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid or any
Lender shall have any Commitment, CMS Energy will, unless the Required Lenders
shall otherwise consent in writing, furnish to the Administrative Agent (with
sufficient copies for each Lender), the following:

                  (a) as soon as possible and in any event within five days
after the Borrower knows or should have reason to know of the occurrence of each
Default or Event of Default continuing on the date of such statement, a
statement of the chief financial officer or chief accounting officer of the
Borrower setting forth details of such Default or Event of Default and the
action that the Borrower proposes to take with respect thereto;

                  (b) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of CMS Energy, a
consolidated balance sheet and consolidated statements of income and retained
earnings and of cash flows of CMS Energy and its Subsidiaries as at the end of
such quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter (which requirement shall be deemed
satisfied by the delivery of CMS Energy's quarterly report on Form 10-Q for such
quarter), all in reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer or chief accounting officer of CMS
Energy as having been prepared in accordance with GAAP, together with (A) a
schedule (substantially in the form of Exhibit E appropriately completed) of (1)
the computations used by CMS Energy in determining compliance with the covenants
contained in Sections 8.01(i) and 8.01(j) and the ratio set forth in Section
9.01(i), (2) all Project Finance Debt of the Consolidated Subsidiaries, together
with CMS Energy's Ownership Interest in each such Consolidated Subsidiary and
(3) all Support Obligations of CMS Energy of the types described in clauses (iv)
and (v) of the definition of Support Obligations (whether or not each such
Support Obligation or the primary obligation so supported is fixed, conclusively
determined or reasonably quantifiable) to the extent such Support Obligations
have not been previously disclosed as "Consolidated Debt" pursuant to clause (1)
above, and (B) a certificate of said officer stating that no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
that CMS Energy proposes to take with respect thereto;

                  (c) as soon as available and in any event within 120 days
after the end of each fiscal year of CMS Energy and its Subsidiaries, a copy of
the Annual Report on Form 10-K (or any successor form) for CMS Energy and its
Subsidiaries for such year, including therein a consolidated balance sheet of
CMS Energy and its Subsidiaries as of the end of such fiscal year and
consolidated statements of income and retained earnings and of cash flows of CMS
Energy and its Subsidiaries for such fiscal year, accompanied by a report
thereon of a nationally-recognized independent public accounting firm, together
with (1) a schedule in form satisfactory to the Required Lenders of (A) the
computations used by such accounting firm in

                                       50
<PAGE>
determining, as of the end of such fiscal year, compliance with the covenants
contained in Sections 8.01(i) and 8.01(j) and the ratio set forth in Section
9.01(i), (B) all Project Finance Debt of the Consolidated Subsidiaries, together
with CMS Energy's Ownership Interest in each such Consolidated Subsidiary and
(C) all Support Obligations of CMS Energy of the types described in clauses (iv)
and (v) of the definition of Support Obligations (whether or not each such
Support Obligation or the primary obligation so supported is fixed, conclusively
determined or reasonably quantifiable) to the extent such Support Obligations
have not been previously disclosed as "Consolidated Debt" pursuant to clause (A)
above, and (2) a certificate of the chief financial officer or chief accounting
officer of CMS Energy stating that no Default or Event of Default has occurred
and is continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action that CMS Energy
proposes to take with respect thereto;

                  (d) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of CMS Energy, a
balance sheet and statements of income and retained earnings and of cash flows
of CMS Energy as at the end of such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified (subject to year-end audit adjustments) by
the chief financial officer or chief accounting officer of CMS Energy as having
been prepared in accordance with GAAP;

                  (e) as soon as available and in any event within 120 days
after the end of each fiscal year of CMS Energy, a balance sheet of CMS Energy
as at the end of such fiscal year and statements of income and retained earnings
and of cash flows of CMS Energy for such fiscal year, all in reasonable detail
and duly certified (subject to year-end audit adjustments) by the chief
financial officer or chief accounting officer of CMS Energy as having been
prepared in accordance with GAAP;

                  (f) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the Borrower,
a balance sheet and statements of income and retained earnings and of cash flows
of the Borrower as at the end of such quarter and for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter, all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer or chief accounting officer of the Borrower as
having been prepared in accordance with GAAP;

                  (g) as soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, a balance sheet of the
Borrower as at the end of such fiscal year and statements of income and retained
earnings and of cash flows of the Borrower for such fiscal year, all in
reasonable detail and duly certified (subject to year-end audit adjustments) by
the chief financial officer or chief accounting officer of the Borrower as
having been prepared in accordance with GAAP;

                  (h) as soon as available, a copy of the report by a
nationally-recognized independent public accounting firm on the consolidated
balance sheet of CMS Energy and its Subsidiaries as at December 31, 2001, and
the related consolidated statements of income,

                                       51
<PAGE>
retained earnings and cash flows of CMS Energy and its Subsidiaries for such
fiscal year then ended;

                  (i) as soon as available, and in any event within ten (10)
Business Days after the close of each calendar month, (i) month-end liquidity
statements with respect to CMS Energy and its consolidated Subsidiaries and (ii)
updates to the monthly cash flow forecasts of CMS Energy and its consolidated
Subsidiaries, in each case in form and detail consistent with such statements
and forecasts provided to the Lenders and the Agents prior to the Closing Date;

                  (j) as soon as possible and in any event (A) within 30 days
after CMS Energy knows or has reason to know that any Plan Termination Event
described in clause (i) of the definition of Plan Termination Event with respect
to any Plan of CMS Energy or any ERISA Affiliate of CMS Energy has occurred and
could reasonably be expected to result in a material liability to CMS Energy and
(B) within 10 days after CMS Energy knows or has reason to know that any other
Plan Termination Event with respect to any Plan of CMS Energy or any ERISA
Affiliate of CMS Energy has occurred and could reasonably be expected to result
in a material liability to CMS Energy, a statement of the chief financial
officer or chief accounting officer of CMS Energy describing such Plan
Termination Event and the action, if any, which CMS Energy proposes to take with
respect thereto;

                  (k) promptly after receipt thereof by CMS Energy or any of its
ERISA Affiliates from the PBGC copies of each notice received by CMS Energy or
any such ERISA Affiliate of the PBGC's intention to terminate any Plan or to
have a trustee appointed to administer any Plan;

                  (l) promptly and in any event within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each Plan
(if any) to which CMS Energy is a contributing employer;

                  (m) promptly after receipt thereof by CMS Energy or any of its
ERISA Affiliates from a Multiemployer Plan sponsor, a copy of each notice
received by CMS Energy or any of its ERISA Affiliates concerning the imposition
or amount of withdrawal liability in an aggregate principal amount of at least
$250,000 pursuant to Section 4202 of ERISA in respect of which CMS Energy is
reasonably expected to be liable;

                  (n) promptly after CMS Energy becomes aware of the occurrence
thereof, notice of all actions, suits, proceedings or other events of the type
described in Section 7.01(f);

                  (o) promptly after the sending or filing thereof, notice to
the Administrative Agent and each Lender of any sending or filing of all proxy
statements, financial statements and reports which CMS Energy sends to its
public security holders (if any), all regular, periodic and special reports
which CMS Energy files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any national
securities exchange, pursuant to the Exchange Act, and all final prospectuses
with respect to any securities issued or to be issued by CMS Energy or any of
its Subsidiaries;

                                       52
<PAGE>
                  (p) as soon as possible and in any event within five days
after the occurrence of any material default under any material agreement to
which CMS Energy or any of its Subsidiaries is a party, which default would
materially adversely affect the business, assets, property, financial condition,
results of operations or prospects of CMS Energy and its Subsidiaries,
considered as a whole, any of which is continuing on the date of such
certificate, a certificate of the chief financial officer of CMS Energy setting
forth the details of such material default and the action which CMS Energy or
any such Subsidiary proposes to take with respect thereto; and

                  (q) promptly after requested, such other information
respecting the business, properties, condition or operations, financial or
otherwise, of CMS Energy and its Subsidiaries as any Agent or the Required
Lenders may from time to time reasonably request in writing.

The Borrower and CMS Energy, as applicable, shall be deemed to have fulfilled
its obligations pursuant to clauses (b), (c), (d), (e), (f), (g), (i) and (o)
above to the extent the Administrative Agent (and the Lenders, if applicable)
receives an electronic copy of the requisite document or documents in a format
acceptable to the Administrative Agent, provided that (1) an executed, tangible
copy of any report required pursuant to clause (e) above is delivered to the
Administrative Agent at the time of any such electronic delivery, and (2) a
tangible copy of each requisite document delivered electronically is made
available by the Borrower or CMS Energy, as applicable, promptly upon request by
any Agent or Lender.

                                   ARTICLE IX
                                    DEFAULTS

         SECTION 9.01. EVENTS OF DEFAULT. If any of the following events (each
an "EVENT OF DEFAULT") shall occur and be continuing, the Administrative Agent
and the Lenders shall be entitled to exercise the remedies set forth in Section
9.02:

                  (a) The Borrower shall fail to pay (i) any principal of any
Loan when due or (ii) any interest thereon, fees or other amounts (other than
any principal of any Loan) payable hereunder within two Business Days after such
interest, fees or other amounts shall have become due; or

                  (b) Any representation or warranty made by or on behalf of the
Borrower in any Loan Document or certificate or other writing delivered pursuant
thereto shall prove to have been incorrect in any material respect when made or
deemed made; or

                  (c) CMS Energy or any of its Subsidiaries shall fail to
perform or observe any term or covenant on its part to be performed or observed
contained in Section 8.01(c), (h), (i), (j) or (l) or in Section 8.02 hereof
(and the Borrower, each Lender and each Agent hereby agrees that an Event of
Default under this subsection (c) shall be given effect as if the defaulting
Subsidiary were a party to this Agreement); or

                  (d) CMS Energy or any of its Subsidiaries shall fail to
perform or observe any other term or covenant on its part to be performed or
observed contained in any Loan Document and any such failure shall remain
unremedied, after written notice thereof shall have been given

                                       53
<PAGE>
to the Borrower by the Administrative Agent, for a period of 10 Business Days
(and the Borrower, each Lender and each Agent hereby agrees that an Event of
Default under this subsection (d) shall be given effect as if the defaulting
Subsidiary were a party to this Agreement); or

                  (e) CMS Energy, any Restricted Subsidiary or Consumers shall
fail to pay any of its Debt (including any interest or premium thereon but
excluding Debt incurred under this Agreement) (i) under the 364 Day Facility or
the Three Year Facility, or (ii) otherwise aggregating, in the case of CMS
Energy and each Restricted Subsidiary, $6,000,000 or more or, in the case of
Consumers, $25,000,000 or more, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in any agreement
or instrument relating to such Debt; or any other default under any agreement or
instrument relating to any such Debt (including any "amortization event" or
event of like import in connection with any Off-Balance Sheet Liabilities), or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such
default or event is (i) to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; unless in each such case the
obligee under or holder of such Debt shall have waived in writing such
circumstance so that such circumstance is no longer continuing, or (ii) with
respect to any such event occurring in connection with any Off-Balance Sheet
Liabilities aggregating $6,000,000 or more, to terminate the reinvestment of
collections or proceeds of receivables and related security under any agreements
or instruments related thereto (other than a termination resulting solely from
the request of CMS Energy or its Subsidiaries); or

                  (f) (i) CMS Energy, any Restricted Subsidiary or Consumers
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make an assignment
for the benefit of creditors; or (ii) any proceeding shall be instituted by or
against CMS Energy, any Restricted Subsidiary or Consumers seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of its debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property and, in the case of a proceeding instituted against CMS Energy,
either such proceeding shall remain undismissed or unstayed for a period of 60
days or any of the actions sought in such proceeding (including the entry of an
order for relief against CMS Energy, a Restricted Subsidiary or Consumers or the
appointment of a receiver, trustee, custodian or other similar official for CMS
Energy, such Restricted Subsidiary or Consumers or any of its property) shall
occur; or (iii) CMS Energy, any Restricted Subsidiary or Consumers shall take
any corporate or other action to authorize any of the actions set forth above in
this subsection (f); or

                  (g) Any judgment or order for the payment of money in excess
of $6,000,000 shall be rendered against the Borrower, any Guarantor or any of
their respective properties and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 30 consecutive days during which a stay of

                                       54
<PAGE>
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

                  (h) Any material provision of any Loan Document, after
execution hereof or delivery thereof under Article VI, shall for any reason
other than the express terms hereof or thereof cease to be valid and binding on
any party thereto; or any Loan Party shall so assert in writing; or any
Guarantor shall terminate or revoke any of its obligations under the applicable
Guaranty; or

                  (i) There shall be imposed or enacted any Consumers Dividend
Restriction, the result of which is that the Dividend Coverage Ratio shall be
less than 1.15 to 1.0 at any time after the imposition of such Consumers
Dividend Restriction.

                  (j) At any time, for any reason (except to the extent
permitted by the terms of the Loan Documents or due to any failure by the
Collateral Agent to take any action on its part to be performed under applicable
law in order to maintain the perfection or priority of any such Liens), (i) the
Liens intended to be created under any of the Loan Documents with respect to
Collateral having a Fair Market Value of $6,000,000 or more become, or the
Borrower or any such Subsidiary seeks to render such Liens, invalid or
unperfected, or (ii) Liens in favor of the Collateral Agent for the benefit of
the Lenders contemplated by the Loan Documents with respect to Collateral having
a Fair Market Value of $6,000,000 or more shall, at any time, for any reason, be
invalidated or otherwise cease to be in full force and effect, or such Liens
shall not have the priority contemplated by this Agreement or the Loan
Documents.

                  (k) A Change of Control shall occur.

         SECTION 9.02. REMEDIES. If any Event of Default has occurred and is
continuing, then the Administrative Agent or the Collateral Agent, as
applicable, shall at the request, or may with the consent, of the Required
Lenders, upon notice to the Borrower (i) declare the obligation of each Lender
to Convert Loans to be terminated, whereupon the same shall forthwith terminate,
(ii) declare the principal amount outstanding hereunder, all interest thereon
and all other amounts payable under this Agreement and the other Loan Documents
to be forthwith due and payable, whereupon the principal amount outstanding
hereunder, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower, and (iii)
exercise in respect of any and all collateral, in addition to the other rights
and remedies provided for herein or otherwise available to the Administrative
Agent or the Lenders, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of New York and in
effect in any other jurisdiction in which collateral is located at that time;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to the Borrower or any Guarantor under the Federal
Bankruptcy Code, (A) the obligation of each Lender to Convert Loans shall
automatically be terminated and (B) the principal amount outstanding hereunder,
all such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.

                                       55
<PAGE>

                                    ARTICLE X
                                   THE AGENTS

         SECTION 10.01. AUTHORIZATION AND ACTION.

                  (a) Each of the Lenders hereby irrevocably appoints each Agent
as its agent and authorizes each such Agent to take such actions on its behalf
and to exercise such powers as are delegated to such Agent by the terms of the
Loan Documents, together with such actions and powers as are reasonably
incidental thereto.

                  (b) Any Lender serving as an Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not an Agent, and such Lender and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with CMS Energy or any of its Subsidiaries or other Affiliate
thereof as if it were not an Agent hereunder.

                  (c) No Agent shall have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (i) no Agent shall be subject to any fiduciary or other implied
duties, regardless of whether a Default or an Event of Default has occurred and
is continuing, (ii) no Agent shall have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated by the Loan Documents that such Agent is required
to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.01), and (iii) except as expressly set forth in the Loan
Documents, no Agent shall have any duty to disclose, or shall be liable for the
failure to disclose, any information relating to CMS Energy or any of its
Subsidiaries or Affiliates that is communicated to or obtained by the Lender
serving as such Agent or any of its Affiliates in any capacity. No Agent shall
be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
11.01 or any other provision of this Agreement) or in the absence of its own
gross negligence or willful misconduct. Each Agent shall be deemed not to have
knowledge of any Default or Event of Default unless and until written notice
thereof is given to such Agent by the Borrower or a Lender (in which case such
Agent shall promptly give a copy of such written notice to the Lenders and the
other Agents). No Agent shall be responsible for or have any duty to ascertain
or inquire into (A) any statement, warranty or representation made in or in
connection with any Loan Document, (B) the contents of any certificate, report
or other document delivered thereunder or in connection therewith, (C) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document, (D) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, or (E) the satisfaction of any condition set forth in
Article VI or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to such Agent.

                  (d) Each Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by

                                       56
<PAGE>

it to be made by the proper Person, and shall not incur any liability for
relying thereon. Each Agent may consult with legal counsel (who may be counsel
for the Borrower), independent accountants and other experts selected by it, and
shall not be liable for any action taken or not taken by it in accordance with
the advice of any such counsel, accountants or experts.

                  (e) Each Agent may perform any and all its duties and exercise
its rights and powers by or through one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding subsections of this Section 10.01 shall
apply to any such sub-agent and to the Related Parties of each Agent and any
such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as an Agent.

                  (f) Subject to the appointment and acceptance of a successor
Agent as provided in this subsection (f), any Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right, in consultation with the Borrower, to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a Lender with an office in New
York, New York, or an Affiliate of any such Lender. Upon the acceptance of its
appointment as an Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After an Agent's resignation hereunder,
the provisions of this Article and Section 11.04 shall continue in effect for
the benefit of such retiring Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as an Agent.

                  (g) Each Lender acknowledges that it has independently and
without reliance upon any Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon any Agent or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder. Each Lender agrees
(except as provided in Section 11.05) that it will not take any legal action,
nor institute any actions or proceedings, against the Borrower or any other
obligor hereunder or with respect to any Collateral, without the prior written
consent of the Required Lenders. Without limiting the generality of the
foregoing, no Lender may accelerate or otherwise enforce its portion of the
Loans, or unilaterally terminate its Commitment except in accordance with
Section 9.02.

     SECTION 10.02. INDEMNIFICATION. The Lenders agree to indemnify each Agent
(to the extent not reimbursed by the Borrower), ratably according to the
respective Percentages of the Lenders, from and against any and all liabilities,
obligations, losses, damages, penalties, actions,

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judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against such Agent
in any way relating to or arising out of this Agreement or any action taken or
omitted by such Agent under this Agreement, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Agents and the Arranger
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agents in connection with the
preparation, syndication, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement to the extent that the Agents are entitled to reimbursement for
such expenses pursuant to Section 11.04 but are not reimbursed for such expenses
by the Borrower.

     SECTION 10.03. CONCERNING THE COLLATERAL AND THE LOAN DOCUMENTS.

                  (a) Each Lender authorizes and directs the Collateral Agent to
enter into the Loan Documents relating to the Collateral for the benefit of the
Lenders. Each Lender agrees that any action taken by any Agent or the Required
Lenders (or, where required by the express terms of this Agreement, a greater
proportion of the Lenders) in accordance with the provisions of this Agreement
or the other Loan Documents, and the exercise by any Agent or the Required
Lenders (or, where so required, such greater proportion) of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. Without
limiting the generality of the foregoing, the Collateral Agent shall have the
sole and exclusive right and authority to (i) act as the disbursing and
collecting agent for the Lenders with respect to all payments and collections
arising in connection with this Agreement and the Loan Documents relating to the
Collateral; (ii) execute and deliver each Loan Document relating to the
Collateral and accept delivery of each such agreement delivered by the Borrower
or any other Loan Party a party thereto; (iii) act as collateral agent for the
Lenders for purposes of the perfection of all Liens created by such agreements
and all other purposes stated therein; provided, however, the Collateral Agent
hereby appoints, authorizes and directs the other Agents and the Lenders to act
as collateral sub-agent for the Collateral Agent and the Lenders for purposes of
the perfection of all Liens with respect to any property of the Borrower or any
of its Subsidiaries at any time in the possession of such Lender, including,
without limitation, deposit accounts maintained with, and cash held by, such
Lender; (iv) manage, supervise and otherwise deal with the Collateral; (v) take
such action as is necessary or desirable to maintain the perfection and priority
of the Liens created or purported to be created by the Loan Documents; and (vi)
except as may be otherwise specifically restricted by the terms of this
Agreement or any other Loan Document, exercise all remedies given to the
Collateral Agent or the Lenders with respect to the Collateral under the Loan
Documents relating thereto, applicable law or otherwise.

                  (b) The Administrative Agent and each Lender hereby directs,
in accordance with the terms of this Agreement, the Collateral Agent to release
any Lien held by the Collateral Agent for the benefit of the Lenders:

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<PAGE>

                  (i) against all of the Collateral, upon payment in full of the
         Obligations of all of the Loan Parties under the Loan Documents and
         termination of this Agreement;

                  (ii) against any part of the Collateral sold or disposed of by
         the Borrower or any of its Subsidiaries, if such sale or disposition is
         otherwise permitted under this Agreement, as certified to the
         Collateral Agent by the Borrower, or is otherwise consented to by the
         Required Lenders; and/or

                  (iii) against any part of the Collateral consisting of a
         promissory note, upon payment in full of the Debt evidenced thereby.

The Administrative Agent and each Lender hereby directs the Collateral Agent to
execute and deliver or file such termination and partial release statements and
do such other things as are necessary to release Liens to be released pursuant
to this Section 10.03(b) promptly upon the effectiveness of any such release.

         SECTION 10.04. RELEASE OF GUARANTORS. Upon the liquidation or
dissolution of any Guarantor, or sale of all of the capital stock of any
Guarantor, in each case which is permitted pursuant to the terms of any Loan
Document or consented to in writing by the Required Lenders or all of the
Lenders, as applicable, and upon at least five (5) Business Days' prior written
request by the Borrower, the Collateral Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the applicable Guarantor from its obligations under the
Guaranty; provided, however, that (i) the Collateral Agent shall not be required
to execute any such document on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Guarantor without recourse
or warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Loans, any other Guarantor's obligations under the Guaranty, or, if
applicable, any obligations of CMS Energy or any Subsidiary in respect of the
proceeds of any such sale retained by CMS Energy or any Subsidiary.

                                   ARTICLE XI
                                  MISCELLANEOUS

         SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (i) waive, modify or
eliminate any of the conditions specified in Article VI, (ii) increase the
Commitments of the Lenders that may be maintained hereunder, (iii) reduce the
principal of, or interest on, any Loan, any Applicable Margin or any fees or
other amounts payable hereunder (other than fees payable to the Administrative
Agent pursuant to Section 2.02), (iv) postpone any date fixed for any payment of
principal of, or interest on, any Loan or any fees or other amounts payable
hereunder (other than fees payable to the Administrative Agent pursuant to
Section 2.02), (v) change the definition of "Required Lenders" contained in
Section 1.01 or change any other provision that specifies the

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<PAGE>

percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans or the number of Lenders which shall be required for the Lenders or any of
them to take any action hereunder, (vi) amend any Loan Document in a manner
intended to prefer one or more Lenders over any other Lenders, (vii) amend,
waive or modify this Section 11.01, (viii) release the Collateral Agent's Lien
on all or a substantial portion of the Collateral (except as provided in Section
10.03(b)), (ix) extend the Termination Date, or (x) amend, waive or modify
Section 8.02(e) to increase the amount of Restricted Payments permitted to be
paid by the Borrower thereunder or to extend any date set forth therein; and
provided, further, that no amendment, waiver or consent shall, unless in writing
and signed by each Agent in addition to the Lenders required above to take such
action, affect the rights or duties of any Agent under this Agreement or any
other Loan Document. Any request from the Borrower for any amendment, waiver or
consent under this Section 11.01 shall be addressed to the Administrative Agent.

         SECTION 11.02. NOTICES, ETC. All notices and other communications
provided for hereunder and under the other Loan Documents shall be in writing
(including telegraphic, facsimile, telex or cable communication) and mailed,
telegraphed, telecopied, telexed, cabled or delivered, (i) if to the Borrower or
CMS Energy, at its address at c/o CMS Energy Corporation, Fairlane Plaza South,
330 Town Center Drive, Suite 1100, Dearborn, Michigan 48126, Attention: S.
Kinnie Smith, Jr., General Counsel, with a copy to Laura L. Mountcastle, Vice
President, Investor Relations and Treasurer, 330 Town Center Drive, Suite 1100,
Dearborn, Michigan 48126; (ii) if to any Bank, at its Domestic Lending Office
specified opposite its name on Schedule I; (iii) if to any Lender other than a
Bank, at its Domestic Lending Office specified in the Lender Assignment pursuant
to which it became a Lender; (iv) if to the Administrative Agent with respect to
funding or payment of any amounts hereunder, at its address at 2 Penns Way,
Suite 200, New Castle, DE 19270, Attn: Onat Acet, Telephone No. (302) 894-6088,
Telecopy No. (302) 894-6120; (v) if to the Administrative Agent for any other
reason or to the Collateral Agent, at its address at 388 Greenwich Street, New
York, New York 10003, Attn: Nick McKee, Telephone No. (212) 816-8592, Telecopy
No. (212) 816-8098; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, when mailed, telegraphed, telecopied, telexed
or cabled, be effective five days after when deposited in the mails, or when
delivered to the telegraph company, telecopied, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices and
communications to any Agent pursuant to Article II, III, or X shall not be
effective until received by such Agent.

         SECTION 11.03. NO WAIVER OF REMEDIES. No failure on the part of the
Borrower, any Lender or any Agent to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

         SECTION 11.04. COSTS, EXPENSES AND INDEMNIFICATION.

                  (a) The Borrower agrees to (i) reimburse on demand all
reasonable costs and expenses of each Agent and the Arranger (including
reasonable fees and expenses of counsel to the Agents) in connection with (A)
the preparation, syndication, negotiation, execution and

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<PAGE>

delivery of the Loan Documents and (B) the care and custody of any and all
collateral, and any proposed modification, amendment, or consent relating to any
Loan Document, and (ii) to pay on demand all reasonable costs and expenses of
each Agent and, on and after the date upon which the principal amount
outstanding hereunder becomes or is declared to be due and payable pursuant to
Section 9.02 or an Event of Default specified in Section 9.01(a) shall have
occurred and be continuing, each Lender (including fees and expenses of counsel
to the Agents, special Michigan counsel to the Lenders and, from and after such
date, counsel for each Lender (including the allocated costs and expenses of
in-house counsel)) in connection with the workout, restructuring or enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the other Loan Documents and the other documents to be delivered
hereunder.

                  (b) The Borrower shall indemnify each Agent, the Arranger,
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an "INDEMNIFIED PERSON") against, and hold each Indemnified
Person harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnified Person, incurred by or asserted against any
Indemnified Person arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any other agreement or instrument
contemplated hereby or thereby, the performance by the parties to the Loan
Documents of their respective obligations thereunder or the consummation of the
transactions contemplated hereby or thereby, (ii) any Loan or other Extension of
Credit or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of any Hazardous Substance on or from any property
owned or operated by CMS Energy or any of its Subsidiaries, or any Environmental
Liability related in any way to CMS Energy or any of its Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnified Person is a party thereto;
provided that such indemnity shall not, as to any Indemnified Person, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnified Person.

                  (c) The Borrower's other obligations under this Section 11.04
shall survive the repayment of all amounts owing to the Lenders and the Agents
under the Loan Documents and the termination of the Commitments. If and to the
extent that the obligations of the Borrower under this Section 11.04 are
unenforceable for any reason, the Borrower agrees to make the maximum
contribution to the payment and satisfaction thereof which is permissible under
applicable law.

    SECTION 11.05. RIGHT OF SET-OFF.

                  (a) Upon (i) the occurrence and during the continuance of any
Event of Default and (ii) the making of the request or the granting of the
consent specified by Section 9.02 to authorize the Administrative Agent to
declare the principal amount outstanding hereunder to be due and payable
pursuant to the provisions of Section 9.02, each Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the

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<PAGE>

Borrower, against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the Promissory Notes held by such
Lender, irrespective of whether or not such Lender shall have made any demand
under this Agreement or such Promissory Notes, as the case may be, and although
such obligations may be unmatured. Each Lender agrees to notify promptly the
Borrower after any such set-off and application made by such Lender, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender under this Section 11.05 are
in addition to other rights and remedies (including other rights of set-off)
which such Lender may have.

                  (b) The Borrower agrees that it shall have no right of
off-set, deduction or counterclaim in respect of its obligations hereunder, and
that the obligations of the Lenders hereunder are several and not joint. Nothing
contained herein shall constitute a relinquishment or waiver of the Borrower's
rights to any independent claim that the Borrower may have against any Agent or
any Lender for such Agent's or such Lender's, as the case may be, gross
negligence or willful misconduct, but no Lender shall be liable for any such
conduct on the part of any Agent or any other Lender, and no Agent shall be
liable for any such conduct on the part of any Lender.

         SECTION 11.06. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower and the Agents and when the
Administrative Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agents and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.

         SECTION 11.07. ASSIGNMENTS AND PARTICIPATION.

                  (a) Each Lender may, with the consent of the Borrower and the
Administrative Agent (such consent not to be unreasonably withheld or delayed
and, in the case of the Borrower, shall not be required if an Event of Default
has occurred and is continuing), assign to one or more banks or other entities
all or a portion of its rights and obligations under this Agreement and the
other Loan Documents (including all or a portion of its Commitment, the Loans
owing to it and any Promissory Notes held by it); provided, however, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
all of the assigning Lender's rights and obligations under this Agreement, (ii)
the amount of the Commitment of the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Lender Assignment with
respect to such assignment) shall in no event be less than the lesser of the
amount of such Lender's Commitment and $2,500,000 and shall be an integral
multiple of $1,000,000, (iii) each such assignment shall be to an Eligible
Assignee, (iv) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register, a
Lender Assignment, together with any Promissory Notes subject to such
assignment, an Administrative Questionnaire and a processing and recordation fee
of $3,500 and (v) after giving effect to such assignment, the amount of the
Commitment of the assigning Lender shall be not less than $2,500,000 or such
lesser amount as may be agreed to by the Administrative Agent and, so long as no
Event of Default has occurred and is continuing, the Borrower; and provided
further, however, that the consent of the Borrower and the Administrative Agent
shall not be required for any assignments by a Lender to any of its

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<PAGE>

Affiliates or to any other Lender or any of its Affiliates. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Lender Assignment, which effective date shall be at least five Business
Days after the execution thereof, (A) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Lender Assignment, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it to
an Eligible Assignee pursuant to such Lender Assignment, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of a
Lender Assignment covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto); provided, however, that the limitation set forth in clause (iv),
above, shall not apply if an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have declared all Loans to be, or
all Loans shall have automatically become, immediately due and payable
hereunder. The Administrative Agent agrees to give prompt notice to the Lenders
and the Borrower of any assignment or participation of its rights and
obligations as a Bank hereunder. Notwithstanding anything to the contrary
contained in this Agreement, any Lender may at any time assign all or any
portion of the Loans owing to it to any Affiliate of such Lender. The assigning
Lender shall promptly notify the Borrower of any such assignment. No such
assignment, other than to an Eligible Assignee, shall release the assigning
Lender from its obligations hereunder.

                  (b) By executing and delivering a Lender Assignment, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Lender Assignment, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with any Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant thereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of each Loan Document, together with copies of the financial statements
referred to in Section 7.01(e) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Lender Assignment; (iv) such assignee will, independently and without
reliance upon the Agents, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents; (v) such assignee confirms that it is an Eligible Assignee
(unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have declared all Loans to be immediately due and
payable hereunder, in which case no such confirmation is necessary); (vi) such
assignee appoints and authorizes each Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
each Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

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<PAGE>

                  (c) The Administrative Agent shall maintain at its address
referred to in Section 11.02 a copy of each Lender Assignment delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time (the "REGISTER"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agents and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

                  (d) Upon its receipt of a Lender Assignment executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with the assignee's completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), any Promissory Notes subject to
such assignment, the processing and recordation fee referred to in subsection
(a) above and any written consent to such assignment required by subsection (a)
above, the Administrative Agent shall, if such Lender Assignment has been
completed and is in substantially the form of Exhibit F, (i) accept such Lender
Assignment, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. New and/or replacement
Promissory Notes payable to the assignee and the assigning Lender (if the
assigning Lender assigned less than all of its rights and obligations hereunder)
shall be issued upon request pursuant to Section 3.01(d), and shall be dated the
effective date of such Lender Assignment.

                  (e) Each Lender may sell participations to one or more banks
or other entities (a "PARTICIPANT") in or to all or a portion of its rights
and/or obligations under the Loan Documents (including all or a portion of its
Commitment, the Loans owing to it and any Promissory Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Promissory Notes for all purposes of this Agreement, and (iv) the
Borrower, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and the other Loan Documents and to
approve any amendment, modification or waiver of any provision of this Agreement
or any other Loan Document; provided, that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 11.01 that affects such Participant. Subject to subsection (f) below,
the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 5.04 and 5.06 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to subsection (a) above. To the
extent permitted by law, each Participant shall also be entitled to the benefits
of Section 11.05(a) as though it were a Lender, provided such Participant agrees
to be subject to Section 5.05 as though it were a Lender.

                  (f) A Participant shall not be entitled to receive any greater
payment under Section 5.04 or 5.06 than the applicable Lender would have been
entitled to receive with respect

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<PAGE>

to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower's prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 5.06 unless the Borrower is notified
of the participation sold to such Participant and such Participant agrees, for
the benefit of the Borrower, to comply with Section 5.06(e) as though it were a
Lender.

                  (g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.07, disclose to the assignee or Participant or proposed assignee or
Participant, any information relating to CMS Energy or any of its Subsidiaries
furnished to such Lender by or on behalf of the Borrower; provided that, prior
to any such disclosure, the assignee or Participant or proposed assignee or
Participant shall agree, in accordance with the terms of Section 11.08, to
preserve the confidentiality of any Confidential Information received by it from
such Lender.

                  (h) If any Lender (or any Participant to which such Lender has
sold a participation) shall make any demand for payment under Section 5.04(a) or
(c), then in the case of any such demand, within 30 days after any such demand
(if, but only if, such demanded payment has been made by the Borrower) or
notice, the Borrower may, with the approval of the Administrative Agent (which
approval shall not be unreasonably withheld) and provided that no Event of
Default or Default shall then have occurred and be continuing, demand that such
Lender assign, at the sole cost and expense of the Borrower, in accordance with
this Section 11.07 to one or more Eligible Assignees designated by the Borrower,
all (but not less than all) of such Lender's Commitment and the Loans owing to
it within the period ending on the later to occur of (x) the last day in the
period described above, as applicable, and (y) the last day of the longest of
the then current Interest Periods for such Loans. If any such Eligible Assignee
designated by the Borrower shall fail to consummate such assignment on terms
acceptable to such Lender, or if the Borrower shall fail to designate any such
Eligible Assignees for all or part of such Lender's Commitment or Loans, then
such demand by the Borrower shall become ineffective; it being understood for
purposes of this subsection (h) that such assignment shall be conclusively
deemed to be on terms acceptable to such Lender, and such Lender shall be
compelled to consummate such assignment to an Eligible Assignee designated by
the Borrower, if such Eligible Assignee (1) shall agree to such assignment by
entering into a Lender Assignment with such Lender and (2) shall offer
compensation to such Lender in an amount equal to all amounts then owing by the
Borrower to such Lender hereunder and under any Promissory Notes made by the
Borrower to such Lender, whether for principal, interest, fees, costs or
expenses (other than the demanded payment referred to above, and payable by the
Borrower as a condition to the Borrower's right to demand such assignment) or
otherwise (including, without limitation, to the extent not paid by the
Borrower, any payments required pursuant to Section 5.04(b)). In addition, in
the case of any amount demanded for payment by any Lender (or such Participant)
pursuant to Section 5.04(a) or (c), the Borrower may, in the case of any such
Lender, with the approval of the Administrative Agent (which approval shall not
be unreasonably withheld) and provided that no Event of Default or Default shall
then have occurred and be continuing, terminate all (but not less than all) such
Lender's Commitment and prepay all (but not less than all) such Lender's Loans
not so assigned, together with all interest accrued thereon to the date of such
prepayment and all fees, costs and expenses and other amounts then owing by the
Borrower to such Lender hereunder and under any Promissory Notes made by the
Borrower to such Lender, at any time from and after such later occurring day in
accordance with Sections 2.03 and 5.03 (but without the requirement

                                       65
<PAGE>

stated therein for ratable treatment of the other Lenders), if and only if,
after giving effect to such termination and prepayment, the sum of the aggregate
principal amount of the Loans of all Lenders then outstanding does not exceed
the then remaining Commitments of the Lenders. Notwithstanding anything set
forth above in this subsection (h) to the contrary, the Borrower shall not be
entitled to compel the assignment by any Lender demanding payment under Section
5.04(a) of its Commitment and Loans or terminate and prepay the Commitment and
Loans of such Lender if, prior to or promptly following any such demand by the
Borrower, such Lender shall have changed or shall change, as the case may be,
its Applicable Lending Office for its Eurodollar Rate Loans so as to eliminate
the further incurrence of such increased cost. In furtherance of the foregoing,
any such Lender demanding payment or giving notice as provided above agrees to
use reasonable efforts to so change its Applicable Lending Office if, to do so,
would not result in the incurrence by such Lender of additional costs or
expenses which it deems material or, in the sole judgment of such Lender, be
inadvisable for regulatory, competitive or internal management reasons.

                  (i) Anything in this Section 11.07 to the contrary
notwithstanding, any Lender may assign and pledge all or any portion of its
Commitment and the Loans owing to it to any Federal Reserve Bank (and its
transferees) as collateral security pursuant to Regulation A of the Board and
any Operating Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Lender from its obligations hereunder.

     SECTION 11.08. CONFIDENTIALITY. In connection with the negotiation and
administration of this Agreement and the other Loan Documents, the Borrower has
furnished and will from time to time furnish to the Agents and the Lenders
(each, a "RECIPIENT") written information which is identified to the Recipient
when delivered as confidential (such information, other than any such
information which (i) was publicly available, or otherwise known to the
Recipient, at the time of disclosure, (ii) subsequently becomes publicly
available other than through any act or omission by the Recipient or (iii)
otherwise subsequently becomes known to the Recipient other than through a
Person whom the Recipient knows to be acting in violation of his or its
obligations to the Borrower, being hereinafter referred to as "CONFIDENTIAL
INFORMATION"). The Recipient will not knowingly disclose any such Confidential
Information to any third party (other than to those persons who have a
confidential relationship with the Recipient), and will take all reasonable
steps to restrict access to such information in a manner designed to maintain
the confidential nature of such information, in each case until such time as the
same ceases to be Confidential Information or as the Borrower may otherwise
instruct. It is understood, however, that the foregoing will not restrict the
Recipient's ability to freely exchange such Confidential Information with its
Affiliates or with prospective participants in or assignees of the Recipient's
position herein, but the Recipient's ability to so exchange Confidential
Information shall be conditioned upon any such Affiliate's or prospective
participant's (as the case may be) entering into an agreement as to
confidentiality similar to this Section 11.08. It is further understood that the
foregoing will not prohibit the disclosure of any or all Confidential
Information if and to the extent that such disclosure may be required (1) by a
regulatory agency or otherwise in connection with an examination of the
Recipient's records by appropriate authorities, (2) pursuant to court order,
subpoena or other legal process or in connection with any proceeding, suit or
other action relating to any Loan Document or (3) otherwise, as required by law;
in the event of any required disclosure under clause (2) or (3), above, the
Recipient agrees to use

                                       66
<PAGE>

reasonable efforts to inform the Borrower as promptly as practicable to the
extent not prohibited by law.

     SECTION 11.09. Waiver of Jury Trial. THE BORROWER, CMS ENERGY, THE AGENTS
AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED
HEREUNDER OR THEREUNDER.

     SECTION 11.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
AND THE PROMISSORY NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES). THE BORROWER, CMS ENERGY, THE LENDERS AND THE
AGENTS, EACH (I) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT SITTING IN NEW YORK CITY IN ANY ACTION ARISING OUT OF ANY
LOAN DOCUMENT, (II) AGREES THAT ALL CLAIMS IN SUCH ACTION MAY BE DECIDED IN SUCH
COURT, (III) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM AND (IV) CONSENTS TO THE SERVICE OF PROCESS BY MAIL. A
FINAL JUDGMENT IN ANY SUCH ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT ITS RIGHT TO BRING ANY
ACTION IN ANY OTHER COURT. EACH OF THE BORROWER AND CMS ENERGY AGREES THAT THE
AGENTS SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER, CMS ENERGY OR ITS
RESPECTIVE PROPERTY IN A COURT IN ANY LOCATION TO ENABLE THE AGENTS AND THE
LENDERS TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENTS OR
ANY LENDER. EACH OF THE BORROWER AND CMS ENERGY AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY ANY AGENT OR ANY
LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS,
OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF ANY AGENT OR ANY
LENDER. EACH OF THE BORROWER AND CMS ENERGY WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH ANY AGENT OR ANY LENDER MAY COMMENCE
A PROCEEDING DESCRIBED IN THIS SECTION.

     SECTION 11.11. RELATION OF THE PARTIES; NO BENEFICIARY. No term, provision
or requirement, whether express or implied, of any Loan Document, or actions
taken or to be taken by any party thereunder, shall be construed to create a
partnership, association, or joint venture between such parties or any of them.
No term or provision of the Loan Documents shall be construed to confer a
benefit upon, or grant a right or privilege to, any Person other than the
parties hereto. The Borrower hereby acknowledges that neither any Agent nor any
Lender has

                                       67
<PAGE>

any fiduciary relationship with or fiduciary duty to the Borrower arising out of
or in connection with this Agreement or any of the other Loan Documents, and the
relationship between the Agents and the Lenders, on the one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor.

     SECTION 11.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.

     SECTION 11.13. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made herein and in the certificates pursuant
hereto shall be considered to have been relied upon by the Agents and the
Lenders and shall survive the making by the Lenders of the Extensions of Credit
and the execution and delivery to the Lenders of any Promissory Notes evidencing
the Extensions of Credit and shall continue in full force and effect so long as
any Promissory Note or any amount due hereunder is outstanding and unpaid or any
Commitment of any Lender has not been terminated.

                            [Signature pages follow.]

                                       68
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                  CMS ENTERPRISES COMPANY

                                  By: /s/ Alan M. Wright
                                      --------------------------------------
                                      Name:    Alan M. Wright
                                      Title:   Executive Vice President
                                      Chief Financial Officer &
                                      Chief Administrative Officer

                                  CMS ENERGY CORPORATION

                                  By: /s/ Alan M. Wright
                                      --------------------------------------
                                      Name:    Alan M. Wright
                                      Title:   Executive Vice President
                                      Chief Financial Officer &
                                      Chief Administrative Officer

                 Signature Page to $150,000,000 Credit Agreement
<PAGE>

                                CITICORP USA, INC., individually as a Lender, as
                                Administrative Agent and as Collateral Agent

                                By: /s/ Dale R. Goncher
                                    ---------------------------------------
                                    Name: Dale R. Goncher
                                    Title: Director

                 Signature Page to $150,000,000 Credit Agreement
<PAGE>

                                 BARCLAYS BANK PLC, individually as a Lender

                                 By: /s/ Sidney G. Dennis
                                     --------------------------------------
                                     Name:  Sidney G. Dennis
                                     Title: Director

(The signature pages for the remaining banks are not attached)

                 Signature Page to $150,000,000 Credit Agreement
<PAGE>

                              COMMITMENT SCHEDULE

<TABLE>
<CAPTION>

-------------------------------------------- ------------------
LENDER                                       COMMITMENT
-------------------------------------------- ------------------
<S>                                          <C>
                                             $25,000,000
BARCLAYS BANK PLC
-------------------------------------------- ------------------

                                             $25,000,000
BANK OF AMERICA, N.A.
-------------------------------------------- ------------------

                                             $25,000,000
JPMORGAN CHASE BANK
-------------------------------------------- ------------------

                                             $25,000,000
CITICORP USA, INC.
-------------------------------------------- ------------------

                                             $25,000,000
UNION BANK OF CALIFORNIA, N.A.
-------------------------------------------- ------------------

                                             $25,000,000
BANK ONE, NA
-------------------------------------------- ------------------

                                             $150,000,000
TOTAL:
-------------------------------------------- ------------------
</TABLE>

                                       69

<PAGE>

<TABLE>
<CAPTION>

                                        SCHEDULE III

                                     Pledged Capital Stock
                                     ---------------------

GRANTOR                              PLEDGED SUBSIDIARIES
-------                              ---------------------
<S>                                  <C>
CMS Enterprises Company              CMS Generation Co. (100%)

                                     CMS Gas Transmission Company (100%)

                                     CMS Capital, L.L.C. (100%)

                                     CMS Electric and Gas Company (100%)

                                     CMS Oil and Gas Company (100%)

                                     CMS Marketing Services and Trading Company (100%)

                                     CMS International Ventures, L.L.C. (66.7%)

CMS Generation Co.                   CMS International Ventures, L.L.C. (33.3%)

                                     Dearborn Industrial Energy, L.L.C. (100%)

                                     CMS Generation Michigan Power L.L.C. (100%)

Dearborn Industrial Energy, L.L.C.   Dearborn Industrial Generation, L.L.C. (100%)

CMS Gas Transmission Company         CMS Field Services, Inc. (100%)

                                     Panhandle Eastern Pipe Line Company (100%)

CMS Field Services, Inc.             CMS Gas Processing, L.L.C. (100%)

                                     CMS Natural Gas Gathering, L.L.C. (100%)
</TABLE>

                                       70<PAGE>

                                                                     EXHIBIT 4.4
================================================================================

                            364 DAY CREDIT AGREEMENT

                            Dated as of July 12, 2002

                                      among

                            CONSUMERS ENERGY COMPANY,
                                as the Borrower,

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,
                                  as the Banks,

                                       and

                                  BANK ONE, NA,
                                    as Agent

================================================================================

                         BANC ONE CAPITAL MARKETS, INC.
                      as Lead Arranger and Sole Book Runner

================================================================================

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               Page
<S>                                                                                                          <C>
ARTICLE I             DEFINITIONS................................................................................1

         1.1      Definitions....................................................................................1

         1.2      Singular and Plural...........................................................................11

         1.3      Accounting Terms..............................................................................11

ARTICLE II            THE ADVANCES..............................................................................12

         2.1      Commitment....................................................................................12

         2.2      Required Payments; Termination................................................................12

         2.3      Ratable Loans.................................................................................12

         2.4      Types of Advances.............................................................................12

         2.5      Commitment Fee and Reductions of Commitment...................................................12

         2.6      Minimum Amount of Advances....................................................................13

         2.7      Optional Principal Payments...................................................................13

         2.8      Method of Selecting Types and Interest Periods for New Advances...............................13

         2.9      Conversion and Continuation of Outstanding Advances...........................................14

         2.10     Interest Rates, Interest Payment Dates........................................................14

         2.11     Rate after Maturity...........................................................................15

         2.12     Method of Payment.............................................................................15

         2.13     Bonds; Record-keeping; Telephonic Notices.....................................................15

         2.14     Lending Installations.........................................................................16

         2.15     Non-Receipt of Funds by the Agent.............................................................16

ARTICLE III           LETTER OF CREDIT FACILITY.................................................................16

         3.1      Issuance......................................................................................16

         3.2      Participations................................................................................17

         3.3      Notice........................................................................................17

         3.4      LC Fees.......................................................................................17

         3.5      Administration; Reimbursement by Banks........................................................17

         3.6      Reimbursement by Company......................................................................18

         3.7      Obligations Absolute..........................................................................18

         3.8      Actions of LC Issuer..........................................................................19
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                          <C>
         3.9      Indemnification...............................................................................19

         3.10     Banks' Indemnification........................................................................20

         3.11     Rights as a Bank..............................................................................20

ARTICLE IV            CHANGE IN CIRCUMSTANCES...................................................................20

         4.1      Yield Protection..............................................................................20

         4.2      Replacement Bank..............................................................................21

         4.3      Availability of Eurodollar Rate Loans.........................................................22

         4.4      Funding Indemnification.......................................................................22

         4.5      Taxes.........................................................................................22

         4.6      Bank Certificates, Survival of Indemnity......................................................24

ARTICLE V             REPRESENTATIONS AND WARRANTIES............................................................24

         5.1      Incorporation and Good Standing...............................................................24

         5.2      Corporate Power and Authority: No Conflicts...................................................24

         5.3      Governmental Approvals........................................................................25

         5.4      Legally Enforceable Agreements................................................................25

         5.5      Financial Statements..........................................................................25

         5.6      Litigation....................................................................................25

         5.7      Margin Stock..................................................................................26

         5.8      ERISA.........................................................................................26

         5.9      Insurance.....................................................................................26

         5.10     Taxes.........................................................................................26

         5.11     Investment Company Act........................................................................26

         5.12     Public Utility Holding Company Act............................................................26

         5.13     Bonds.........................................................................................26

ARTICLE VI            AFFIRMATIVE COVENANTS.....................................................................26

         6.1      Payment of Taxes, Etc.........................................................................26

         6.2      Maintenance of Insurance......................................................................26

         6.3      Preservation of Corporate Existence, Etc......................................................27

         6.4      Compliance with Laws, Etc.....................................................................27

         6.5      Visitation Rights.............................................................................27

         6.6      Keeping of Books..............................................................................27

         6.7      Reporting Requirements........................................................................27

         6.8      Use of Proceeds...............................................................................29

</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                          <C>
         6.9      Maintenance of Properties, Etc................................................................29

         6.10     Bonds.........................................................................................29

         6.11     Post-Closing Opinion..........................................................................29

ARTICLE VII           NEGATIVE COVENANTS........................................................................29

         7.1      Liens.........................................................................................30

         7.2      Sale of Assets................................................................................31

         7.3      Mergers, Etc..................................................................................31

         7.4      Compliance with ERISA.........................................................................31

         7.5      Change in Nature of Business..................................................................31

         7.6      Restricted Payments...........................................................................31

         7.7      Off-Balance Sheet Liabilities.................................................................31

ARTICLE VIII          FINANCIAL COVENANTS.......................................................................32

         8.1      Debt to Capital Ratio.........................................................................32

         8.2      Interest Coverage Ratio.......................................................................32

ARTICLE IX            EVENTS OF DEFAULT.........................................................................32

         9.1      Events of Default.............................................................................32

         9.2      Remedies......................................................................................33

ARTICLE X             WAIVERS, AMENDMENTS AND REMEDIES..........................................................34

         10.1     Amendments....................................................................................34

         10.2     Preservation of Rights........................................................................35

ARTICLE XI            CONDITIONS PRECEDENT......................................................................35

         11.1     Initial Credit Extension......................................................................35

         11.2     Each Credit Extension.........................................................................36

ARTICLE XII           GENERAL PROVISIONS........................................................................37

         12.1     Successors and Assigns........................................................................37

         12.2     Survival of Representations...................................................................38

         12.3     Governmental Regulation.......................................................................38

         12.4     Taxes.........................................................................................39

         12.5     Choice of Law.................................................................................39

         12.6     Headings......................................................................................39

         12.7     Entire Agreement..............................................................................39

         12.8     Expenses; Indemnification.....................................................................39

         12.9     [Intentionally Omitted].......................................................................40

</TABLE>

<PAGE>

<TABLE>

<S>                                                                                                            <C>
         12.10    Severability of Provisions....................................................................40

         12.11    Setoff........................................................................................40

         12.12    Ratable Payments..............................................................................40

         12.13    Nonliability of Bank..........................................................................40

ARTICLE XIII          THE AGENT.................................................................................41

         13.1     Appointment...................................................................................41

         13.2     Powers........................................................................................41

         13.3     General Immunity..............................................................................41

         13.4     No Responsibility for Loans, Recitals, Etc....................................................41

         13.5     Action on Instructions of Banks...............................................................41

         13.6     Employment of Agents and Counsel..............................................................42

         13.7     Reliance on Documents; Counsel................................................................42

         13.8     Agent's Reimbursement and Indemnification.....................................................42

         13.9     Rights as a Lender............................................................................42

         13.10    Bank Credit Decision..........................................................................42

         13.11    Successor Agent...............................................................................42

         13.12    Agent and Arranger Fees.......................................................................43

ARTICLE XIV           NOTICES...................................................................................43

         14.1     Giving Notice.................................................................................43

         14.2     Change of Address.............................................................................43

ARTICLE XV            ..........................................................................................44
</TABLE>

<PAGE>

SCHEDULES

PRICING SCHEDULE
COMMITMENT SCHEDULE

EXHIBITS
<TABLE>
<S>              <C>
Exhibit A        Form of Supplemental Indenture
Exhibit B-1      Required Opinions from Michael D. VanHemert, Esq.
Exhibit B-2      Required Opinions from Skadden, Arps, Slate, Meagher & Flom, LLP
Exhibit B-3      Required Opinions from Miller, Canfield, Paddock and Stone, P.L.C.
Exhibit C        Form of Compliance Certificate
Exhibit D        Form of Assignment and Assumption Agreement
Exhibit E        Terms of Subordination (Junior Subordinated Debt)
Exhibit F        Terms of Subordination (Guaranty of Hybrid Preferred Securities)
Exhibit G        Form of Bond Delivery Agreement
</TABLE>

<PAGE>

                            364 DAY CREDIT AGREEMENT

         This 364 Day Credit Agreement, dated as of July 12, 2002, is among
Consumers Energy Company, a Michigan corporation (the "Company"), the financial
institutions listed on the signature pages hereof (together with their
respective successors and assigns, the "Banks") and Bank One, NA, a national
banking association having its principal office in Chicago, Illinois, as Agent
and as LC Issuer.

                                   WITNESSETH:

         WHEREAS, the Company, certain banks and Bank One, NA (formerly known as
The First National Bank of Chicago), as agent, are parties to a Credit Agreement
dated as of July 14, 1999 (as amended, the "Prior Agreement"); and

         WHEREAS, the Company has requested, and the Banks have agreed to enter
into, a 364 day credit facility in an aggregate amount of $250,000,000;

         NOW THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1      Definitions.  As used in this Agreement:

         "Accounting Changes" -- see Section 1.3.

         "Adjusted Face Amount" means, with respect to any Zero Rate Bond, the
Face Amount of such Zero Rate Bond minus all payments under this Agreement
which, in accordance with the terms set forth in the Supplemental Indenture,
reduce the principal amount of such Zero Rate Bond.

         "Advance" means a group of Loans made by the Banks hereunder of the
same Type, made, converted or continued on the same day and, in the case of
Eurodollar Rate Loans, having the same Interest Period.

         "Agent" means Bank One in its capacity as administrative agent for the
Banks pursuant to Article XIII, and not in its individual capacity as a Bank,
and any successor Agent appointed pursuant to Article XIII.

         "Aggregate Commitment" means the aggregate amount of the Commitments of
all Banks.

         "Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Banks.

         "Agreement" means this 364 Day Credit Agreement, as amended from time
to time.

                                       1
<PAGE>

         "Alternate Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds
Effective Rate for such day plus 1/2% per annum.

         "Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.

         "Arranger" -- see Section 13.12.

         "Article" means an article of this Agreement unless another document is
specifically referenced.

         "Assignment Agreement" -- see Section 12.1(e).

         "Available Aggregate Commitment" means, at any time, the Available
Commitment then in effect minus the Aggregate Outstanding Credit Exposure at
such time.

         "Available Commitment" means, at any time, the least of (i) the
Aggregate Commitment, (ii) the sum of the Face Amount of Interest Bearing Bonds
and the Adjusted Face Amount of Zero Rate Bonds and (iii) $235,000,000 (or, if
the Company has delivered Bonds to the Agent in an aggregate Face Amount of
$265,000,000 or more, $250,000,000).

         "Banks" - see the preamble.

         "Bank One" means Bank One, NA (Main Office -- Chicago), in its
individual capacity, and its successors and assigns.

         "Base Eurodollar Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the per annum interest rate determined by the
offered rate per annum at which deposits in U.S. dollars, for a period equal or
comparable to such Interest Period, appears on Telerate page 3750 (or any
successor page) as of 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, or in the event such offered rate is not
available from the Telerate page, the rate offered on deposits in U.S. dollars,
for a period equal or comparable to such Interest Period, by Bank One's London
Office to prime banks in the London interbank market at approximately 11:00 a.m.
(London time), two Business Days prior to the first day of such Interest Period,
and in an amount substantially equal to the amount of Bank One's relevant
Eurodollar Rate Loan for such Interest Period.

         "Bonds" means, collectively, the Interest Bearing Bonds and the Zero
Rate Bonds.

         "Bond Delivery Agreement" means a bond delivery agreement whereby the
Agent (x) acknowledges delivery of the Bonds and (y) agrees to hold the Bonds
for the benefit of the Banks and to distribute all payments made by the Company
on account thereof to the Banks, substantially in the form of Exhibit G.

         "Borrowing Date" means a date on which a Credit Extension is made
hereunder.

                                       2
<PAGE>

         "Borrowing Notice" - see Section 2.8.

         "Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Illinois and New York, New York for
the conduct of substantially all of their commercial lending activities,
interbank wire transfers can be made on the Fedwire system and dealings in
United States dollars are carried on in the London interbank market and (ii) for
all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago, Illinois and New York, New York for the conduct
of substantially all of their commercial lending activities and interbank wire
transfers can be made on the Fedwire system.

         "Capital Lease" means any lease which has been or would be capitalized
on the books of the lessee in accordance with GAAP.

         "CMS" means CMS Energy Corporation, a Michigan corporation.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

         "Collateral Shortfall Amount" -- see Section 9.2.

         "Commitment" means, for each Bank, the obligation of such Bank to make
Loans to, and participate in Facility LCs issued upon the application of, the
Company in an aggregate amount not exceeding the amount set forth on the
Commitment Schedule or as set forth in any Assignment Agreement that has become
effective pursuant to Section 12.1, as such amount may be modified from time to
time.

         "Commitment Fee" -- see Section 2.5.

         "Commitment Fee Rate" means, at any time, the percentage rate per annum
at which Commitment Fees are accruing on the Unused Commitment as set forth in
the Pricing Schedule.

         "Commitment Schedule" means the Schedule identifying each Bank's
Commitment as of the date hereof attached hereto and identified as such.

         "Company" - see the preamble.

         "Consolidated EBIT" means Consolidated Net Income plus, (i) to the
extent deducted from revenues in determining Consolidated Net Income (without
duplication), (a) Consolidated Interest Expense, (b) expense for taxes paid or
accrued, (c) any non-cash write-offs and write-downs contained in the Company's
Consolidated Net Income, including, without limitation, write-offs or
write-downs related to the sale of assets, impairment of assets and loss on
contracts, and (d) the pre-tax write-off for the fiscal period ending December
31, 2001 in an amount not to exceed $126,000,000 arising from the loss on Power
Purchase Agreement -- MCV Partnership, minus, (ii) to the extent included in
Consolidated Net Income, extraordinary gains realized other than in the ordinary
course of business, all calculated for the Company and its Subsidiaries on a
consolidated basis in accordance with GAAP.

                                       3
<PAGE>

         "Consolidated Interest Expense" means with respect to any period for
which the amount thereof is to be determined, an amount equal to interest
expense on Debt, including payments in the nature of interest under Capital
Leases, all calculated for the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP.

         "Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries calculated on a
consolidated basis for such period.

         "Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of the Company in accordance
with GAAP.

         "Credit Documents" means this Agreement, the Facility LC Applications,
the Supplemental Indenture and the Bonds.

         "Credit Extension" means the making of an Advance or the issuance of a
Facility LC hereunder.

         "Debt" means, with respect to any Person, and without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all indebtedness of such
Person for the deferred purchase price of property or services (other than trade
accounts payable arising in the ordinary course of business which are not
overdue), (c) all Unfunded Vested Liabilities of such Person (if such Person is
not the Company, determined in a manner analogous to that of determining
Unfunded Vested Liabilities of the Company), (d) all obligations of such Person
arising under acceptance facilities, (e) all obligations of such Person as
lessee under Capital Leases, (f) all obligations of such Person arising under
any interest rate swap, "cap", "collar" or other hedging agreement; provided
that for purposes of the calculation of Debt for this clause (f) only, the
actual amount of Debt of such Person shall be determined on a net basis to the
extent such agreements permit such amounts to be calculated on a net basis, and
(g) all guaranties, endorsements (other than for collection in the ordinary
course of business) and other contingent obligations of such Person to assure a
creditor against loss (whether by the purchase of goods or services, the
provision of funds for payment, the supply of funds to invest in any Person or
otherwise) in respect of indebtedness or obligations of any other Person of the
kinds referred to in clauses (a) through (f) above.

         "Default" means an event which but for the giving of notice or lapse of
time, or both, would constitute an Event of Default.

         "Designated Officer" means the Chief Financial Officer, the Treasurer,
an Assistant Treasurer, any Vice President in charge of financial or accounting
matters or the principal accounting officer of the Company.

         "Discounted Amount" means, with respect to any Zero Rate Bond, the
Adjusted Face Amount of such Bond minus the product of (x) such Adjusted Face
Amount multiplied by (y) a percentage equal to the sum of the highest interest
rate then applicable to any Eurodollar Rate Loan hereunder (or, if no Eurodollar
Rate Loans are then outstanding hereunder, the rate that would be applicable to
a Eurodollar Rate Loan borrowed on the most recent Business Day for a one-month
Interest Period) plus the then applicable Commitment Fee Rate multiplied by (z)
a

                                       4
<PAGE>

fraction, the numerator of which is the number of days remaining until the
Termination Date and the denominator of which is 360.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or is under common control (within
the meaning of Section 414(c) of the Code) with the Company.

         "Eurodollar Advance" means an Advance consisting of Eurodollar Rate
Loans.

         "Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, an interest rate per annum equal to the sum of (i) the
quotient obtained by dividing (a) the Base Eurodollar Rate applicable to such
Interest Period by (b) one minus the Reserve Requirement (expressed as a
decimal) applicable to such Interest Period, plus (ii) the Applicable Margin.

         "Eurodollar Rate Loan" means a Loan which bears interest by reference
to the Eurodollar Rate.

         "Event of Default" means an event described in Article IX.

         "Excluded Taxes" means, in the case of each Bank, the LC Issuer or
applicable Lending Installation and the Agent, taxes imposed on its overall net
income, and franchise taxes imposed on it, by (i) the jurisdiction under the
laws of which such Bank, the LC Issuer or the Agent is incorporated or organized
or (ii) the jurisdiction in which the Agent's, the LC Issuer's or such Bank's
principal executive office or such Bank's or the LC Issuer's applicable Lending
Installation is located.

         "Face Amount" means, with respect to any Bond, the face amount of such
Bond.

         "Facility LC" -- see Section 3.1.

         "Facility LC Application" -- see Section 3.3.

         "Facility LC Collateral Account" means a special, interest-bearing
account maintained (pursuant to arrangements satisfactory to the Agent) at the
Agent's office at the address specified pursuant to Article XII, which account
shall be in the name of the Company but under the sole dominium and control of
the Agent, for the benefit of the Banks.

         "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such

                                       5
<PAGE>

day on such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by the Agent in its sole discretion.

          "First Mortgage Bonds" means bonds issued by the Company pursuant to
the Indenture.

         "Fitch" means Fitch, Inc. or any successor thereto.

         "Floating Rate" means a rate per annum equal to (i) the Alternate Base
Rate plus (ii) the Applicable Margin, changing when and as the Alternate Base
Rate or the Applicable Margin changes.

         "Floating Rate Advance" means an Advance consisting of Floating Rate
Loans.

         "Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.

         "FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.

         "GAAP" means generally accepted accounting principles in the United
States of America as in effect on the date hereof, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.5 (except, for purposes of the financial statements required to be
delivered pursuant to Sections 6.7(b) and (c), for changes concurred in by the
Company's independent public accountants).

         "Hybrid Preferred Securities" means any preferred securities issued by
a Hybrid Preferred Securities Subsidiary, where such preferred securities have
the following characteristics:

                  (i) such Hybrid Preferred Securities Subsidiary lends
         substantially all of the proceeds from the issuance of such preferred
         securities to the Company or a wholly-owned direct or indirect
         Subsidiary of the Company in exchange for Junior Subordinated Debt
         issued by the Company or such wholly-owned direct or indirect
         Subsidiary, respectively;

                  (ii) such preferred securities contain terms providing for the
         deferral of interest payments corresponding to provisions providing for
         the deferral of interest payments on the Junior Subordinated Debt; and

                  (iii) the Company or a wholly-owned direct or indirect
         Subsidiary of the Company (as the case may be) makes periodic interest
         payments on the Junior Subordinated Debt, which interest payments are
         in turn used by the Hybrid Preferred Securities Subsidiary to make
         corresponding payments to the holders of the preferred securities.

         "Hybrid Preferred Securities Subsidiary" means any Delaware business
trust (or similar entity) (i) all of the common equity interest of which is
owned (either directly or indirectly through one or more wholly-owned
Subsidiaries of the Company) at all times by the Company or a wholly-owned
direct or indirect Subsidiary of the Company, (ii) that has been formed for the

                                       6
<PAGE>

purpose of issuing Hybrid Preferred Securities and (iii) substantially all of
the assets of which consist at all times solely of Junior Subordinated Debt
issued by the Company or a wholly-owned direct or indirect Subsidiary of the
Company (as the case may be) and payments made from time to time on such Junior
Subordinated Debt.

         "Indenture" means the Indenture, dated as of September 1, 1945, as
supplemented and amended from time to time, from the Company to JPMorgan Chase
Bank (formerly known as The Chase Manhattan Bank), as successor Trustee.

         "Initial Borrowing Date"  means July 15, 2002.

         "Interest Bearing 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 Agent.

         "Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three or six months, or such shorter period agreed to by the
Company and the Banks, commencing on a Business Day selected by the Company
pursuant to this Agreement. Such Interest Period shall end on the day which
corresponds numerically to such date one, two, three or six months thereafter
(or such shorter period agreed to by the Company and the Banks), provided,
however, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month (or such shorter period, as applicable),
such Interest Period shall end on the last Business Day of such next, second,
third or sixth succeeding month (or such shorter period, as applicable). If an
Interest Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new calendar
month, such Interest Period shall end on the immediately preceding Business Day.
The Company may not select any Interest Period that ends after the scheduled
Termination Date.

         "Junior Subordinated Debt" means any unsecured Debt of the Company or a
Subsidiary of the Company (i) issued in exchange for the proceeds of Hybrid
Preferred Securities and (ii) subordinated to the rights of the Banks hereunder
and under the other Credit Documents pursuant to terms of subordination
substantially similar to those set forth in Exhibit E, or pursuant to other
terms and conditions satisfactory to the Majority Banks.

         "LC Fee" -- see Section 3.4.

         "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One
designated by Bank One) in its capacity as issuer of Facility LCs hereunder.

         "LC Obligations" means, at any time, the sum, without duplication, of
(i) the aggregate undrawn stated amount under all Facility LCs outstanding at
such time plus (ii) the aggregate unpaid amount at such time of all
Reimbursement Obligations.

         "LC Payment Date" -- see Section 3.5.

         "Lending Installation" means any office, branch, subsidiary or
affiliate of a Bank.

                                       7
<PAGE>

         "Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.

         "Loan" - see Section 2.1.

         "Majority Banks" means, as of any date of determination, Banks in the
aggregate having 51% or more of the Aggregate Commitment as of such date or, if
the Aggregate Commitment has been terminated, Banks in the aggregate holding 51%
or more of the aggregate unpaid principal amount of the Aggregate Outstanding
Credit Exposure as of such date.

         "Modify" and "Modification" -- see Section 3.1.

         "Moody's" means Moody's Investors Service, Inc. or any successor
thereto.

         "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.

          "Net Proceeds" means, with respect to any sale or issuance of
securities or incurrence of Debt by any Person, the excess of (i) the gross cash
proceeds received by or on behalf of such Person in respect of such sale,
issuance or incurrence (as the case may be) over (ii) customary underwriting
commissions, auditing and legal fees, printing costs, rating agency fees and
other customary and reasonable fees and expenses incurred by such Person in
connection therewith.

         "Net Worth" means, with respect to any Person, the excess of such
Person's total assets over its total liabilities, total assets and total
liabilities each to be determined in accordance with GAAP consistently applied,
excluding, however, from the determination of total assets (i) goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, and other similar intangibles, (ii) cash held in a sinking or other
analogous fund established for the purpose of redemption, retirement or
prepayment of capital stock or Debt, and (iii) any items not included in clauses
(i) or (ii) above, that are treated as intangibles in conformity with GAAP.

         "Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all Reimbursement Obligations, all accrued and unpaid
commitment fees and all other obligations of the Company to the Banks or to any
Bank, the LC Issuer or the Agent arising under the Credit Documents.

         "Off-Balance Sheet Liability" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any sale and leaseback
transaction which is not a Capital Lease, (iii) any liability under any
so-called "synthetic lease" transaction entered into by such Person, or (iv) any
obligation arising with respect to any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute a
liability on the balance sheets of such Person, but excluding from this clause
(iv) Operating Leases.

         "Operating Lease" of a Person means any lease of Property (other than a
Capital Lease) by such Person as lessee.

                                       8
<PAGE>

         "Other Taxes" -- see Section 4.5(b).

         "Outstanding Credit Exposure" means, as to any Bank at any time, the
sum of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such
time.

         "Payment Date" means the second Business Day of each calendar quarter
occurring after the Initial Borrowing Date.

         "PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.

          "Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.

         "Plan" means any employee benefit plan (other than a Multiemployer
Plan) maintained for employees of the Company or any ERISA Affiliate and covered
by Title IV of ERISA.

         "Pricing Schedule" means the Schedule attached hereto identified as
such.

         "Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.

         "Prior Agreement" - see the recitals.

         "Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.

         "Pro Rata Share" means, with respect to a Bank, a portion equal to a
fraction the numerator of which is such Bank's Commitment and the denominator of
which is the Aggregate Commitment.

          "Regulation D" means Regulation D of the FRB from time to time in
effect and shall include any successor or other regulation or official
interpretation of said FRB relating to reserve requirements applicable to member
banks of the Federal Reserve System.

         "Regulation U" means Regulation U of the FRB from time to time in
effect and shall include any successor or other regulation or official
interpretation of said FRB relating to the extension of credit by banks,
non-banks and non-broker-dealers for the purpose of purchasing or carrying
margin stocks.

         "Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Company then outstanding under Article III to reimburse the
LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.

         "Reportable Event" has the meaning assigned to that term in Title IV of
ERISA.

                                       9

<PAGE>
         "Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

         "S&P" means Standard and Poor's Rating Services, a division of The
McGraw Hill Companies, Inc. or any successor thereto.

         "SEC" means the Securities and Exchange Commission or any governmental
authority which may be substituted therefor.

         "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

         "Securitized Bonds" shall mean any nonrecourse bonds or similar
asset-backed securities issued by a special-purpose Subsidiary of the Company
which are payable solely from specialized charges authorized by the utility
commission of the relevant state in connection with the recovery of regulatory
assets or other stranded costs.

         "Senior Debt" means the First Mortgage Bonds.

         "Single Employer Plan" means a Plan maintained by the Company or any
ERISA Affiliate for employees of the Company or any ERISA Affiliate.

         "Subsidiary" means, as to any Person, any corporation or other entity
of which at least a majority of the securities or other ownership interests
having ordinary voting power (absolutely or contingently) for the election of
directors or other Persons performing similar functions are at the time owned
directly or indirectly by such Person.

         "Supplemental Indenture" means a supplemental indenture substantially
in the form of Exhibit A.

         "Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

         "Term Loan Agreement" means the Term Loan Agreement, dated as of July
12, 2002, by and among the Company, the various financial institutions from time
to time parties thereto, and Citicorp USA, Inc., as Agent, as the same may be
amended, restated, supplemented or otherwise modified from time to time.

         "Termination Date" means the earlier of (i) July 11, 2003, or (ii) the
date on which the Commitments are terminated.

         "Termination Event" means (a) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of the Company or any of its ERISA
Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001 (a) (2) of ERISA, or (c) the filing of a
notice of intent to

                                       10
<PAGE>
terminate a Plan or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan
by the PBGC or to appoint a trustee to administer any Plan.

         "Total Consolidated Capitalization" means, at any date of
determination, the sum of (a) Total Consolidated Debt, (b) equity of the common
stockholders of the Company, (c) equity of the preference stockholders of the
Company and (d) equity of the preferred stockholders of the Company, in each
case determined at such date.

         "Total Consolidated Debt" means, at any date of determination, the
aggregate Debt of the Company and its Consolidated Subsidiaries; provided, that
Total Consolidated Debt shall exclude (i) the principal amount of any
Securitized Bonds, (ii) any Junior Subordinated Debt owned by any Hybrid
Preferred Securities Subsidiary, (iii) any guaranty by the Company of payments
with respect to any Hybrid Preferred Securities, provided that such guaranty is
subordinated to the rights of the Banks hereunder and under the other Credit
Documents pursuant to terms of subordination substantially similar to those set
forth in Exhibit F, or pursuant to other terms and conditions satisfactory to
the Majority Banks, (iv) such percentage of the Net Proceeds from any issuance
of hybrid debt/equity securities (other than Junior Subordinated Debt and Hybrid
Preferred Securities) by the Company or any Consolidated Subsidiary as shall be
agreed to be deemed equity by the Agent and the Company prior to the issuance
thereof (which determination shall be based on, among other things, the
treatment (if any) given to such securities by the applicable rating agencies).

         "Type" - see Section 2.4.

         "Unfunded Vested Liabilities" means, (i) in the case of Single Employer
Plans, the amount (if any) by which the present value of all vested
nonforfeitable benefits under such Plan exceeds the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, and (ii) in the case of Multiemployer
Plans, the withdrawal liability of the Company and its ERISA Affiliates.

         "Unused Commitment" means, at any time, the Aggregate Commitment then
in effect minus the Aggregate Outstanding Credit Exposure at such time.

         "Zero Rate Bonds" means a series of zero coupon First Mortgage Bonds
created under the Supplemental Indenture issued in favor of, and in form and
substance satisfactory to, the Agent.

         1.2 Singular and Plural. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms.

         1.3 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. If any changes in generally
accepted accounting principles are hereafter required or permitted and are
adopted by the Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries shall change its application of generally accepted accounting
principles with respect to any Off-Balance Sheet Liabilities, in each case with
the agreement of its independent certified public accountants, and such changes
result in a change in the method of calculation of any of the financial
covenants, tests, restrictions or standards herein

                                       11
<PAGE>
or in the related definitions or terms used therein ("Accounting Changes"), the
parties hereto agree, at the Company's request, to enter into negotiations, in
good faith, in order to amend such provisions in a credit neutral manner so as
to reflect equitably such changes with the desired result that the criteria for
evaluating the Company's and its Subsidiaries' financial condition shall be the
same after such changes as if such changes had not been made; provided, however,
until such provisions are amended in a manner reasonably satisfactory to the
Agent, the Arranger and the Majority Banks, no Accounting Change shall be given
effect in such calculations. In the event such amendment is entered into, all
references in this Agreement to GAAP shall mean generally accepted accounting
principles as of the date of such amendment.

                                   ARTICLE II
                                  THE ADVANCES

         2.1 Commitment. From and including the Initial Borrowing Date and prior
to the Termination Date, each Bank severally agrees, on the terms and conditions
set forth in this Agreement, (a) to make loans to the Company from time to time
(the "Loans"), and (b) to participate in Facility LCs issued upon the request of
the Company from time to time, provided, that, after giving effect to the making
of each such Loan and the issuance of each such Facility LC, such Bank's
Outstanding Credit Exposure shall not exceed its Commitment. In no event may the
Aggregate Outstanding Credit Exposure exceed the Available Commitment. Subject
to the terms and conditions of this Agreement, the Company may borrow, repay and
reborrow at any time prior to the Termination Date. The Commitments shall expire
on the Termination Date.

         2.2 Required Payments; Termination. The Aggregate Outstanding Credit
Exposure and all other unpaid obligations of the Company hereunder shall be paid
in full on the Termination Date.

         2.3 Ratable Loans. Each Advance shall consist of Loans made by the
several Banks ratably according to their Pro Rata Shares.

         2.4 Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances (each a "Type" of Advance), or a combination thereof, as
selected by the Company in accordance with Sections 2.8 and 2.9.

         2.5 Commitment Fee and Reductions of Commitment.

         (a) The Company agrees to pay to the Agent for the account of each Bank
according to its Pro Rata Share a commitment fee (the "Commitment Fee") at the
Commitment Fee Rate on the daily Unused Commitment from the Initial Borrowing
Date to but not including the date on which this Agreement is terminated in full
and all of the Obligations hereunder have been paid in full. The commitment fee
shall be payable quarterly in arrears on each Payment Date (for the quarter then
most recently ended) and on the Termination Date (for the period then ended for
which such fee has not previously been paid). The commitment fee shall be
calculated for actual days elapsed on the basis of a 360 day year.

         (b) The Company may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Banks in the minimum amount of $10,000,000
(and in multiples of

                                       12
<PAGE>
$1,000,000 if in excess thereof), upon at least five Business Days' written
notice to the Agent, which shall specify the amount of any such reduction,
provided that the Aggregate Commitment may not be reduced below the Aggregate
Outstanding Credit Exposure. All accrued commitment fees shall be payable on the
effective date of any termination of the obligation of the Banks to make Credit
Extensions hereunder. Upon any permanent reduction in the Aggregate Commitment
pursuant to the terms of this Section 2.5(b), the Agent shall, upon request of
the Company, promptly surrender to or upon the order of the Company one or more
Bonds specified by the Company; provided that (i) the Company remains in
compliance with Section 6.10; and (ii) the Agent shall not be required to
surrender any Interest Bearing Bonds so long as any Zero Rate Bonds remain
outstanding.

         2.6 Minimum Amount of Advances. Each Advance shall be in the minimum
amount of $10,000,000 (and in integral multiples of $1,000,000 if in excess
thereof), provided that any Floating Rate Advance may be in the amount of the
Available Aggregate Commitment (rounded down, if necessary, to an integral
multiple of $1,000,000).

         2.7 Optional Principal Payments. The Company may from time to time
prepay, without penalty or premium, all outstanding Floating Rate Advances or,
in a minimum aggregate amount of $10,000,000 or a higher integral multiple of
$1,000,000, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Agent. The Company may from time to time pay,
subject to the payment of any funding indemnification amounts required by
Section 4.4 but without penalty or premium, all outstanding Eurodollar Advances
or, in a minimum aggregate amount of $10,000,000 or a higher integral multiple
of $1,000,000, any portion of any outstanding Eurodollar Advance upon three
Business Days' prior notice to the Agent; provided that if after giving effect
to any such prepayment the principal amount of any Eurodollar Advance is less
than $10,000,000, such Eurodollar Advance shall automatically convert into a
Floating Rate Advance. All payments made pursuant to this Section 2.7 shall be
deemed to be payments of Obligations evidenced by Zero Rate Bonds (except to the
extent such payment results in the Aggregate Outstanding Credit Exposure being
less than the face amount of all Interest Bearing Bonds).

         2.8 Method of Selecting Types and Interest Periods for New Advances.
The Company shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The Company
shall give the Agent irrevocable notice (a "Borrowing Notice") not later than
11:00 a.m. (Chicago time) on the Borrowing Date of each Floating Rate Advance
and not later than 11:00 a.m. (Chicago time) three Business Days before the
Borrowing Date for each Eurodollar Advance, specifying:

      (i)         the Borrowing Date, which shall be a Business Day,

      (ii)        the aggregate amount of such Advance,

      (iii)       the Type of Advance selected, and

      (iv)        in the case of each Eurodollar Advance, the initial Interest
                  Period applicable thereto.

                                       13
<PAGE>
Promptly after receipt thereof, the Agent will notify each Bank of the contents
of each Borrowing Notice. Not later than noon (Chicago time) on each Borrowing
Date, each Bank shall make available its Loan in funds immediately available in
Chicago to the Agent at its address specified pursuant to Section 14. To the
extent funds are received from the Banks, the Agent will make such funds
available to the Company at the Agent's aforesaid address. No Bank's obligation
to make any Loan shall be affected by any other Bank's failure to make any Loan.

         2.9 Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
2.9 or are repaid in accordance with Section 2.2 or 2.7. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless (x) such Eurodollar
Advance is or was repaid in accordance with Section 2.2 or 2.7 or (y) the
Company shall have given the Agent a Conversion/Continuation Notice (as defined
below) requesting that, at the end of such Interest Period, such Eurodollar
Advance continue as a Eurodollar Advance for the same or another Interest
Period. Subject to the terms of Section 2.6, the Company may elect from time to
time to convert all or any part of a Floating Rate Advance into a Eurodollar
Advance. The Company shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Floating Rate Advance
into a Eurodollar Advance or continuation of a Eurodollar Advance not later than
11:00 a.m. (Chicago time) at least three Business Days prior to the date of the
requested conversion or continuation, specifying:

      (i)         the requested date, which shall be a Business Day, of such
                  conversion or continuation;

      (ii)        the aggregate amount and Type of the Advance which is to be
                  converted or continued; and

      (iii)       the amount of the Advance which is to be converted into or
                  continued as a Eurodollar Advance and the duration of the
                  Interest Period applicable thereto.

         2.10 Interest Rates, Interest Payment Dates. (a) Subject to Section
2.11, each Advance shall bear interest as follows:

                  (i) at any time such Advance is a Floating Rate Advance, at a
         rate per annum equal to the Floating Rate from time to time in effect;
         and

                  (ii) at any time such Advance is a Eurodollar Advance, at a
         rate per annum equal to the Eurodollar Rate for each applicable
         Interest Period therein.

Changes in the rate of interest on that portion of any Advance maintained as a
Floating Rate Advance will take effect simultaneously with each change in the
Floating Rate.

         (a) Interest accrued on each Floating Rate Advance shall be payable on
each Payment Date and at maturity. Interest accrued on each Eurodollar Advance
shall be payable on the last day of its applicable Interest Period, on any date
on which such Eurodollar Advance is prepaid and at maturity. Interest accrued on
each Eurodollar Advance having an Interest Period longer

                                       14
<PAGE>
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest on Eurodollar Advances, interest
on Floating Rate Advances based on the Federal Funds Effective Rate and the LC
Fee shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest on Floating Rate Advances based on the Prime Rate shall be calculated
for actual days elapsed on the basis of a 365- or 366-day year, as appropriate.
Interest on each Advance shall accrue from and including the date such Advance
is made to but excluding the date payment thereof is received in accordance with
Section 2.12. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.

         2.11 Rate after Maturity. Any Advance not paid by the Company at
maturity, whether by acceleration or otherwise, shall bear interest until paid
in full at a rate per annum equal to the higher of the rate otherwise applicable
thereto plus 1% or the Floating Rate plus 1%.

         2.12 Method of Payment. All payments of principal, interest and fees
hereunder shall be made in immediately available funds to the Agent at its
address specified on its signature page to this Agreement (or at any other
Lending Installation of the Agent specified in writing by the Agent to the
Company) not later than noon (Chicago time) on the date when due and shall
(except in the case of Reimbursement Obligations for which the LC Issuer has not
been fully indemnified by the Banks, or as otherwise specifically required
hereunder) be applied ratably by the Agent among the Banks. Funds received after
such time shall be deemed received on the following Business Day unless the
Agent shall have received from, or on behalf of, the Company a Federal Reserve
reference number with respect to such payment before 3:00 p.m. (Chicago time) on
the date of such payment. Each payment delivered to the Agent for the account of
any Bank shall be delivered promptly by the Agent in the same type of funds
received by the Agent to such Bank at the address specified for such Bank on its
signature page to this Agreement or at any Lending Installation specified in a
notice received by the Agent from such Bank. The Agent is hereby authorized to
charge the account of the Company maintained with Bank One, if any, for each
payment of principal, interest, Reimbursement Obligation and fees as such
payment becomes due hereunder. Each reference to the Agent in this Section 2.12
shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the
case of payments required to be made by the Company to the LC Issuer pursuant to
Section 3.6.

         2.13 Bonds; Record-keeping; Telephonic Notices.

         (a) The obligation of the Company to repay the Obligations shall be
evidenced by one or more Bonds.

         (b) Each Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Company to such Bank
resulting from each Loan made by such Bank from time to time, including the
amounts of principal and interest payable and paid to such Bank from time to
time hereunder.

         (c) The Agent shall also maintain accounts in which it will record (i)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto, (ii) the

                                       15
<PAGE>
amount of any principal or interest due and payable or to become due and payable
from the Company to each Bank hereunder, (iii) the original stated amount of
each Facility LC and the amount of LC Obligations outstanding at any time, and
(iv) the amount of any sum received by the Agent hereunder from the Company and
each Bank's share thereof.

         (d) The entries maintained in the accounts maintained pursuant to
paragraphs (b) and (c) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Agent or any Bank to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Company to repay the Obligations
in accordance with their terms.

         (e) The Company hereby authorizes the Banks and the Agent to make
Advances based on telephonic notices made by any person or persons the Agent or
any Bank in good faith believes to be acting on behalf of the Company. The
Company agrees to deliver promptly to the Agent a written confirmation of each
telephonic notice signed by a Designated Officer. If the written confirmation
differs in any material respect from the action taken by the Agent and the
Banks, the records of the Agent and the Banks shall govern absent manifest
error.

         2.14 Lending Installations. Subject to the provisions of Section 4.6,
each Bank may book its Loans and its participation in any LC Obligations and the
LC Issuer may book the Facility LCs at any Lending Installation selected by such
Bank or the LC Issuer, as the case may be, and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans shall be deemed held by the applicable
Bank for the benefit of such Lending Installation. Each Bank may, by written or
facsimile notice to the Company, designate a Lending Installation through which
Loans will be made by it or Facility LC's will be issued by it and for whose
account payments on the Loans or payments with respect to Facility LCs are to be
made.

         2.15 Non-Receipt of Funds by the Agent. Unless a Bank or the Company,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Bank, the
proceeds of a Loan or (ii) in the case of the Company, a payment of principal,
interest or fees to the Agent for the account of the Banks, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Bank or the Company, as the case may be, has not in fact made such payment
to the Agent, the recipient of such payment shall, on demand by the Agent, repay
to the Agent the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to (i) in the case of payment by a Bank, the Federal Funds
Rate for such day or (ii) in the case of payment by the Company, the interest
rate applicable to the relevant Loan.

                                       16
<PAGE>
                                   ARTICLE III
                            LETTER OF CREDIT FACILITY

         3.1 Issuance. The LC Issuer hereby agrees, on the terms and conditions
set forth in this Agreement, to issue standby and commercial letters of credit
(each, a "Facility LC") and to renew, extend, increase, decrease or otherwise
modify each Facility LC ("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 immediately after each such
Facility LC is issued or Modified, (i) the aggregate amount of the outstanding
LC Obligations shall not exceed $100,000,000 and (ii) the Aggregate Outstanding
Credit Exposure shall not exceed the Available Commitment. No Facility LC shall
have an expiry date later than the fifth Business Day prior to the scheduled
Termination Date.

         3.2 Participations. Upon the issuance or Modification by the LC Issuer
of a Facility LC in accordance with this Article III, the LC Issuer shall be
deemed, without further action by any party hereto, to have unconditionally and
irrevocably sold to each Bank, and each Bank shall be deemed, without further
action by any party hereto, to have unconditionally and irrevocably purchased
from the LC Issuer, a participation in such Facility LC (and each Modification
thereof) and the related LC Obligations in proportion to its Pro Rata Share.

         3.3 Notice. Subject to Section 3.1, the Company shall give the LC
Issuer notice prior to 11:00 a.m. (Chicago time) at least three Business Days
prior to the proposed date of issuance or Modification of each Facility LC,
specifying the beneficiary, the proposed date of issuance (or Modification) and
the expiry date of such Facility LC, and describing the proposed terms of such
Facility LC and the nature of the transactions proposed to be supported thereby.
Upon receipt of such notice, the LC Issuer shall promptly notify the Agent, and
the Agent shall promptly notify each Bank, of the contents thereof and of the
amount of such Bank's participation in such proposed Facility LC. The issuance
or Modification by the LC Issuer of any Facility LC shall, in addition to the
conditions precedent set forth in Article XI (the satisfaction of which the LC
Issuer shall have no duty to ascertain), be subject to the conditions precedent
that such Facility LC shall be satisfactory to the LC Issuer and that the
Company shall have executed and delivered such application agreement and/or such
other instruments and agreements relating to such Facility LC as the LC Issuer
shall have reasonably requested (each, a "Facility LC Application"). In the
event of any conflict between the terms of this Agreement and the terms of any
Facility LC Application, the terms of this Agreement shall control.

         3.4 LC Fees. The Company shall pay to the Agent, for the account of the
Banks ratably in accordance with their respective Pro Rata Shares, a letter of
credit fee at a per annum rate equal to the Applicable Margin for Eurodollar
Rate Loans in effect from time to time on the average daily undrawn stated
amount under each Facility LC, such fee to be payable in arrears on each Payment
Date (such fee being the "LC Fee"). The Company shall also pay to the LC Issuer
for its own account (x) at the time of issuance of each Facility LC, a fronting
fee in an amount equal to 0.125% of the initial stated amount (or, with respect
to a Modification of any such Facility LC which increases the stated amount
thereof, such increase in the stated amount) thereof, and (y) documentary and
processing charges in connection with the issuance or Modification of and draws
under Facility LCs in accordance with the LC Issuer's standard schedule for such
charges as in effect from time to time.

                                       17
<PAGE>
         3.5 Administration; Reimbursement by Banks. Upon receipt from the
beneficiary of any Facility LC of any demand for payment under such Facility LC,
the LC Issuer shall notify the Agent and the Agent shall promptly notify the
Company and each other Bank as to the amount to be paid by the LC Issuer as a
result of such demand and the proposed payment date (the "LC Payment Date"). The
responsibility of the LC Issuer to the Company and each Bank shall be only to
determine that the documents (including each demand for payment) delivered under
each Facility LC in connection with such presentment shall be in conformity in
all material respects with such Facility LC. The LC Issuer shall endeavor to
exercise the same care in the issuance and administration of the Facility LCs as
it does with respect to letters of credit in which no participations are
granted, it being understood that in the absence of any gross negligence or
willful misconduct by the LC Issuer, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or any
condition precedent whatsoever, to reimburse the LC Issuer on demand for (i)
such Bank's Pro Rata Share of the amount of each payment made by the LC Issuer
under each Facility LC to the extent such amount is not reimbursed by the
Company pursuant to Section 3.6 below, plus (ii) interest on the foregoing
amount to be reimbursed by such Bank, for each day from the date of the LC
Issuer's demand for such Reimbursement (or, if such demand is made after 11:00
a.m. (Chicago time) on such date, from the next succeeding Business Day) to the
date on which such Bank pays the amount to be reimbursed by it, at a rate of
interest per annum equal to the Federal Funds Effective Rate for the first three
days and, thereafter, at a rate of interest equal to the rate applicable to
Floating Rate Advances.

         3.6 Reimbursement by Company. The Company shall be irrevocably and
unconditionally obligated to reimburse the LC Issuer on the applicable LC
Payment Date for any amounts to be paid by the LC Issuer upon any drawing under
any Facility LC, without presentment, demand, protest or other formalities of
any kind; provided that neither the Company nor any Bank shall hereby be
precluded from asserting any claim for direct (but not consequential) damages
suffered by the Company or such Bank to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the LC Issuer in
determining whether a request presented under any Facility LC issued by it
complied with the terms of such Facility LC or (ii) the LC Issuer's failure to
pay under any Facility LC issued by it after the presentation to it of a request
strictly complying with the terms and conditions of such Facility LC. All such
amounts paid by the LC Issuer and remaining unpaid by the Company 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 for such day if such day
falls on or before the applicable LC Payment Date and (y) the sum of 1% plus the
rate applicable to Floating Rate Advances for such day if such day falls after
such LC Payment Date. The LC Issuer will pay to each Bank ratably in accordance
with its Pro Rata Share all amounts received by it from the Company for
application in payment, in whole or in part, of the Reimbursement Obligation in
respect of any Facility LC issued by the LC Issuer, but only to the extent such
Bank has made payment to the LC Issuer in respect of such Facility LC pursuant
to Section 3.5. Subject to the terms and conditions of this Agreement (including
without limitation the submission of a Borrowing Notice in compliance with
Section 2.8 and the satisfaction of the applicable conditions precedent set
forth in Article XI), the Company may request an Advance hereunder for the
purpose of satisfying any Reimbursement Obligation.

                                       18
<PAGE>

         3.7 Obligations Absolute. The Company's obligations under this Article
III shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the Company
may have or have had against the LC Issuer, any Bank or any beneficiary of a
Facility LC. The Company further agrees with the LC Issuer and the Banks that
the LC Issuer and the Banks shall not be responsible for, and the Company's
Reimbursement Obligation in respect of any Facility LC 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 Facility LC or any
financing institution or other party to whom any Facility LC may be transferred
or any claims or defenses whatsoever of the Company or of any of its affiliates
against the beneficiary of any Facility LC or any such transferee. The LC Issuer
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 Facility LC. The Company agrees that any
action taken or omitted by the LC Issuer or any Bank under or in connection with
each Facility LC and the related drafts and documents, if done without gross
negligence or willful misconduct, shall be binding upon the Company and shall
not put the LC Issuer or any Bank under any liability to the Company. Nothing in
this Section 3.7 is intended to limit the right of the Company to make a claim
against the LC Issuer for damages as contemplated by the proviso to the first
sentence of Section 3.6.

         3.8 Actions of LC Issuer. The LC Issuer shall be entitled to rely, and
shall be fully protected in relying, upon any Facility LC, 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 LC Issuer.
The LC Issuer shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Majority Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Notwithstanding any other provision of this
Article III, the LC Issuer shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement in accordance with a request of
the Majority Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and any future holders of a
participation in any Facility LC.

         3.9 Indemnification. The Company hereby agrees to indemnify and hold
harmless each Bank, the LC Issuer and the Agent, and their respective directors,
officers, agents and employees from and against any and all claims and damages,
losses, liabilities, reasonable costs or expenses which such Bank, the LC Issuer
or the Agent may incur (or which may be claimed against such Bank, the LC Issuer
or the Agent by any Person whatsoever) by reason of or in connection with the
issuance, execution and delivery or transfer of or payment or failure to pay
under any Facility LC or any actual or proposed use of any Facility LC,
including, without limitation, any claims, damages, losses, liabilities, costs
or expenses which the LC Issuer may incur by reason of or in connection with (i)
the failure of any other Bank to fulfill or comply with its obligations to the
LC Issuer hereunder (but nothing herein contained shall affect any rights the

                                       19
<PAGE>

Company may have against any defaulting Bank) or (ii) by reason of or on account
of the LC Issuer issuing any Facility LC which specifies that the term
"Beneficiary" included therein includes any successor by operation of law of the
named Beneficiary, but which Facility LC does not require that any drawing by
any such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that the Company shall not be required to indemnify any
Bank, the LC Issuer or the Agent for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (x) the
willful misconduct or gross negligence of the LC Issuer in determining whether a
request presented under any Facility LC complied with the terms of such Facility
LC or (y) the LC Issuer's failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms and conditions
of such Facility LC. Nothing in this Section 3.9 is intended to limit the
obligations of the Company under any other provision of this Agreement.

         3.10 Banks' Indemnification. Each Bank shall, ratably in accordance
with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Company) against any cost, expense (including reasonable
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct or the LC Issuer's failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms and conditions
of the Facility LC) that such indemnitees may suffer or incur in connection with
this Article III or any action taken or omitted by such indemnitees hereunder.

         3.11 Rights as a Bank. In its capacity as a Bank, the LC Issuer shall
have the same rights and obligations as any other Bank.

                                   ARTICLE IV
                             CHANGE IN CIRCUMSTANCES

         4.1 Yield Protection. (a) If any change in law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof by any agency or authority having
jurisdiction over any Bank or the LC Issuer,

                  (i) subjects any Bank or any applicable Lending Installation
         or the LC Issuer to any increased tax, duty, charge or withholding on
         or from payments due from the Company (excluding taxation measured by
         or attributable to the overall net income of such Bank or applicable
         Lending Installation, whether overall or in any geographic area), or
         changes the rate of taxation of payments to any Bank or LC Issuer in
         respect of its Credit Extensions (including any participations in
         Facility LCs) or other amounts due it hereunder, or

                  (ii) imposes or increases or deems applicable any reserve,
         assessment, insurance charge, special deposit or similar requirement
         against assets of, deposits with or for the account of, or credit
         extended by any Bank, the LC Issuer or any applicable Lending
         Installation (including, without limitation, any reserve costs under
         Regulation D with respect to Eurocurrency liabilities (as defined in
         Regulation D)), or

                                       20
<PAGE>
                  (iii) imposes any other condition the result of which is to
         increase the cost to any Bank, the LC Issuer or any applicable Lending
         Installation of making, funding or maintaining Credit Extensions
         (including any participations in Facility LCs), or reduces any amount
         receivable by any Bank, the LC Issuer or any applicable Lending
         Installation in connection with Credit Extensions (including any
         participations in Facility LCs) or requires any Bank, the LC Issuer or
         any applicable Lending Installation to make any payment calculated by
         reference to its Outstanding Credit Exposure or interest received by
         it, by an amount deemed material by such Bank or the LC Issuer, or

                  (iv) affects the amount of capital required or expected to be
         maintained by any Bank, the LC Issuer or Lending Installation or any
         corporation controlling any Bank or LC Issuer and such Bank or the LC
         Issuer, as applicable, determines the amount of capital required is
         increased by or based upon the existence of this Agreement or its
         obligation to make Credit Extensions (including any participations in
         Facility LCs) hereunder or of commitments of this type,

then, upon presentation by such Bank or the LC Issuer to the Company of a
certificate (as referred to in the immediately succeeding sentence of this
Section 4.1) setting forth the basis for such determination and the additional
amounts reasonably determined by such Bank or the LC Issuer for the period of up
to 90 days prior to the date on which such certificate is delivered to the
Company and the Agent, to be sufficient to compensate such Bank or the LC
Issuer, as applicable, in light of such circumstances, the Company shall within
30 days of such delivery of such certificate pay to the Agent for the account of
such Bank or the LC Issuer, as applicable, the specified amounts set forth on
such certificate. The affected Bank or the LC Issuer, as applicable, shall
deliver to the Company and the Agent a certificate setting forth the basis of
the claim and specifying in reasonable detail the calculation of such increased
expense, which certificate shall be prima facie evidence as to such increase and
such amounts. An affected Bank or the LC Issuer, as applicable, may deliver more
than one certificate to the Company during the term of this Agreement. In making
the determinations contemplated by the above-referenced certificate, any Bank
and the LC Issuer may make such reasonable estimates, assumptions, allocations
and the like that such Bank or the LC Issuer, as applicable, in good faith
determines to be appropriate, and such Bank's or the LC Issuer's selection
thereof in accordance with this Section 4.1 shall be conclusive and binding on
the Company, absent manifest error.

         (a) Neither the LC Issuer nor any Bank shall 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
such Bank or the LC Issuer, as applicable, first notified the Company of the
occurrence of the event entitling such Bank or the LC Issuer, as applicable, to
such compensation (unless, and to the extent, that any such compensation so
demanded shall relate to the retroactive application of any event so notified to
the Company).

         4.2 Replacement Bank. (a) If any Bank shall make a demand for payment
under Section 4.1, then within 30 days after such demand, the Company may, with
the approval of the Agent (which approval shall not be unreasonably withheld)
and provided that no Default or Event of Default shall then have occurred and be
continuing, demand that such Bank assign to one or more financial institutions
designated by the Company and approved by the Agent all (but not less than all)
of such Bank's Commitment and Outstanding Credit Exposure within the period

                                       21
<PAGE>

ending on the later of such 30th day and the last day of the longest of the then
current Interest Periods or maturity dates for such Outstanding Credit Exposure.
It is understood that such assignment shall be consummated on terms satisfactory
to the assigning Bank, provided that such Bank's consent to such an assignment
shall not be unreasonably withheld.

         (a) If the Company shall elect to replace a Bank pursuant to clause (a)
above, the Company shall prepay the Outstanding Credit Exposure of such Bank,
and the bank or banks selected by the Company shall replace such Bank as a Bank
hereunder pursuant to an instrument satisfactory to the Company, the Agent and
the Bank being replaced by making Credit Extensions to the Company in the amount
of the Outstanding Credit Exposure of such assigning Bank and assuming all the
same rights and responsibilities hereunder as such assigning Bank and having the
same Commitment as such assigning Bank.

         4.3 Availability of Eurodollar Rate Loans. If

                  (a) any Bank determines that maintenance of a Eurodollar Rate
         Loan at a suitable Lending Installation would violate any applicable
         law, rule, regulation or directive, whether or not having the force of
         law, or

                  (b) the Majority Banks determine that (i) deposits of a type
         and maturity appropriate to match fund Eurodollar Rate Loans are not
         available or (ii) the Base Eurodollar Rate does not accurately reflect
         the cost of making or maintaining a Eurodollar Rate Loan,

then the Agent shall suspend the availability of Eurodollar Rate Loans and, in
the case of clause (a), require any Eurodollar Rate Loans to be converted to
Floating Rate Loans on such date as is required by the applicable law, rule,
regulation or directive.

         4.4 Funding Indemnification. If any payment of a Eurodollar Rate Loan
occurs on a date which is not the last day of an applicable Interest Period,
whether because of prepayment or otherwise, or a Eurodollar Rate Loan is not
made on the date specified by the Company for any reason other than default by
the Banks, the Company will indemnify each Bank for any loss or cost (but not
lost profits) incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Rate Loan; provided that the Company shall not be
liable for any of the foregoing to the extent they arise because of acceleration
by any Bank.

         4.5 Taxes.

         (a) All payments by the Company to or for the account of any Bank, the
LC Issuer or the Agent hereunder or under any Bond or Facility LC Application
shall be made free and clear of and without deduction for any and all Taxes. If
the Company shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder to any Bank, the LC Issuer or the Agent, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.5) such Bank, the LC Issuer or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such

                                       22
<PAGE>

deductions, (iii) the Company shall pay the full amount deducted to the relevant
authority in accordance with applicable law and (iv) the Company shall furnish
to the Agent the original copy of a receipt evidencing payment thereof within 30
days after such payment is made.

         (b) In addition, the Company hereby agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any Bond or
Facility LC Application or from the execution or delivery of, or otherwise with
respect to, this Agreement or any Bond or Facility LC Application ("Other
Taxes").

         (c) The Company hereby agrees to indemnify the Agent, the LC Issuer and
each Bank for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under this
Section 3.5) paid by the Agent, the LC Issuer or such Bank and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made within 30 days of
the date the Agent, the LC Issuer or such Bank makes demand therefor pursuant to
Section 4.6.

         (d) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Bank") agrees that it
will, not more than ten Business Days after the date hereof, or, if later, not
more than ten Business Days after becoming a Bank hereunder, (i) deliver to each
of the Company and the Agent two (2) duly completed copies of United States
Internal Revenue Service Form W8BEN or W8ECI, certifying in either case that
such Bank is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes, and (ii) deliver to
each of the Company and the Agent a United States Internal Revenue Form W-8 or
W-9, as the case may be, and certify that it is entitled to an exemption from
United States backup withholding tax. Each Non-U.S. Bank further undertakes to
deliver to each of the Company and the Agent (x) renewals or additional copies
of such form (or any successor form) on or before the date that such form
expires or becomes obsolete, and (y) after the occurrence of any event requiring
a change in the most recent forms so delivered by it, such additional forms or
amendments thereto as may be reasonably requested by the Company or the Agent.
All forms or amendments described in the preceding sentence shall certify that
such Bank is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form or amendment with respect
to it and such Bank advises the Company and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal
income tax.

         (e) For any period during which a Non-U.S. Bank has failed to provide
the Company with an appropriate form pursuant to clause (d), above (unless such
failure is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Bank shall not be entitled to indemnification under
this Section 4.5 with respect to Taxes imposed by the United States; provided
that, should a Non-

                                       23
<PAGE>

U.S. Bank which is otherwise exempt from or subject to a reduced rate of
withholding tax become subject to Taxes because of its failure to deliver a form
required under clause (d) above, the Company shall take such steps as such
Non-U.S. Bank shall reasonably request to assist such Non-U.S. Bank to recover
such Taxes.

         (f) Any Bank that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Bond
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Company (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate.

         (g) If the U.S. Internal Revenue Service or any other governmental
authority of the United States or any other country or any political subdivision
thereof asserts a claim that the Agent did not properly withhold tax from
amounts paid to or for the account of any Bank (because the appropriate form was
not delivered or properly completed, because such Bank failed to notify the
Agent of a change in circumstances which rendered its exemption from withholding
ineffective, or for any other reason), such Bank shall indemnify the Agent fully
for all amounts paid, directly or indirectly, by the Agent as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes
imposed by any jurisdiction on amounts payable to the Agent under this
subsection, together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Agent, which attorneys may
be employees of the Agent). The obligations of the Banks under this Section
4.5(g) shall survive the payment of the Obligations and termination of this
Agreement.

         4.6 Bank Certificates, Survival of Indemnity. To the extent reasonably
possible, each Bank shall designate an alternate Lending Installation with
respect to Eurodollar Rate Loans to reduce any liability of the Company to such
Bank under Section 4.1 or to avoid the unavailability of Eurodollar Rate Loan
under Section 4.3, so long as such designation is not disadvantageous to such
Bank. A certificate of such Bank as to the amount due under Section 4.1, 4.4 or
4.5 shall be final, conclusive and binding on the Company in the absence of
manifest error. Determination of amounts payable under such Sections in
connection with a Eurodollar Rate Loan shall be calculated as though each Bank
funded each Eurodollar Rate Loan through the purchase of a deposit of the type
and maturity corresponding to the deposit used as a reference in determining the
Base Eurodollar Rate applicable to such Loan whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in any certificate
shall be payable on demand after receipt by the Company of such certificate. The
obligations of the Company under Sections 4.1, 4.4 and 4.5 shall survive payment
of the Obligations and termination of this Agreement, provided, that no Bank
shall be entitled to compensation to the extent that such compensation relates
to any period of time more than 90 days after the termination of this Agreement.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

         The Company hereby represents and warrants that:

                                       24
<PAGE>
         5.1 Incorporation and Good Standing. The Company is duly incorporated,
validly existing and in good standing under the laws of the State of Michigan.

         5.2 Corporate Power and Authority: No Conflicts. The execution,
delivery and performance by the Company of the Credit Documents are within the
Company's corporate powers, have been duly authorized by all necessary corporate
action and do not (i) violate the Company's charter, bylaws or any applicable
law, or (ii) 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 Agent on the Facility LC
Collateral Account or any funds therein)

         5.3 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 Credit 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.

         5.4 Legally Enforceable Agreements. Each Credit 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).

         5.5 Financial Statements. The audited balance sheet of the Company and
its Consolidated Subsidiaries as at December 31, 2001, and the related
statements of income and cash flows of the Company and its Consolidated
Subsidiaries for the fiscal year then ended, as set forth in the Company's
Annual Report on Form 10-K (copies of which have been furnished to each Bank),
and the unaudited balance sheet of the Company and its Consolidated Subsidiaries
as at March 31, 2002 (copies of which have been furnished to each Bank), fairly
present the financial condition of the Company and its Consolidated Subsidiaries
as at such dates and the results of operations of the Company and its
Consolidated Subsidiaries for the periods ended on such dates, all in accordance
with GAAP, and since December 31, 2001, there has been no material adverse
change in such financial condition or results of operations of the Company and
its Consolidated Subsidiaries, taken as a whole (except to the extent described
in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002 as filed with the SEC, copies of which have been furnished to each Bank),
that would materially adversely affect the Company's ability to perform its
obligations under any Credit Document.

         5.6 Litigation. Except (i) to the extent described in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002, and Current Report on
Form 8-K filed by the Company on May 29, 2002, in each case as filed with the
SEC, copies of which have been furnished to each Bank, and (ii) such other
similar actions, suits and proceedings predicated on the occurrence of the same
events giving rise to any actions, suits and proceedings described in the
Reports filed with the SEC set forth in clause (i) hereof, there is no pending
or threatened action or proceeding

                                       25
<PAGE>

against the Company or any of its Consolidated Subsidiaries before any court,
governmental agency or arbitrator, which, if adversely determined, might
reasonably be expected to materially adversely affect the financial condition or
results of operations of the Company and its Consolidated Subsidiaries, taken as
a whole, or that would materially adversely affect the Company's ability to
perform its obligations under any Credit Document. As of the Initial Borrowing
Date, there is no litigation challenging the validity or the enforceability of
any of the Credit Documents.

         5.7 Margin Stock. The Company is not engaged in the business of
extending credit for the purpose of buying or carrying margin stock (within the
meaning of Regulation U), and no proceeds of any Credit Extension will be used
to buy or carry any margin stock or to extend credit to others for the purpose
of buying or carrying any margin stock.

         5.8 ERISA. No Termination Event has occurred or is reasonably expected
to occur with respect to any Plan. Neither the Company nor any of its ERISA
Affiliates is an employer under a Multiemployer Plan.

         5.9 Insurance. All insurance required by Section 6.2 is in full force
and effect.

         5.10 Taxes. The Company and its Subsidiaries have filed all tax returns
(Federal, state and local) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, or, to the extent the Company or
any of its Subsidiaries is contesting in good faith an assertion of liability
based on such returns, has provided adequate reserves for payment thereof in
accordance with GAAP.

         5.11 Investment Company Act. The Company is not an investment company
(within the meaning of the Investment Company Act of 1940, as amended).

         5.12 Public Utility Holding Company Act. The Company is exempt from the
registration requirements of the Public Utility Holding Company Act of 1935, as
amended, 15 USC 79, et seq.

         5.13 Bonds. The issuance to the Agent of Bonds as evidence of the
Obligations (i) 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 (ii) will provide the Banks,
as beneficial holders of the Bonds through the Agent, the benefit of the Lien of
the Indenture equally and ratably with the holders of other First Mortgage
Bonds.

                                   ARTICLE VI
                              AFFIRMATIVE COVENANTS

         So long as any Obligations shall remain unpaid or any Bank shall have
any Commitment under this Agreement, the Company shall:

         6.1 Payment of Taxes, Etc. Pay and discharge before the same shall
become delinquent, (a) all taxes, assessments and governmental charges or levies
imposed upon it or

                                       26
<PAGE>

upon its property, and (b) all lawful claims which, if unpaid, might by law
become a Lien upon its property, provided that the Company shall not be required
to pay or discharge any such tax, assessment, charge or claim (i) which is being
contested by it in good faith and by proper procedures or (ii) the non-payment
of which will not materially adversely affect the financial condition or results
of operations of the Company and its Consolidated Subsidiaries, taken as a
whole.

         6.2 Maintenance of Insurance. Maintain insurance in such amounts and
covering such risks with respect to its business and properties as is usually
carried by companies engaged in similar businesses and owning similar
properties, either with reputable insurance companies or, in whole or in part,
by establishing reserves or one or more insurance funds, either alone or with
other corporations or associations.

         6.3 Preservation of Corporate Existence, Etc. Preserve and maintain its
corporate existence, rights and franchises, and qualify and remain qualified as
a foreign corporation in each jurisdiction in which such qualification is
necessary in view of its business and operations or the ownership of its
properties, provided that the Company shall not be required to preserve any such
right or franchise or to remain so qualified unless the failure to do so would
have a material adverse effect on the financial condition or results of
operations of the Company and its Consolidated Subsidiaries, taken as a whole,
or the ability of the Company to enter into, or to perform its obligations
under, any Credit Document.

         6.4 Compliance with Laws, Etc. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
the non-compliance with which would materially adversely affect the financial
condition or results of operations of the Company and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Company to perform its
obligations under any Credit Document.

         6.5 Visitation Rights. Subject to any necessary approval from the
Nuclear Regulatory Commission, at any reasonable time and from time to time,
permit the Agent, any of the Banks or any agents or representatives 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.

         6.6 Keeping of Books. Keep, and cause each Consolidated Subsidiary to
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.

         6.7 Reporting Requirements. Furnish to the Agent, with sufficient
copies for each of the Banks:

         (a) as soon as practicable and in any event within five Business Days
after becoming aware of the occurrence of any Default or Event of 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;

                                       27
<PAGE>

         (b) as soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
at the end of such quarter, and the related consolidated statements of income,
cash flows and common stockholder's equity of the Company and its Consolidated
Subsidiaries as at the end of and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
date or period of the preceding fiscal year, or statements providing
substantially similar information (which requirement shall be deemed satisfied
by the delivery of the Company's quarterly report of Form 10-Q for such
quarter), all in reasonable detail and duly certified (subject to the absence of
footnotes and to year-end audit adjustments) by a Designated Officer as having
been prepared in accordance with GAAP, together with (i) a certificate of a
Designated Officer (which certificate shall also accompany the financial
statements delivered pursuant to clause (c) below) stating that such officer has
no knowledge (having made due inquiry with respect thereto) that a Default or
Event of Default has occurred and is continuing, or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and
the actions which the Company has taken, is taking or proposes to take with
respect thereto, and (ii) a certificate of a Designated Officer, in
substantially the form of Exhibit C hereto, setting forth the Company's
computation of the financial ratios specified in Sections 8.1 and 8.2 as of the
end of the immediately preceding fiscal quarter or year, as the case may be, of
the Company;

         (c) as soon as available and in any event within 120 days after the end
of each fiscal year of the Company, a copy of the Annual Report on Form 10-K (or
any successor form) for the Company for such year, including therein the
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
at the end of such year and the consolidated statements of income, cash flows
and common stockholder's equity of the Company and its Consolidated Subsidiaries
as at the end of and for such year, or statements providing substantially
similar information, in each case certified by independent public accountants of
recognized national standing selected by the Company (and not objected to by the
Majority Banks), together with a certificate of such accounting firm addressed
to the Banks stating that, in the course of its examination of the consolidated
financial statements of the Company and its Consolidated Subsidiaries, which
examination was conducted by such accounting firm in accordance with GAAP, (1)
such accounting firm has obtained no knowledge that an Event of Default, insofar
as such Event of Default related to accounting or financial matters, has
occurred and is continuing, or if, in the opinion of such accounting firm, such
an Event of Default has occurred and is continuing, a statement as to the nature
thereof, and (2) such accounting firm has examined a certificate prepared by the
Company setting forth the computations made by the Company in determining, as of
the end of such fiscal year, the ratios specified in Sections 8.1 and 8.2, which
certificate shall be attached to the certificate of such accounting firm, and
such accounting firm confirms that such computations accurately reflect such
ratios;

         (d) promptly after the sending or filing thereof, copies of all proxy
statements which the Company sends to its stockholders, copies of all regular,
periodic and special reports (other than those which relate solely to employee
benefit plans) which the Company files with the SEC and notice of the sending or
filing of (and, upon the request of the Agent or any Bank, a copy of) any final
prospectus filed with the SEC;

                                       28
<PAGE>

         (e) as soon as possible and in any event (i) within 30 days after the
Company or any of its ERISA Affiliates knows or has reason to know that any
Termination Event described in clause (a) of the definition of Termination Event
with respect to any Plan has occurred and (ii) within ten days after the Company
or any of its ERISA Affiliates knows or has reason to know that any other
Termination Event with respect to any Plan has occurred, a statement of the
Chief Financial Officer of the Company describing such Termination Event and the
action, if any, which the Company or such ERISA Affiliate, as the case may be,
proposes to take with respect thereto;

         (f) promptly upon becoming aware thereof, notice of any upgrading or
downgrading of the rating of the Senior Debt by Fitch, Moody's or S&P.

         (g) as soon as possible and in any event within five (5) days after the
occurrence of any material default under any material agreement to which the
Company or any of its Subsidiaries is a party, which default would materially
adversely affect the financial condition, business, results of operations or
property of the Company and its Subsidiaries, considered as a whole, any of
which is continuing on the date of such certificate, a certificate of the
president or chief financial officer of the Company setting forth the details of
such material default and the action which the Company or any such Subsidiary
proposes to take with respect thereto; and

         (h) such other information respecting the business, properties or
financial condition of the Company as the Agent or any Bank through the Agent
may from time to time reasonably request.

         6.8 Use of Proceeds. The Company will use the proceeds of the Credit
Extensions for general corporate purposes, working capital and refinancing the
Debt under the Prior Agreement. The Company will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Credit Extensions to purchase or
carry any "margin stock" (as defined in Regulation U).

         6.9 Maintenance of Properties, Etc. The Company shall, and shall cause
each of its Subsidiaries to, maintain in all material respects all of its
respective owned and leased Property in good and safe condition and repair to
the same degree as other companies engaged in similar businesses and owning
similar properties, and not permit, commit or suffer any waste or abandonment of
any such Property, and from time to time make or cause to be made all material
repairs, renewals and replacements thereof, including, without limitation, any
capital improvements which may be required; provided, however, that such
Property may be altered or renovated in the ordinary course of the Company's or
its Subsidiaries' business; and provided, further, that the foregoing shall not
restrict the sale of any asset of the Company or any Subsidiary to the extent
not prohibited by Section 7.2.

         6.10 Bonds. Beginning on the Initial Borrowing Date and continuing
until the Commitments have terminated and all Obligations have been paid in
full, cause (a) the sum of (i) the face amount of all Interest Bearing Bonds
plus (ii) the Discounted Amount of all Zero Rate Bonds to at all times be equal
to or greater than (b) the sum of the Aggregate Outstanding Credit Exposure plus
all accrued and unpaid Commitment Fees, LC Fees and interest hereunder.

                                       29
<PAGE>

         6.11 Post-Closing Opinion. Within ten days after the date hereof, the
Company shall cause to be delivered to the Agent a favorable opinion of Miller,
Canfield, Paddock and Stone, P.L.C., special counsel to the Company, as to the
matters set forth in Exhibit B-3 and as to such other matters as the Agent may
reasonably request. Such opinion shall be addressed to the Agent and the Banks
and shall be satisfactory in form and substance to the Agent.

                                   ARTICLE VII
                               NEGATIVE COVENANTS

         So long as any Obligations shall remain unpaid or any Bank shall have
any Commitment under this Agreement, the Company shall not:

         7.1 Liens. Create, incur, assume or suffer to exist any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:

         (a) Liens created pursuant to the Indenture securing the First Mortgage
Bonds and any Lien in favor of the Agent on the Facility LC Collateral Account
or any funds therein;

         (b) Liens securing pollution control bonds, or bonds issued to refund
or refinance pollution control bonds (including Liens securing obligations
(contingent or otherwise) of the Company under letter of credit agreements or
other reimbursement or similar credit enhancement agreements with respect to
pollution control bonds), provided that the aggregate face amount of any such
bonds so issued shall not exceed the aggregate face amount of such pollution
control bonds, as the case may be, so refunded or refinanced;

         (c) Liens in (and only in) assets acquired to secure Debt incurred to
finance the acquisition of such assets;

         (d) Statutory and common law banker's Liens on bank deposits;

         (e) Liens in respect of accounts receivable sold, transferred or
assigned by the Company;

         (f) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;

         (g) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue or
being contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;

         (h) Liens incurred in the ordinary course of business in connection
with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;

                                       30
<PAGE>

         (i) Judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or the payment of
which is covered (subject to a customary deductible) by insurance;

         (j) Zoning restrictions, easements, licenses, covenants, reservations,
utility company rights, restrictions on the use of real property or minor
irregularities of title incident thereto which do not in the aggregate
materially detract from the value of the property or assets of the Company or
materially impair the operation of its business;

         (k) Liens arising in connection with the financing of the Company's
fuel resources, including, but not limited to, nuclear fuel;

         (l) Liens arising pursuant to MCL 324.20138; provided that the
aggregate amount of all obligations secured by such Liens (excluding any such
Liens of which the Company has no knowledge or which are permitted by subsection
(f) above) shall not exceed $20,000,000;

         (m) Liens arising in connection with Securitized Bonds; and

         (n) Other Liens securing obligations in an aggregate amount not in
excess of $150,000,000.

         7.2 Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of 15% or more of its assets.

         7.3 Mergers, Etc. Merge with or into or consolidate with or into any
other Person, except that the Company may merge with any other Person, provided
that, in each case, immediately after giving effect thereto, (a) no event shall
occur and be continuing which constitutes a Default or Event of Default, (b) the
Company is the surviving corporation, (c) the Company shall not be liable with
respect to any Debt or allow its property to be subject to any Lien which it
could not become liable with respect to or allow its property to become subject
to under this Agreement on the date of such transaction and (d) the Company's
Net Worth shall be equal to or greater than its Net Worth immediately prior to
such merger.

         7.4 Compliance with ERISA. Permit to exist any occurrence of any
Reportable Event, or any other event or condition which presents a material (in
the reasonable opinion of the Majority Banks) risk of a termination by the PBGC
of any Plan of the Company or any ERISA Affiliate, which termination will result
in any material (in the reasonable opinion of the Majority Banks) liability of
the Company or such ERISA Affiliate to the PBGC.

         7.5 Change in Nature of Business. Make any material change in the
nature of its business as carried on as of the date hereof.

         7.6 Restricted Payments. The Company: (a) will not declare or pay any
dividends or make any other distributions on its capital stock (other than
dividends payable solely in such capital stock) or redeem any such capital
stock; and (b) will not, and will not permit any Subsidiary to, purchase or
otherwise acquire or retire any of the Company's capital stock or make any loans
or advances to CMS or any Subsidiary thereof (other than the Company or any

                                       31
<PAGE>

Subsidiary thereof); provided that, so long as no Default or Event of Default
exists, the Company may pay dividends in an aggregate amount not to exceed
$300,000,000 during any calendar year.

         7.7 Off-Balance Sheet Liabilities. Create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist,
Off-Balance Sheet Liabilities (exclusive of obligations arising in connection
with (a) the Amended and Restated Receivables Sale Agreement among the Company,
Asset Securitization Cooperative Corporation and Canadian Imperial Bank of
Commerce dated as of April 1, 2002 and (b) the Master Lease and Lease
Supplement, each dated as of April 23, 2001, between Consumers Campus Holding,
LLC (a wholly-owned Subsidiary of the Company), as lessee, and Wilmington Trust
Company, not in its individual capacity but solely as Owner Trustee of CEC Trust
2001-A, as lessor, along with various other related agreements) in the aggregate
in excess of $150,000,000 at any time.

                                  ARTICLE VIII
                               FINANCIAL COVENANTS

         So long as any of the Obligations shall remain unpaid or any Bank shall
have any Commitment under this Agreement, the Company shall:

         8.1 Debt to Capital Ratio. At all times, maintain a ratio of Total
Consolidated Debt to Total Consolidated Capitalization of not greater than 0.65
to 1.0.

         8.2 Interest Coverage Ratio. Not permit the ratio, determined as of the
end of each of its fiscal quarters for the then most-recently ended four fiscal
quarters, of (i) Consolidated EBIT to (ii) Consolidated Interest Expense to be
less than 2.0 to 1.0.

                                   ARTICLE IX
                                EVENTS OF DEFAULT

         9.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default":

         (a) The Company shall fail to pay (i) any principal of any Advance when
due and payable, or (ii) any Reimbursement Obligation within one (1) day after
the same becomes due, or (iii) any interest on any Advance or any fee or other
Obligation payable hereunder within five (5) days after such interest or fee or
other Obligation becomes due and payable;

         (b) Any representation or warranty made by the Company (or any of its
officers) in this Agreement or any other Credit Document or in any certificate,
document, report, financial or other written statement furnished at any time
pursuant to any Credit Document shall prove to have been incorrect in any
material respect on or as of the date made;

         (c) The Company shall fail to perform or observe any term, covenant or
agreement contained in Section 6.10, Section 6.11, Article VII or Article VIII;
or the Company shall fail to perform or observe any other term, covenant or
agreement on its part to be performed or observed in this Agreement or in any
other Credit Document and such failure shall continue for

                                       32
<PAGE>

30 consecutive days after notice thereof by means of facsimile, regular mail or
written notice delivered in person (or telephonic notice thereof confirmed in
writing) shall have been given to the Company by the Agent or the Majority
Banks;

         (d) The Company shall: (i) fail to pay any Debt (other than the payment
obligations described in subsection (a) above) in excess of $25,000,000, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the instrument or
agreement relating to such Debt; or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Debt, when required to be performed
or observed, if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, the maturity of such Debt, unless
the obligee under or holder of such Debt shall have waived in writing such
circumstance, or such circumstance has been cured, so that such circumstance is
no longer continuing; or (iii) any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), in each case in accordance with the terms of such agreement or
instrument, prior to the stated maturity thereof; or (iv) generally not, or
shall admit in writing its inability to, pay its debts as such debts become due;

         (e) The Company: (i) 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
(ii) 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 (iii) shall have had
any such petition or application filed or any such proceeding shall have been
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 (iv) 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 (v) shall suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of 30 days or more; or (vi) shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e);

         (f) One or more judgments, decrees or orders for the payment of money
in excess of $25,000,000 in the aggregate shall be rendered against the Company
and either (i) enforcement proceedings shall have been commenced by any creditor
upon any such judgment or order or (ii) there shall be any period of more than
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;

         (g) Any Termination Event with respect to a Plan shall have occurred,
and 30 days after notice thereof shall have been given to the Company by the
Agent, (i) such Termination Event (if correctable) shall not have been corrected
and (ii) the then present value of such Plan's vested benefits exceeds the then
current value of the assets accumulated in such Plan by more than the amount of
$25,000,000 (or in the case of a Termination Event involving the withdrawal of a
"substantial employer" (as defined in Section 4001(A)(2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount).

                                       33
<PAGE>

         (h) Any Bond shall cease to be in full force and effect (except for
Bonds surrendered by the Agent pursuant to Section 2.5(b)); or the Company shall
deny that it has any liability or obligation under any Bond or purport to
revoke, terminate, rescind or redeem any Bond (other than in accordance with the
terms of the Bonds and the Indenture).

         9.2 Remedies.

         (a) If any Event of Default shall occur and be continuing, the Agent
shall upon the request, or may with the consent, of the Majority Banks, by
notice to the Company, (i) declare the Commitments and the obligation and power
of the LC Issuer to issue Facility LCs to be terminated or suspended, whereupon
the same shall forthwith terminate, and/or (ii) declare the Obligations to be
forthwith due and payable, whereupon the Aggregate Outstanding Credit Exposure
and all other Obligations shall become and be forthwith due and payable, and/or
(iii) in addition to the continuing right to demand payment of all amounts
payable under this Agreement, 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 Agent the Collateral Shortfall Amount (as defined below), which funds shall
be deposited in the Facility LC Collateral Account, in each case without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company, provided that in the case of an Event of
Default referred to in subsection 9.1(e) above, the Commitments shall
automatically terminate, the obligation and power of the LC Issuer to issue
Facility LCs shall automatically terminate and the Obligations shall
automatically become due and payable without notice, presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company, and the Company will be and become thereby
unconditionally obligated, without any further notice, act or demand, to pay to
the Agent an amount in immediately available funds, which funds shall be held in
the Facility LC Collateral Account, equal to the difference of (x) the amount of
LC Obligations at such time, less (y) the amount on deposit in the Facility LC
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 Obligations (such
difference, the "Collateral Shortfall Amount").

         (b) If at any time while any Event of Default is continuing, the Agent
determines that the Collateral Shortfall Amount at such time is greater than
zero, the Agent 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
Agent the Collateral Shortfall Amount, which funds shall be deposited in the
Facility LC Collateral Account.

         (c) The Agent may, at any time or from time to time after funds are
deposited in the Facility LC Collateral Account, apply such funds to the payment
of the Obligations and any other amounts as shall from time to time have become
due and payable by the Company to the Banks or the LC Issuer under the Credit
Documents. The Company hereby pledges, assigns and grants to the Agent, on
behalf of and for the ratable benefit of the Banks and the LC Issuer, 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 Facility LC Collateral Account
to secure the prompt and complete payment and performance of the Obligations.
The Agent will invest any funds on deposit from time to time in the Facility LC
Collateral Account in certificates of deposit of Bank One having a maturity not
exceeding 30 days.

                                       34
<PAGE>

         (d) At any time while any Event of 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 Facility LC Collateral
Account. After all of the Obligations have been indefeasibly paid in full and
the Aggregate Commitment has been terminated, any funds remaining in the
Facility LC Collateral Account shall be returned by the Agent to the Company or
paid to whomever may be legally entitled thereto at such time.

                                    ARTICLE X
                        WAIVERS, AMENDMENTS AND REMEDIES

         10.1 Amendments. Subject to the provisions of this Article X, the
Majority Banks (or the Agent with the consent in writing of the Majority Banks)
and the Company may enter into written agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Credit Documents or
changing in any manner the rights of the Banks or the Company hereunder or
waiving any Event of Default hereunder, provided that no such supplemental
agreement shall, without the consent of all of the Banks:

                  (a) Extend the maturity of any Loan or reduce the principal
         amount thereof, or extend the expiry date of any Facility LC to a date
         after the Termination Date, or reduce the rate or extend the time of
         payment of interest thereon or fees thereon or Reimbursement
         Obligations related thereto.

                  (b) Modify the percentage specified in the definition of
         Majority Banks.

                  (c) Extend the Termination Date or increase the amount of the
         Commitment of any Bank hereunder or the commitment to issue Facility
         LCs, or permit the Company to assign its rights under this Agreement.

                  (d) Amend Section 6.10 or this Section 10.1.

                  (e) Make any change in an express right in this Agreement of a
         single Bank to give its consent, make a request or give a notice.

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent, and no amendment of any
provision relating to the LC Issuer shall be effective without the written
consent of the LC Issuer.

         10.2 Preservation of Rights. No delay or omission of the Banks, the LC
Issuer or the Agent to exercise any right under the Credit Documents shall
impair such right or be construed to be a waiver of any Default or Event of
Default or an acquiescence therein, and the making of a Credit Extension
notwithstanding the existence of a Default or Event of Default or the inability
of the Company to satisfy the conditions precedent to such Credit Extension
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Credit Documents whatsoever shall be
valid unless in writing signed by the Banks required pursuant to Section 10.1,
and then only to the extent in such writing specifically set forth. All remedies
contained in the Credit Documents

                                       35
<PAGE>

or by law afforded shall be cumulative and all shall be available to the Agent,
the LC Issuer and the Banks until the Obligations have been paid in full.

                                   ARTICLE XI
                              CONDITIONS PRECEDENT

         11.1 Initial Credit Extension. The Banks shall not be required to make
the initial Credit Extension hereunder unless the Company has furnished to the
Agent with sufficient copies for the Banks:

         (a) Copies 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) Copies, 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 any
Bank) authorizing the execution of the Credit 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 Credit Documents and the officers or other employees
authorized to make borrowings hereunder, upon which certificate the Banks 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 hereof no Default or Event of Default has occurred and
is continuing.

         (e) Evidence satisfactory to the Agent of the issuance of the Bonds in
the form set forth in the Supplemental Indenture and in an aggregate principal
amount of $250,000,000 pursuant to the Bond Delivery Agreement.

         (f) Favorable opinions of: (i) Michael D. VanHemert, Esq., Deputy
General Counsel of the Company, as to the matters set forth in Exhibit B-1 and
as to such other matters as the Agent may reasonably request; and (ii) Skadden,
Arps, Slate, Meagher & Flom LLP, special counsel to the Company, as to the
matters set forth in Exhibit B-2 and as to such other matters as the Agent may
reasonably request. Such opinions shall be addressed to the Agent and the Banks
and shall be satisfactory in form and substance to the Agent.

         (g) Evidence satisfactory to the Agent that the Prior Agreement shall
have been or shall simultaneously on the Initial Borrowing Date be terminated
(except for those provisions that expressly survive the termination thereof) and
all loans outstanding and other amounts owed to the lenders or agents thereunder
shall have been, or shall simultaneously with the initial Credit Extension
hereunder be, paid in full.

                                       36
<PAGE>

         (h) Evidence satisfactory to the Agent that the initial "Credit
Extension" under and as defined in the Term Loan Agreement shall have been made
or shall be made simultaneously with the initial Credit Extension hereunder.

         (i) Evidence, in form and substance satisfactory to the Agent, that the
Company has obtained all governmental approvals, if any, necessary for it to
enter into the Credit Documents.

         (j) Such other documents as any Bank or its counsel may have reasonably
requested.

It shall be a further condition precedent to the making of the initial Credit
Extension hereunder that the Company shall have paid (i) to the Agent for the
account of the Banks the fees required to be paid on the Initial Borrowing Date
and (ii) to the Agent and the Arranger the fees required to be paid to them
pursuant to the fee letter described in Section 13.12.

         11.2 Each Credit Extension. The Banks shall not be required to make any
Credit Extension unless on the applicable Borrowing Date, (i) no Default or
Event of Default exists, (ii) the representations and warranties contained in
Article V are true and correct as of such Borrowing Date, (iii) after giving
effect to such Credit Extension the Aggregate Outstanding Credit Exposure, plus
all accrued and unpaid Commitment Fees, LC Fees and interest hereunder, will not
exceed the sum of (x) the Face Amount of all Interest Bearing Bonds plus (y) the
Discounted Amount of all Zero Rate Bonds and (iv) all legal matters incident to
the making of such Credit Extension are satisfactory to the Banks and their
counsel. Each Borrowing Notice and each request for issuance of a Facility LC
shall constitute a representation and warranty by the Company that the
conditions contained in subsections (i), (ii) and (iii) above will be satisfied
on the relevant Borrowing Date. For the avoidance of doubt, the conversion or
continuation of an Advance shall not be considered the making of a Credit
Extension.

                                   ARTICLE XII
                               GENERAL PROVISIONS

         12.1 Successors and Assigns. (a) The terms and provisions of the Credit
Documents shall be binding upon and inure to the benefit of the Company and the
Banks and their respective successors and assigns, except that the Company shall
not have the right to assign its rights under the Credit Documents. Any Bank may
sell participations in all or a portion of its rights and obligations under this
Agreement pursuant to subsection (b) below and any Bank may assign all or any
part of its rights and obligations under this Agreement pursuant to subsection
(c) below.

         (a) Any Bank may sell participations to one or more banks or other
entities (each a "Participant") in all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and its Outstanding Credit Exposure), provided that
(i) such Bank's obligations under this Agreement (including, without limitation,
its Commitment to the Company hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of the Outstanding
Credit Exposure of such Bank for all purposes of this Agreement and (iv) the
Company shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement. Each Bank shall
retain the sole right to approve, without the consent of any Participant, any
amendment,

                                       37
<PAGE>

modification or waiver of any provision of the Credit Documents other than any
amendment, modification or waiver with respect to any Loan or Commitment in
which such Participant has an interest which would require consent of all of the
Banks pursuant to the terms of Section 10.1 or of any other Credit Document. The
Company agrees that each Participant shall be deemed to have the right of setoff
provided in Section 12.11 in respect of its participating interest in amounts
owing under the Credit Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under the Credit
Documents, provided that each Bank shall retain the right of setoff provided in
Section 12.11 with respect to the amount of participating interests sold to each
Participant. The Banks agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 12.11, agrees
to share with each Bank, any amount received pursuant to the exercise of its
right of setoff, such amounts to be shared in accordance with Section 12.11 as
if each Participant were a Bank. The Company further agrees that each
Participant shall be entitled to the benefits of Sections 4.1, 4.3, 4.4 and 4.5
to the same extent as if it were a Bank and had acquired its interest by
assignment pursuant to Section 12.1(c), provided that (i) a Participant shall
not be entitled to receive any greater payment under Section 4.1, 4.3, 4.4 or
4.5 than the Bank who sold the participating interest to such Participant would
have received had it retained such interest for its own account, unless the sale
of such interest to such Participant is made with the prior written consent of
the Company, and (ii) any Participant not incorporated under the laws of the
United States of America or any State thereof agrees to comply with the
provisions of Section 4.5 to the same extent as if it were a Bank.

         (b) Any Bank may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more financial
institutions all or any part of its rights and obligations under this Agreement,
provided that (i) such Bank has received the Agent's and, so long as no Event of
Default exists, the Company's prior written consent to such assignment, which
consent shall not be unreasonably withheld, and (ii) the minimum principal
amount of any such assignment (other than assignments to a Federal Reserve Bank,
or to any other Bank or affiliate of such assigning Bank, or to any direct or
indirect contractual counterparties in swap agreements relating to the Loans to
the extent required in connection with the physical settlement of any Bank's
obligations pursuant thereto) shall be $5,000,000 (or such lesser amount
consented to by the Agent and, so long as no Event of Default shall be
continuing, the Company); provided, that after giving effect to such assignment
the assigning Bank shall have a Commitment of not less than $5,000,000 (unless
otherwise consented to by the Agent and, so long as no Event of Default shall be
continuing, the Company). Notwithstanding the foregoing sentence, any Bank may
at any time, without the consent of the Company or the Agent, assign all or any
portion of its rights under this Agreement to (i) a Federal Reserve Bank,
provided that no such assignment shall release the transferor Bank from its
obligations hereunder; and (ii) any Bank or any affiliate of such assigning
Bank, provided that the creditworthiness of such affiliate (as determined in
accordance with customary standards of the banking industry) is no less than
that of the assigning Bank; and (iii) any direct or indirect contractual
counterparties in swap agreements relating to the Loans to the extent required
in connection with the physical settlement of any Bank's obligations pursuant
thereto.

         (c) Any Bank may, in connection with any sale or participation or
proposed sale or participation pursuant to this Section 12.1, disclose to the
purchaser or participant or proposed purchaser or participant any information
relating to the Company furnished to such Bank by or

                                       38
<PAGE>

on behalf of the Company, provided that prior to any such disclosure of
non-public information, the purchaser or participant or proposed purchaser or
participant (which purchaser or participant is not an affiliate of a Bank) shall
agree to preserve the confidentiality of any confidential information (except
any such disclosure as may be required by law or regulatory process) relating to
the Company received by it from such Bank.

         (d) Assignments under this Section 12.1 shall be made pursuant to an
agreement ("Assignment Agreement") substantially in the form of Exhibit D hereto
or in such other form as may be agreed to by the parties thereto and shall not
be effective until a $3,500 fee has been paid to the Agent by the assignee,
which fee shall cover the cost of processing such assignment, provided that such
fee shall not be incurred in the event of an assignment by any Bank of all or a
portion of its rights under this Agreement to (i) a Federal Reserve Bank or (ii)
a Bank or an affiliate of the assigning Bank or (iii) to any direct or indirect
contractual counterparties in swap agreements relating to the Loans to the
extent required in connection with the physical settlement of any Bank's
obligations pursuant thereto.

         12.2 Survival of Representations. All representations and warranties of
the Company contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.

         12.3 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, neither the LC Issuer nor any Bank shall be
obligated to extend credit to the Company in violation of any limitation or
prohibition provided by any applicable statute or regulation.

         12.4 Taxes. Any taxes (excluding income taxes) payable or ruled payable
by any Federal or State authority in respect of the execution of the Credit
Documents shall be paid by the Company, together with interest and penalties, if
any.

         12.5 Choice of Law. THE CREDIT DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO THE
LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY CREDIT DOCUMENT AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY WAIVES ANY RIGHT TO A JURY
TRIAL IN ANY ACTION OR ARISING HEREUNDER OR UNDER ANY CREDIT DOCUMENT.

         12.6 Headings. Section headings in the Credit Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Credit Documents.

                                       39
<PAGE>
         12.7 Entire Agreement. The Credit Documents embody the entire agreement
and understanding between the Company, the LC Issuer, the Agent and the Banks
and supersede all prior agreements and understandings between the Company, the
LC Issuer, the Agent and the Banks relating to the subject matter thereof (other
than those contained in the fee letter described in Section 13.12 which shall
survive and remain in full force and effect during the term of this Agreement).

         12.8 Expenses; Indemnification. The Company shall reimburse the Agent
and the Arranger for (a) any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent) paid or incurred by the Agent or the Arranger in
connection with the preparation, review, execution, delivery, syndication,
distribution (including, without limitation, via the internet), amendment and
modification of the Credit Documents and (b) any reasonable costs, internal
charges and out-of-pocket expenses (including reasonable attorneys' fees and
time charges of attorneys for the Agent) paid or incurred by the Agent or the
Arranger on its own behalf or on behalf of the LC Issuer or any Bank in
connection with the collection and enforcement of the Credit Documents. The
Company further agrees to indemnify the Agent, the Arranger, the LC Issuer and
each Bank and their respective directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and reasonable
expenses (including, without limitation, all material expenses of litigation or
preparation therefor whether or not the Agent, the Arranger, the LC Issuer or
any Bank is a party thereto) which any of them may pay or incur arising out of
or relating to this Agreement, the other Credit Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Credit Extension hereunder, provided that the
Company shall not be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Agent, the Arranger, the
LC Issuer or any Bank. The obligations of the Company under this Section shall
survive the termination of this Agreement.

         12.9 [Intentionally Omitted]

         12.10 Severability of Provisions. Any provision in any Credit Document
that is held to be inoperative, unenforceable or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction, and to
this end the provisions of all Credit Documents are declared to be severable.

         12.11 Setoff. In addition to, and without limitation of, any rights of
the Banks under applicable law, if the Company becomes insolvent, however
evidenced, or any Default or Event of Default occurs, any indebtedness from any
Bank to the Company (including all account balances, whether provisional or
final and whether or not collected or available) may be offset and applied
toward the payment of the Obligations owing to such Bank, whether or not the
Obligations, or any part hereof, shall then be due. The Company agrees that any
purchaser or participant under Section 12.1 may, to the fullest extent permitted
by law, exercise all its rights of payment with respect to such purchase or
participation as if it were the direct creditor of the Company in the amount of
such purchase or participation.

                                       40

<PAGE>
         12.12 Ratable Payments. If any Bank, whether by setoff or otherwise,
has payment made to it upon its Outstanding Credit Exposure in a greater
proportion than that received by any other Bank, such Bank agrees, promptly upon
demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held
by the other Banks so that after such purchase each Bank will hold its Pro Rata
Share of the Aggregate Outstanding Credit Exposure. If any Bank, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Bank agrees, promptly upon demand, to take
such action necessary such that all Banks share in the benefits of such
collateral ratably in proportion to their respective Pro Rata Share of the
Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.

         12.13 Nonliability of Bank. The relationship between the Company, on
the one hand, and the Banks, the LC Issuer and the Agent, on the other hand,
shall be solely that of borrower and lender. Neither the Agent, the Arranger,
the LC Issuer nor any Bank shall have any fiduciary responsibilities to the
Company. Neither the Agent, the Arranger, the LC Issuer nor any Bank undertakes
any responsibility to the Company to review or inform the Company of any matter
in connection with any phase of the Company's business or operations. The
Company shall rely entirely upon its own judgment with respect to its business,
and any review, inspection, supervision or information supplied to the Company
by the Banks is for the protection of the Banks and neither the Company nor any
third party is entitled to rely thereon. The Company agrees that neither the
Agent, the Arranger, the LC Issuer nor any Bank shall have liability to the
Company (whether sounding in tort, contract or otherwise) for losses suffered by
the Company in connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the Credit
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of
competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Agent, the Arranger, the LC Issuer nor any Bank shall have any liability with
respect to, and the Company hereby waives, releases and agrees not to sue for,
any special, indirect, consequential or punitive damages suffered by the Company
in connection with, arising out of, or in any way related to the Credit
Documents or the transactions contemplated thereby.

                                  ARTICLE XIII
                                    THE AGENT

         13.1 Appointment. Bank One, NA (Main Office -- Chicago) is hereby
appointed Agent hereunder, and each of the Banks irrevocably authorizes the
Agent to act as the contractual representative on behalf of such Bank. The Agent
agrees to act as such upon the express conditions contained in this Article
XIII. The Agent shall not have a fiduciary relationship in respect of any Bank
by reason of this Agreement.

         13.2 Powers. The Agent shall have and may exercise such powers
hereunder as are specifically delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. The Agent shall
not have any implied duties to the Banks or any

                                       41

<PAGE>
obligation to the Banks to take any action hereunder except any action
specifically provided by this Agreement to be taken by the Agent.

         13.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Banks or any Bank for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith except for its or their own gross negligence or willful misconduct.

         13.4 No Responsibility for Loans, Recitals, Etc. The Agent shall not be
responsible to the Banks for any recitals, reports, statements, warranties or
representations herein or in any Credit Document or be bound to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement.

         13.5 Action on Instructions of Banks. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Credit Document in accordance with written instructions signed by the
Majority Banks (or all of the Banks if required by Section 10.1), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks. The Banks hereby acknowledge that the Agent shall
be under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement or any other Credit Document unless
it shall be requested in writing to do so by the Majority Banks. The Agent shall
be fully justified in failing or refusing to take any action hereunder and under
any other Credit Document unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.

         13.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder by or through employees, agents and attorneys-in-fact
and shall not be answerable to the Banks, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The Agent
shall be entitled to advice of counsel concerning all matters pertaining to the
agency hereby created and its duties hereunder.

         13.7 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.

         13.8 Agent's Reimbursement and Indemnification. The Banks agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Company for which the
Agent is entitled to reimbursement by the Company under the Credit Documents,
(ii) for any other expenses reasonably incurred by the Agent on behalf of the
Banks, in connection with the preparation, execution, delivery, administration
and enforcement of the Credit Documents, and for which the Agent is not entitled
to reimbursement by the Company under the Credit Documents, and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or

                                       42
<PAGE>
asserted against the Agent in any way relating to or arising out of this
Agreement or any other document delivered in connection with this Agreement or
the transactions contemplated hereby or the enforcement of any of the terms
hereof or of any such other documents, and for which the Agent is not entitled
to reimbursement by the Company under the Credit Documents, provided that no
Bank shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Agent.

         13.9 Rights as a Lender. With respect to its Commitment and any Credit
Extension made by it, the Agent shall have the same rights and powers hereunder
as any Bank and may exercise the same as though it were not the Agent, and the
term "Bank" or "Banks" shall, unless the context otherwise indicates, include
Bank One in its individual capacity. The Agent may accept deposits from, lend
money to, and generally engage in any kind of banking or trust business with the
Company or any Subsidiary as if it were not the Agent.

         13.10 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements prepared by the Company and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.

         13.11 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and the Company, and the Agent may be
removed at any time with or without cause by written notice received by the
Agent from the Majority Banks. Upon any such resignation or removal, the
Majority Banks shall have the right to appoint, on behalf of the Banks, a
successor Agent. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty days after
the retiring Agent's giving notice of resignation, then the retiring Agent may
appoint, on behalf of the Banks, a successor Agent. Such successor Agent shall
be a commercial bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article XIII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent hereunder.

         13.12 Agent and Arranger Fees. The Company agrees to pay to the Agent
and Banc One Capital Markets, Inc. (the "Arranger"), for their respective
accounts, the fees agreed to by the Company, the Agent and the Arranger pursuant
to that certain letter agreement dated July 9, 2002, or as otherwise agreed from
time to time.

                                       43
<PAGE>
                                   ARTICLE XIV
                                     NOTICES

         14.1 Giving Notice. Except as otherwise permitted by Section 2.8 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Company or the Agent or the LC Issuer, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or facsimile number set forth below its signature hereto or
(z) in the case of any party, at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Agent and the
Company in accordance with the provisions of this Section 14.1. Each such
notice, request or other communication shall be effective (i) if given by
facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, or (iii) if given by any other means,
when delivered (or, in the case of electronic transmission, received) at the
address specified in this Section; provided that notices to the Agent under
Article II shall not be effective until received.

         14.2 Change of Address. The Company, the Agent and any Bank may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       44

<PAGE>
                                   ARTICLE XV
                                  COUNTERPARTS

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Agent, the LC Issuer and the Banks and each party has notified the Agent by
facsimile or telephone that it has taken such action.

         IN WITNESS WHEREOF, the Company, the Banks, the LC Issuer and the Agent
have executed this Agreement as of the date first above written.

                                     CONSUMERS ENERGY COMPANY

                                     By: /s/ Laura L. Mountcastle
                                         ------------------------
                                         Name: Laura L. Mountcastle
                                         Title: Vice President and Treasurer

                                     212 West Michigan Avenue
                                     Jackson, MI  49201
                                     Attention: Laura L. Mountcastle
                                     Facsimile No.:  (517)788-1006
                                     Confirmation (Phone) No:  (517)788-0123
                                     E-Mail Address: llmountc@cmsenergy.com

                                       45
<PAGE>
                                     BANK ONE, NA (MAIN OFFICE -
                                     CHICAGO), Individually and as Agent and as
                                     LC Issuer

                                     By: /s/ Jane A. Bek
                                        -----------------------------
                                        Name:  Jane A. Bek
                                        Title: Director

                                     ADDRESS:
                                     Bank One Plaza
                                     Chicago, Illinois  60670
                                     Attention:  Jane A. Bek
                                     Facsimile No.:  (312) 732-5435
                                     Confirmation (Phone) No:  (312) 732-3422
                                     E-Mail Address:  Jane_bek@bankone.com

                                       46
<PAGE>
                                     CITIBANK, N.A.

                                     By: /s/ J. Nicholas McKee
                                        -----------------------------
                                        Name:  J. Nicholas McKee
                                        Title: Managing Director

                                     ADDRESS: 388 Greenwich St., 21st FL
                                              New York, NY 10013

                                     Attention: Nick McKee
                                     Facsimile No.: (212) 816-8098
                                     Confirmation (Phone) No: (212) 816-8592
                                     E-Mail Address: j.nicholas.mckee@citi.com

                                       47
<PAGE>
                                     JP MORGAN CHASE BANK

                                     By: /s/ Thomas Casey
                                        -----------------------------
                                        Thomas Casey
                                        Vice President

                                     ADDRESS (CREDIT MATTERS ONLY):
                                     270 Park Avenue
                                     New York, New York 10017
                                     Attention Thomas Casey
                                     Facsimile No.: (212) - 270-3089
                                     Confirmation (Phone) No: (212) 270-5305
                                     E-Mail Address: thomas.casey@jpmorgan.com

                                       48
<PAGE>
                                BARCLAYS BANK PLC

                                By:/s/ Sydney G. Dennis
                                   --------------------
                                   Name: Sydney G. Dennis
                                   Title: Director

                                ADDRESS: 222 BROADWAY
                                         NEW YORK, NEW YORK 10038

                                Attention:Sydney G. Dennis
                                Facsimile No.:(212)412-2241 -
                                Confirmation (Phone) No:(212)412-2470 -
                                E-Mail Address:sydney.dennis@barclayscapital.com

                                       49
<PAGE>
                                 UNION BANK OF CALIFORNIA, N.A.

                                 By: /s/ Kevin M. Zitar
                                     ----------------------
                                     Name:   Kevin M. Zitar
                                     Title:  Vice President

                                 ADDRESS: 445 South Figueroa Street, 15th Floor
                                          Los Angeles CA  90071

                                 Attention: Kevin Zitar
                                 Facsimile No.:(213)236-4096
                                 Confirmation (Phone) No:(213)236-5503
                                 E-Mail Address: kevin.zitar@uboc.com

                                       50
<PAGE>
                                     COMERICA BANK

                                     By: /s/ David C. Bird
                                        -----------------
                                        Name:  David C. Bird
                                        Title: Vice President

                                     ADDRESS: 500 Woodward Ave
                                              MC  3268 9th Floor
                                                  Detroit, MI 48226

                                     Attention: David C. Bird
                                     Facsimile No.:  (313)222-9514
                                     Confirmation (Phone) No: (313)222-5060
                                     E-Mail Address: David_C_Bird@comerica.com

                                       51
<PAGE>

                                    EXHIBIT A

                        [FORM OF SUPPLEMENTAL INDENTURE]

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       EIGHTY-FIRST SUPPLEMENTAL INDENTURE

                        PROVIDING AMONG OTHER THINGS FOR

                              FIRST MORTGAGE BONDS,

                  COLLATERAL SERIES (INTEREST BEARING) DUE 2003

                                       and

                     COLLATERAL SERIES (ZERO RATE) DUE 2003

                                 --------------

                            DATED AS OF JULY 12, 2002

                                 --------------

                            CONSUMERS ENERGY COMPANY

                                       TO

                              JPMORGAN CHASE BANK,

                                     TRUSTEE

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

         THIS EIGHTY-FIRST SUPPLEMENTAL INDENTURE, dated as of July 12, 2002
(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 212 West Michigan Avenue, in Jackson,
Jackson County, Michigan 49201, formerly known as Consumers Power Company
(hereinafter sometimes referred to as the "Company"), and JPMORGAN CHASE BANK, a
corporation organized and existing under the laws of the State of New York, with
its corporate trust offices at 450 W. 33rd Street, in the Borough of Manhattan,
The City of New York, New York 10001 (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 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

<PAGE>

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 364 Day Credit Agreement dated
as of July 12, 2002 (as amended or otherwise modified from time to time, the
"Credit Agreement") with various financial institutions and Bank One, NA, as
administrative agent (in such capacity, the "Agent") for the Banks (as such term
is defined in the Credit Agreement), providing for the making of certain
financial accommodations thereunder, and pursuant to such Credit Agreement the
Company has agreed to issue to the Agent, as evidence of and security for the
Obligations (as such term is defined in the Credit Agreement), two (2) new
series of bonds under the Indenture; and

         WHEREAS, for such purposes the Company desires to issue: (i) a new
series of bonds, to be designated First Mortgage Bonds, Collateral Series
(Interest Bearing) due 2003, each of which bonds shall also bear the descriptive
title "First Mortgage Bond" (hereinafter provided for and hereinafter sometimes
referred to as the "2003 Interest Bearing 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 July 11, 2003;
and (ii) a new series of bonds, to be designated First Mortgage Bonds,
Collateral Series (Zero Rate) due 2003,

                                       2
<PAGE>

each of which bonds shall also bear the descriptive title "First Mortgage Bond"
(hereinafter provided for and hereinafter sometimes referred to as the "2003
Zero Rate Collateral Bonds"), the bonds of which series are to be issued as
registered bonds without coupons and are to mature July 11, 2003; and

         WHEREAS, each of the registered bonds without coupons of the 2003
Interest Bearing Collateral Bonds and the Trustee's Authentication Certificate
thereon and the 2003 Zero Rate Collateral Bonds and the Trustee's Authentication
Certificate thereon are to be substantially in the following forms, to wit:

                                       3
<PAGE>

                            [FORM OF REGISTERED BOND

                 OF THE 2003 INTEREST BEARING COLLATERAL BONDS]

                                     [FACE]

                            CONSUMERS ENERGY COMPANY
                               FIRST MORTGAGE BOND
                  COLLATERAL SERIES (INTEREST BEARING) DUE 2003

         No. 1                                                $22,500,000

         CONSUMERS ENERGY COMPANY, a Michigan corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to Bank One, NA, as
agent (in such capacity, the "Agent") for the Banks under and as defined in the
364 Day Credit Agreement dated as of July 12, 2002 among the Company, the Banks
and the Agent (as amended or otherwise modified from time to time, the "Credit
Agreement"), or registered assigns, the principal sum of Twenty-Two Million Five
Hundred Thousand Dollars ($22,500,000) or such lesser principal amount as shall
be equal to the IB Percentage (as defined below) of the aggregate principal
amount of the Loans (as defined in the Credit Agreement) and Reimbursement
Obligations (as defined in the Credit Agreement) included in the Obligations (as
defined in the Credit Agreement) outstanding on July 11, 2003 (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 July 12, 2002. 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 Chicago, Illinois and 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; (B) "IB Percentage"
means the difference between 100% and the ZR

                                       4
<PAGE>

Percentage (as defined below); (C) "Interest Payment Date" shall mean each date
on which Obligations constituting interest and/or fees are due and payable from
time to time pursuant to the Credit Agreement; (D) "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 Obligations constituting interest and
fees due under the Credit Agreement on the applicable Interest Payment Date; (E)
"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; and (F) "ZR Percentage" means the percentage (rounded, if necessary, to
the nearest or, if there is no nearest, the next higher 1/10 of 1%) which (x)
the Discounted Amount (as defined in the Credit Agreement) of the outstanding
Zero Rate Bonds (as defined in the Credit Agreement) is of (y) the sum of the
Discounted Amount of the outstanding Zero Rate Bonds and the Face Amount (as
defined in the Credit Agreement) of the outstanding First Mortgage Bonds,
Collateral Series (Interest Bearing) due 2003.

         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.

         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:
       --------------------------

                                       5
<PAGE>

                      TRUSTEE'S AUTHENTICATION CERTIFICATE

         This is one of the bonds, of the series designated therein, described
in the within-mentioned Indenture.

                                           JPMORGAN CHASE BANK, Trustee

                                           By
                                             -----------------------------------
                                                    Authorized Officer

<PAGE>

                                    [REVERSE]

                            CONSUMERS ENERGY COMPANY

                               FIRST MORTGAGE BOND
                  COLLATERAL SERIES (INTEREST BEARING) DUE 2003

         This bond is one of the bonds of a series designated as First Mortgage
Bonds, Collateral Series (Interest Bearing) due 2003 (sometimes herein referred
to as the "2003 Interest Bearing 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 (JPMorgan Chase Bank, 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 2003 Interest Bearing Collateral Bonds are to be issued and
delivered to the Agent in order to evidence and secure the obligation of the
Company under the Credit Agreement to make payments to the Banks under the
Credit Agreement and to provide the Banks the benefit of the lien of the
Indenture with respect to the 2003 Interest Bearing Collateral Bonds.

         The obligation of the Company to make payments with respect to the
principal of 2003 Interest Bearing 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 principal of the IB Percentage
of the Loans and/or IB Percentage of the Reimbursement Obligations included in
the IB Percentage of the Obligations shall have been fully or partially paid.
Satisfaction of any obligation to the extent that payment is made with respect
to the IB Percentage of the Loans and/or the IB Percentage of the Reimbursement
Obligations means that if any payment is made on the principal of the IB
Percentage of the Loans and/or the IB Percentage of the Reimbursement
Obligations, a corresponding payment obligation with respect to the principal of
the 2003 Interest Bearing Collateral Bonds shall be deemed discharged in the
same amount as the payment with respect to the IB Percentage of the Loans and/or
the IB Percentage of the Reimbursement Obligations discharges the outstanding
obligation with respect to such IB Percentage of the Loans and/or IB Percentage
of the Reimbursement Obligations. No such payment of principal shall reduce the
principal amount of the 2003 Interest Bearing Collateral Bonds.

         The obligation of the Company to make payments with respect to the
interest on 2003 Interest Bearing 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 IB Percentage of the then due interest
and/or fees under the Credit Agreement shall have been fully or partially

                                       2
<PAGE>

paid. Satisfaction of any obligation to the extent that payment is made with
respect to the IB Percentage of the interest and/or fees under the Credit
Agreement means that if any payment is made on the interest and/or fees under
the Credit Agreement, a corresponding payment obligation with respect to the
interest on the 2003 Interest Bearing Collateral Bonds shall be deemed
discharged in the same amount as the payment with respect to the IB Percentage
of the Loans and/or the IB Percentage of the Reimbursement Obligations
discharges the outstanding obligation with respect to such IB Percentage of the
Loans and/or IB Percentage of the 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 Agent stating (i) that timely payment of
principal and interest on the 2003 Interest Bearing 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 Agent in connection with the Obligations pursuant to the
Credit Agreement, and (iii) the IB Percentage of the amount of the arrearage.

         If an Event of Default (as defined in the Credit Agreement) with
respect to the payment of the principal of the Loans and/or 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 2003
Interest Bearing Collateral Bonds equal to the IB Percentage of the amount of
such unpaid principal or Reimbursement Obligations (but in no event in excess of
the principal amount of the 2003 Interest Bearing Collateral Bonds). If an Event
of Default (as defined in the Credit Agreement) with respect to the payment of
interest on the Loans and/or 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 2003 Interest Bearing
Collateral Bonds equal to the IB Percentage of the amount of such unpaid
interest or fees.

         This bond is not redeemable except upon written demand of the Agent
following the occurrence of an Event of Default under the Credit Agreement and
the acceleration of the Obligations, as provided in Section 9.2 of the Credit
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

                                       3
<PAGE>

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 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 2003 Interest Bearing 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 Agent shall surrender this bond to the Trustee when all of the
principal of and interest on the Loans and Reimbursement Obligations arising
under the Credit Agreement, and all of the fees payable pursuant to the Credit
Agreement with respect to the Obligations shall have been duly paid, and the
Credit Agreement shall have been terminated.

                         [END OF FORM OF REGISTERED BOND

                 OF THE 2003 INTEREST BEARING COLLATERAL BONDS]

                          - - - - - - - - - - - - - - -

                                       4
<PAGE>

                            [FORM OF REGISTERED BOND

                     OF THE 2003 ZERO RATE COLLATERAL BONDS]

                                     [FACE]

                            CONSUMERS ENERGY COMPANY
                               FIRST MORTGAGE BOND
                     COLLATERAL SERIES (ZERO RATE) DUE 2003

         No. 1                                              $227,500,000

         CONSUMERS ENERGY COMPANY, a Michigan corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to Bank One, NA, as
agent (in such capacity, the "Agent") for the Banks under and as defined in the
364 Day Credit Agreement dated as of July 12, 2002 among the Company, the Banks
and the Agent (as amended or otherwise modified from time to time, the "Credit
Agreement"), or registered assigns, the principal sum of Two Hundred
Twenty-Seven Million Five Hundred Thousand Dollars ($227,500,000) or such lesser
principal amount as shall be equal to the ZR Percentage (as defined below) of
the aggregate Obligations (as defined in the Credit Agreement) consisting of (x)
the principal amount of the Loans (as defined in the Credit Agreement), (y) the
Reimbursement Obligations (as defined in the Credit Agreement) and (z) unpaid
interest and fees under the Credit Agreement. Such amount shall be payable on or
before July 11, 2003 (the "Maturity Date"). Any payment of interest and/or fees
under the Credit Agreement shall be considered a reduction of the principal
amount hereof in an amount equal to the ZR Percentage of such interest and/or
fees and shall reduce the principal amount hereof by such amount. If the
Maturity Date falls on a day which is not a Business Day, as defined below, all
amounts payable on the Maturity Date will be paid on the immediately preceding
Business Day. As used herein, (A) "Business Day" shall mean any day, other than
a Saturday or Sunday, on which banks generally are open in Chicago, Illinois and
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; (B) "ZR Percentage" means the percentage (rounded, if necessary,
to the nearest or, if there is no nearest, the next higher 1/10 of 1%) which (x)
the Discounted Amount (as defined in the Credit Agreement) of the outstanding
First Mortgage Bonds, Collateral Series (Zero Rate) due 2003 is of (y) the sum
of the Discounted Amount of the outstanding First Mortgage Bonds, Collateral
Series (Zero Rate) due 2003 and the Face Amount (as defined in the Credit
Agreement) of the outstanding First Mortgage Bonds, Collateral Series (Interest
Bearing) due 2003.

         Payment of the principal of 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. In the event the Company shall fail to pay the
principal amount of this bond at maturity, whether by acceleration or otherwise,
such principal amount

                                       5
<PAGE>

shall bear interest until paid in full at a rate per annum equal to the Floating
Rate (as defined in the Credit Agreement) plus 1%.

         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.

         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:
       ------------------------

                                       6
<PAGE>

                      TRUSTEE'S AUTHENTICATION CERTIFICATE

         This is one of the bonds, of the series designated therein, described
in the within-mentioned Indenture.

                                          JPMORGAN CHASE BANK, Trustee

                                          By
                                            ------------------------------------
                                                    Authorized Officer

                                       7
<PAGE>

                                    [REVERSE]

                            CONSUMERS ENERGY COMPANY

                               FIRST MORTGAGE BOND
                     COLLATERAL SERIES (ZERO RATE) DUE 2003

         This bond is one of the bonds of a series designated as First Mortgage
Bonds, Collateral Series (Zero Rate) due 2003 (sometimes herein referred to as
the "2003 Zero Rate 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 (JPMorgan Chase Bank, 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 2003 Zero Rate Collateral Bonds are to be issued and delivered to
the Agent in order to evidence and secure the obligation of the Company under
the Credit Agreement to make payments to the Banks and to provide the Banks the
benefit of the lien of the Indenture with respect to the 2003 Zero Rate
Collateral Bonds.

         The obligation of the Company to make payments with respect to the
principal of 2003 Zero Rate 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 principal of the ZR Percentage of the
Loans and/or the ZR Percentage of the Reimbursement Obligations, and the
then-due ZR Percentage of payment obligations with respect to interest and/or
fees under the Credit Agreement, shall have been fully or partially paid.
Satisfaction of any obligation to the extent that payment is made with respect
to the ZR Percentage of the Loans, the ZR Percentage of the Reimbursement
Obligations, or the ZR Percentage of interest and/or fees under the Credit
Agreement means that if any payment is made on the principal of the ZR
Percentage of the Loans and/or the ZR Percentage of the Reimbursement
Obligations, or if any payment is made on the ZR Percentage of the interest
and/or fees under the Credit Agreement, a corresponding payment obligation with
respect to the principal of the 2003 Zero Rate Collateral Bonds shall be deemed
discharged in the same amount as the payment with respect to the ZR Percentage
of the Loans, the ZR Percentage of the Reimbursement Obligations, or the ZR
Percentage of the interest and/or fees discharges the outstanding obligation
with respect to such ZR Percentage of the Loans, ZR Percentage of the
Reimbursement Obligations, or the ZR Percentage of the interest and/or fees. No
payment of principal of the 2003 Zero Rate Collateral Bonds attributable to any
payment of the principal of Loans or Reimbursement Obligations shall reduce the
principal amount of the 2003 Zero Rate Collateral Bonds, but any payment of

                                      -8-
<PAGE>

principal of the 2003 Zero Rate Collateral Bonds attributable to any payment of
interest or fees under the Credit Agreement shall reduce the principal of the
2003 Zero Rate Collateral Bonds.

         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 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 Agent stating (i) that timely payment of principal on
the 2003 Zero Rate 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 Agent in
connection with the Obligations pursuant to the Credit Agreement, and (iii) the
ZR Percentage of the amount of the arrearage.

         If an Event of Default (as defined in the Credit Agreement) with
respect to the payment of the principal of the Loans and/or the Reimbursement
Obligations and/or any interest or 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 principal of the 2003 Zero Rate Collateral Bonds equal to the ZR Percentage
of the amount of such unpaid principal, Reimbursement Obligations, interest
and/or fees (but in no event in excess of the principal amount of the 2003 Zero
Rate Collateral Bonds).

         This bond is not redeemable except upon written demand of the Agent
following the occurrence of an Event of Default under the Credit Agreement and
the acceleration of the Obligations, as provided in Section 9.2 of the Credit
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
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 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 2003 Zero Rate 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

                                      -9-
<PAGE>

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 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 Agent shall surrender this bond to the Trustee when all of the
principal of and interest on the Loans and Reimbursement Obligations arising
under the Credit Agreement, and all of the fees payable pursuant to the Credit
Agreement with respect to the Obligations shall have been duly paid, and the
Credit Agreement shall have been terminated.

                         [END OF FORM OF REGISTERED BOND

                     OF THE 2003 ZERO RATE COLLATERAL BONDS]

                          - - - - - - - - - - - - - - -

         AND WHEREAS all acts and things necessary to make the 2003 Interest
Bearing Collateral Bonds and the 2003 Zero Rate Collateral Bonds (collectively
referred to herein as, 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

                                      -10-
<PAGE>

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 $22,500,000 principal
amount of the 2003 Interest Bearing Collateral Bonds and the $227,500,000
principal amount of the 2003 Zero Rate 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 JPMorgan Chase Bank, 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;

         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

                                      -11-
<PAGE>

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 two (2) series of bonds (the "2003
Interest Bearing Collateral Bonds" and the "2003 Zero Rate Collateral Bonds")
designated as hereinabove provided, both of which shall also bear the
descriptive title "First Mortgage Bond", and the forms thereof shall be
substantially as hereinbefore set forth (collectively, the "Sample Bonds"). The
2003 Interest Bearing Collateral Bonds shall be issued in the aggregate
principal amount of $22,500,000, shall mature on July 11, 2003 and shall be
issued only as registered bonds without coupons in denominations of $1,000 and
any multiple thereof. The 2003 Zero Rate Collateral Bonds shall be issued in the
aggregate principal amount of $227,500,000, shall mature on July 11, 2003 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 Agent under the Credit Agreement (as such
terms are defined in the Sample Bonds) to evidence and secure any and all
Obligations (as such term is defined in the Credit Agreement) of the Company
under the Credit Agreement.

           The 2003 Interest Bearing Collateral Bonds shall bear interest as set
forth in the Form of Registered Bond of the 2003 Interest Bearing Collateral
Bonds hereinbefore set forth (the "Interest Bearing Sample Bond"). The principal
of and the interest on said bonds shall be payable as set forth in the Interest
Bearing Sample Bond. The principal of the 2003 Zero Rate Collateral Bonds shall
be payable as set forth in the Form of Registered Bond of the 2003 Zero Rate
Collateral Bonds hereinbefore set forth (the "Zero Rate Sample Bond"). All
payments of interest with respect to the Obligations shall be applied to the
Collateral Bonds according to the IB Percentage (in the case of the 2003
Interest Bearing Collateral Bonds) or the ZR Percentage (in the case of the 2003
Zero Rate Collateral Bonds), as applicable. "IB Percentage" and "ZR Percentage"
shall have the meanings assigned to such terms in the Interest Bearing Sample
Bond and the Zero Rate Sample Bond, respectively.

         The obligation of the Company to make payments with respect to the
principal of 2003 Interest Bearing 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 principal of the IB Percentage
of the Loans and/or IB Percentage of the Reimbursement Obligations included in
the IB Percentage of the Obligations shall have been fully or partially paid.
Satisfaction of any obligation to the extent that payment is made with respect
to the IB

                                      -12-
<PAGE>

Percentage of the Loans and/or the IB Percentage of the Reimbursement
Obligations means that if any payment is made on the principal of the IB
Percentage of the Loans and/or the IB Percentage of the Reimbursement
Obligations, a corresponding payment obligation with respect to the principal of
the 2003 Interest Bearing Collateral Bonds shall be deemed discharged in the
same amount as the payment with respect to the IB Percentage of the Loans and/or
the IB Percentage of the Reimbursement Obligations discharges the outstanding
obligation with respect to such IB Percentage of the Loans and/or IB Percentage
of the Reimbursement Obligations. No such payment of principal shall reduce the
principal amount of the 2003 Interest Bearing Collateral Bonds.

         The obligation of the Company to make payments with respect to the
interest on 2003 Interest Bearing 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 IB Percentage of the then due interest
and/or fees under the Credit Agreement shall have been fully or partially paid.
Satisfaction of any obligation to the extent that payment is made with respect
to the IB Percentage of the interest and/or fees under the Credit Agreement
means that if any payment is made on the interest and/or fees under the Credit
Agreement, a corresponding payment obligation with respect to the interest on
the 2003 Interest Bearing Collateral Bonds shall be deemed discharged in the
same amount as the payment with respect to the IB Percentage of the Loans and/or
the IB Percentage of the Reimbursement Obligations discharges the outstanding
obligation with respect to such IB Percentage of the Loans and/or IB Percentage
of the Reimbursement Obligations.

         The obligation of the Company to make payments with respect to the
principal of 2003 Zero Rate 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 principal of the ZR Percentage of the
Loans and/or the ZR Percentage of the Reimbursement Obligations, and the
then-due ZR Percentage of payment obligations with respect to interest and/or
fees under the Credit Agreement, shall have been fully or partially paid.
Satisfaction of any obligation to the extent that payment is made with respect
to the ZR Percentage of the Loans, the ZR Percentage of the Reimbursement
Obligations, or the ZR Percentage of interest and/or fees under the Credit
Agreement means that if any payment is made on the principal of the ZR
Percentage of the Loans and/or the ZR Percentage of the Reimbursement
Obligations, or if any payment is made on the ZR Percentage of the interest
and/or fees under the Credit Agreement, a corresponding payment obligation with
respect to the principal of the 2003 Zero Rate Collateral Bonds shall be deemed
discharged in the same amount as the payment with respect to the ZR Percentage
of the Loans, the ZR Percentage of the Reimbursement Obligations, or the ZR
Percentage of the interest and/or fees discharges the outstanding obligation
with respect to such ZR Percentage of the Loans, ZR Percentage of the
Reimbursement Obligations, or the ZR Percentage of the interest and/or fees. No
payment of principal of the 2003 Zero Rate Collateral Bonds attributable to any
payment of the principal of Loans or Reimbursement Obligations shall reduce the
principal amount of the 2003 Zero Rate Collateral Bonds, but any payment of
principal of the 2003 Zero Rate Collateral Bonds attributable to any payment of
interest or fees under the Credit Agreement shall be applied to reduce the
principal of the 2003 Zero Rate Collateral Bonds.

                                      -13-
<PAGE>

         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 Agent stating (i) that timely
payment of principal and interest on the 2003 Interest Bearing Collateral Bonds
has not been made or that timely payment of principal on the 2003 Zero Rate
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 Agent pursuant to the Credit
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 an Event of Default under the Credit
Agreement and the acceleration of the Obligations, the Collateral Bonds shall be
redeemable in whole upon receipt by the Trustee of a written demand from the
Agent stating that there has occurred under the Credit Agreement both an Event
of Default and a declaration of acceleration of the Obligations and demanding
redemption of the Collateral Bonds (including a description of the amount of
principal, interest and fees which comprise such Obligations). 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 Agent to the Trustee,
the Collateral Bonds shall be redeemed at a redemption price equal to the
aggregate amount of the Obligations.

         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

                                      -14-
<PAGE>

         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 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

                                      -15-
<PAGE>

         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 Agent, for the benefit of the Banks (as such term
is defined in the Credit Agreement), 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 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 Chicago, Illinois and
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.

                                      -16-
<PAGE>

                       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 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

                                      -17-
<PAGE>

         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
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.

                                      -18-
<PAGE>

                                      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.

                                      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
line 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

                                      -19-
<PAGE>

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.

                                       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 line 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:

                                      -20-
<PAGE>

                  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:

                  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

                                      -21-
<PAGE>

         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.

                                   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

                                      -22-
<PAGE>

         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 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:

                  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.

                                      -23-
<PAGE>

                                 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
         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

                                      -24-
<PAGE>

         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 Block three (3) of Assessors Plat of the Village of
Litchfield.

                                  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:

                                      -25-

<PAGE>

                  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.)

                                  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

                                      -26-
<PAGE>

         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.

                                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

                                      -27-
<PAGE>

         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 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:

                                      -28-

<PAGE>

                  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.

                                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.

                                      -29-

<PAGE>

                                 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 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:

                                      -30-

<PAGE>

                  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
         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.

                                      -31-
<PAGE>

                                 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.

                                 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

                                      -32-
<PAGE>

         Certain land in Comins Township, Oscoda County, Michigan described as:

                  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.

                                ROSCOMMON COUNTY

         Certain land in Gerrish Township, Roscommon County, Michigan described
as:

                                      -33-
<PAGE>

                  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:

                  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:

                                      -34-
<PAGE>

                  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:

                  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;

                                      -35-

<PAGE>

         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 9401(5)
of the Michigan Uniform Commercial Code (M.C.L. 440.9401(5)) as defined in
M.C.L. 440.9105(n).

         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 said JPMorgan Chase Bank, 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 and to be attested by a Trust Officer, in several counterparts, all as
of the day and year first above written.

                                                CONSUMERS ENERGY COMPANY

                                                By___________________________
                                                Printed
                                                Title

                                      -36-

<PAGE>

_____________________
Printed
Title

Signed, sealed and delivered
by CONSUMERS ENERGY COMPANY
in the presence of

_____________________
Name Printed

_____________________
Name Printed

                                      -37-
<PAGE>

STATE OF MICHIGAN  )
                   ss.
COUNTY OF JACKSON  )

         The foregoing instrument was acknowledged before me this ___ day of
July, 2002, by ____________________, ___________________of CONSUMERS ENERGY
COMPANY, a Michigan corporation, on behalf of the corporation.

                                               ________________________________
                                               _________________, Notary Public
                                               _______________ County, Michigan

My Commission Expires:  _____________, 200__

                                      -38-
<PAGE>

                                                JPMORGAN CHASE BANK, AS TRUSTEE

                                                By___________________________
                                                Printed
                                                Title

                                      S-1
<PAGE>

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

         The foregoing instrument was acknowledged before me this ___ day of
July, 2002, by ____________________, ___________________of JPMORGAN CHASE BANK,
a New York corporation, on behalf of the corporation.

                                               ________________________________
                                               _________________, Notary Public
                                               _______________ County, New York

My Commission Expires:  _____________, 200__

Prepared by:                            When recorded, return to:
Kimberly C. Wilson                      Consumers Energy Company
212 West Michigan Avenue                General Services Real Estate Department
Jackson, MI 49201                       Attn:  Nancy P. Fisher, P-21-410B
                                        1945 W. Parnall Road
                                        Jackson, MI 49201

                                      A-1

<PAGE>
                                   EXHIBIT B-1

                             REQUIRED OPINIONS FROM

                           MICHAEL D. VANHEMERT, ESQ.

         1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Michigan.

         2. The execution and delivery of the Credit Documents by the Company
and the performance by the Company of the Obligations have been duly authorized
by all necessary corporate action and proceedings on the part of the Company and
will not:

                  (a) contravene the Company's Restated Articles of
         Incorporation, as amended, or bylaws;

                  (b) contravene any law or any contractual restriction imposed
         by any indenture or any other agreement or instrument evidencing or
         governing indebtedness for borrowed money of the Company; or

                  (c) result in or require the creation of any Lien upon or with
         respect to any of the Company's properties except the lien of the
         Indenture securing the Bonds and any Lien in favor of the Agent on the
         Facility LC Collateral Account or any funds therein.

         3. The Credit Documents have been duly executed and delivered by the
Company.

         4. To the best of my knowledge, there is no pending or threatened
action or proceeding against the Company or any of its Consolidated Subsidiaries
before any court, governmental agency or arbitrator (except (i) to the extent
described in the Company's annual report on Form 10-K for the year ended
December 31, 2001, quarterly report on Form 10-Q for the quarter ended March 31,
2002, and current report on Form 8-K filed by the Company on May 29, 2002, in
each case as filed with the SEC, and (ii) such other similar actions, suits and
proceedings predicated on the occurrence of the same events giving rise to any
actions, suits and proceedings described in the reports filed with the SEC set
forth in clause (i) of this paragraph 4) which might reasonably be expected to
materially adversely affect the financial condition or results of operations of
the Company and its Consolidated Subsidiaries, taken as a whole, or that would
materially adversely affect the Company's ability to perform its obligations
under any Credit Document. To the best of my knowledge, there is no litigation
challenging the validity or the enforceability of any of the Credit Documents.

         5. 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 Credit Document,
except for the authorization to issue, sell or guarantee secured and/or
unsecured short-term debt granted by the Federal Energy Regulatory

                                      B-1
<PAGE>
Commission in Docket No. ES02-37-000 (hereinafter the "FERC Order"). The FERC
Order is in full force and effect as of the date hereof.

         6. The Bonds, assuming due authentication in accordance with the terms
of the Indenture, are in due and proper form and, when delivered to the Agent
pursuant to the Bond Delivery Agreement, will evidence and secure the
Obligations owing under the Agreement and will be valid and enforceable
obligations of the Company in accordance with their terms, secured by the lien
of the Indenture on an equal and ratable basis with all other bonds issued
thereunder and otherwise entitled to the benefits provided by the Indenture.

         7. The Indenture has been qualified under the Trust Indenture Act of
1939, as amended, and the execution and delivery of the Supplemental Indenture
will not cause the Indenture to not be so qualified.

         8. The Company is not an "investment company" or a company "controlled"
by an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.

         9. The Company (i) is a "public utility" and a "subsidiary company" of
a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended (the "Holding Company Act"), and (ii) is
currently exempt from all provisions of the Holding Company Act, except Section
9(a)(2) thereof.

         10. In a properly presented case, a Michigan court or a federal court
applying Michigan choice of law rules should give effect to the choice of law
provisions of the Agreement and should hold that the Agreement is to be governed
by the laws of the State of New York rather than the laws of the State of
Michigan, except in the case of those provisions set forth in the Agreement the
enforcement of which would contravene a fundamental policy of the State of
Michigan. In the course of our review of the Agreement, nothing has come to my
attention to indicate that any of such provisions would do so. Notwithstanding
the foregoing, even if a Michigan court or a federal court holds that the
Agreement is to be governed by the laws of the State of Michigan, the Agreement
constitutes a legal, valid and binding obligation of the Company, enforceable
under Michigan law (including usury provisions) against the Company 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).

                                      B-2
<PAGE>
                                   EXHIBIT B-2

                             REQUIRED OPINIONS FROM

                    SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

         1. The execution and delivery of the Credit Documents by the Company
and the performance by the Company of the Obligations will not:

                  (a) contravene any contractual restriction imposed by the
         Company Indentures; or

                  (b) result in or require the creation of any Lien upon or with
         respect to any of the Company's properties pursuant to either of the
         Company Indentures.

         2. The Agreement constitutes a legal, valid and binding obligation of
the Company enforceable against the Company 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 preceding in equity or at law).

         "Company Indentures" means (i) the Indenture dated as of January 1,
1996, as supplemented and amended from time to time, between the Company
(formerly known as Consumers Power Company) and The Bank of New York, as
Trustee, and (ii) the Indenture dated as of February 1, 1998, as supplemented
and amended from time to time, between the Company and JP Morgan Chase Bank
(formerly known as The Chase Manhattan Bank), as Trustee.

                                      B-3
<PAGE>
                                   EXHIBIT B-3

                             REQUIRED OPINIONS FROM

                   MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.

         1. The Bonds, assuming due authentication in accordance with the terms
of the Indenture, are in due and proper form and, when delivered to the Agent
pursuant to the Bond Delivery Agreement, will evidence and secure the
Obligations owing under the Agreement and will be valid and enforceable
obligations of the Company in accordance with their terms, secured by the lien
of the Indenture on an equal and ratable basis with all other bonds issued
thereunder and otherwise entitled to the benefits provided by the Indenture.

                                      B-4
<PAGE>
                                    EXHIBIT C

                         FORM OF COMPLIANCE CERTIFICATE

         I, _________________, ______________ of Consumers Energy Company, a
Michigan corporation (the "Company"), DO HEREBY CERTIFY in connection with the
364 Day Credit Agreement dated as of July 12, 2002 (the "Credit Agreement"; the
terms defined therein being used herein as so defined) among the Company,
various financial institutions and Bank One, NA (Main Office -- Chicago), as
Agent, that:

I.       Section 8.1 of the Credit Agreement provides that the Company shall:
         "At all times, maintain a ratio of Total Consolidated Debt to Total
         Consolidated Capitalization of not greater than 0.65 to 1.0."

         The following calculations are made in accordance with the definitions
         of Total Consolidated Debt and Total Consolidated Capitalization in the
         Credit Agreement and are correct and accurate as of
         _____________, ___:

<TABLE>
<CAPTION>
<S>                                                                          <C>
A.           Total Consolidated Debt
             -----------------------

             (a)    Indebtedness for borrowed money                                 $

plus         (b)    Indebtedness for deferred purchase price of
                    property/services

plus         (c)    Unfunded Vested Liabilities

plus         (d)    Obligations under acceptance facilities

plus         (e)    Obligations under Capital Leases

plus         (f)    Obligations under interest rate swap, "cap",
                    "collar" or other hedging agreement

plus         (g)    Guaranties, endorsements and
                    other contingent obligations

minus        (h)    Principal amount of any Securitized Bonds

minus        (i)    Junior Subordinated Debt owned by any Hybrid
                    Preferred Securities Subsidiary

minus        (j)    Subordinated guaranties by the Company of payments
                    with respect to Hybrid Preferred Securities

minus        (k)    Agreed upon percentage of Net Proceeds
</TABLE>

                                      C-1
<PAGE>
<TABLE>
<S>          <C>                                                             <C>
                    from issuance of hybrid debt/equity securities
                    (other than Junior Subordinated Debt and Hybrid
                    Preferred Securities)

                                                       TOTAL                        $

B.           Total Consolidated Capitalization:
             ---------------------------------

             (a)    Total Consolidated Debt                                         $

             (b)    Equity of common stockholders

             (c)    Equity of preference stockholders
                                                                             ---------------

             (d)    Equity of preferred stockholders
                                                                             ---------------

                                                       TOTAL                        $

C.           Debt to Capital Ratio                                                        _____ to 1.00
             ---------------------
             (total of A divided by total of B)
</TABLE>

II.      Section 8.2 of the Credit Agreement provides that the Company shall:
         "Not permit the ratio, determined as of the end of each of its fiscal
         quarters for the then most-recently ended four fiscal quarters, of (i)
         Consolidated EBIT to (ii) cash Consolidated Interest Expense to be less
         than 2.0 to 1.0"

                  The following calculations are made in accordance with the
definitions of Consolidated EBIT and Consolidated Interest Expense in the Credit
Agreement and are correct and accurate as of _____________, ___:

<TABLE>
<S>          <C>                                                          <C>
A.           Consolidated EBIT
             -----------------

             (a)    Consolidated Net Income                                $

plus         (b)    Consolidated Interest Expense                          $

plus         (c)    Expense for taxes paid or accrued                      $

plus         (d)    Non-cash write-offs and write-downs contained in the   $
                    Company's Consolidated Net Income, including,
                    without limitation, write-offs or write-downs
                    related to the sale of assets, impairment of assets
                    and loss on contracts

plus         (e)    For any fiscal period ending prior to March 31,        $
                    2003, pre-tax write-off for the fiscal
</TABLE>

                                      C-2
<PAGE>
<TABLE>
<S>          <C>                                                                   <C>

                    period ending December 31, 2001 in an amount not to exceed
                    $126,000,000 arising from the loss on Power Purchase
                    Agreement -- MCV Partnership

minus        (f)    Extraordinary gains realized other than in the         $
                    ordinary course of business

                                                       TOTAL                        $

B.           Consolidated Interest Expense                                          $
             -----------------------------

C.           Interest Coverage Ratio                                                      _______ to 1.00
             -----------------------
             (total of A divided by total of B)
</TABLE>

         IN WITNESS WHEREOF, I have signed this Certificate this ___ day of
_________, ___.

                                      C-3
<PAGE>
                                    EXHIBIT D

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

         This Assignment and Assumption (the "Assignment and Assumption") is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee]
(the "Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
"Credit Agreement"), receipt of a copy of which is hereby acknowledged by the
Assignee. The Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Assumption as if set forth herein in full.

         For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Agent as contemplated below, the interest in and to all of the Assignor's
rights and obligations in its capacity as a Bank under the Credit Agreement and
any other documents or instruments delivered pursuant thereto that represents
the amount and percentage interest identified below of all of the Assignor's
outstanding rights and obligations under the respective facilities identified
below (including without limitation any letters of credit, guaranties and
swingline loans included in such facilities and, to the extent permitted to be
assigned under applicable law, all claims (including without limitation contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity), suits, causes of action and any other right of the
Assignor against any Person whether known or unknown arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby) (the
"Assigned Interest"). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

1.   Assignor:
                  -----------------------------------------------------

2.   Assignee:                                                          [and is
                  -----------------------------------------------------
an affiliate of Assignor]

3.   Borrower:    CONSUMERS ENERGY COMPANY

4.   Agent:       Bank One, NA, as the Agent under the Credit Agreement.

5.   Credit Agreement: The 364 Day Credit Agreement dated as of July 12, 2002
among Consumers Energy Company, the Banks party thereto, and Bank One, NA, as
Agent.

                                      D-1
<PAGE>
6.   Assigned Interest:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                Aggregate Amount of         Amount of Commitment/             Percentage Assigned of
Facility Assigned               Commitment/ Outstanding     Credit Exposure       Commitment/ Outstanding Credit
                                Credit Exposure for all     Assigned*                         Exposure2
                                Banks*
-------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                         <C>                               <C>
____________                    $                           $                                 _______%
-------------------------------------------------------------------------------------------------------------------------------
____________                    $                           $                                 _______%
-------------------------------------------------------------------------------------------------------------------------------
____________                    $                           $                                 _______%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

7.   Trade Date:                                             (4)
                 --------------------------------------------

Effective Date:                     , 20   TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE AGENT.]

         The terms set forth in this Assignment and Assumption are hereby agreed
to:

                                     ASSIGNOR
                                     [NAME OF ASSIGNOR]

                                     By:
                                        ----------------------------------------
                                            Title:

                                     ASSIGNEE
                                     [NAME OF ASSIGNEE]

                                     By:
                                        ----------------------------------------
                                            Title:

[Consented to and](5) Accepted:

BANK ONE, NA, as Agent

By:
   -----------------------------------------
Title:

[Consented to:](6)

*Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.
(2) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Banks thereunder.
(4) Insert if satisfaction of minimum amounts is to be determined as of the
Trade Date.
(5) To be added only if the consent of the Agent is required by the terms of the
Credit Agreement.

                                      D-2
<PAGE>

(6) To be added only if the consent of the Company and/or other parties (e.g. LC
Issuer) is required by the terms of the Credit Agreement.

[NAME OF RELEVANT PARTY]

By:
   -----------------------------------
Title:

                                      D-3
<PAGE>

                                     ANNEX 1
                            TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

                  1.  Representations and Warranties.

                  1.1 Assignor. The Assignor represents and warrants that (i) it
is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby. Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Credit Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency, perfection, priority,
collectibility, or value of the Credit Documents or any collateral thereunder,
(iii) the financial condition of the Company, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Credit Document, (iv)
the performance or observance by the Company, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Credit Document, (v) inspecting any of the property, books or records of the
Company, or any guarantor, or (vi) any mistake, error of judgment, or action
taken or omitted to be taken in connection with the Credit Extensions or the
Credit Documents.

         1.2. Assignee. The Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Bank under the Credit Agreement, (ii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Bank thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Bank thereunder, (iii) agrees that its payment
instructions and notice instructions are as set forth in Schedule 1 to this
Assignment and Assumption, (iv) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Credit Documents will not be "plan assets" under
ERISA, (v) agrees to indemnify and hold the Assignor harmless against all
losses, costs and expenses (including, without limitation, reasonable attorneys'
fees) and liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee's non-performance of the obligations assumed under
this Assignment and Assumption, (vi) it has received a copy of the Credit
Agreement, together with copies of financial statements and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Agent or any other Bank, and (vii)
attached as Schedule 1 to this Assignment and Assumption is any documentation
required to be delivered by the Assignee with respect to its tax status pursuant
to the terms of the Credit Agreement, duly completed and executed by the
Assignee and (b) agrees that (i) it will, independently and without reliance on
the Agent, the Assignor or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Documents, and

                                      D-4
<PAGE>

(ii) it will perform in accordance with their terms all of the obligations which
by the terms of the Credit Documents are required to be performed by it as a
Bank.

                  2. Payments. The Assignee shall pay the Assignor, on the
Effective Date, the amount agreed to by the Assignor and the Assignee. From and
after the Effective Date, the Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, Reimbursement
Obligations, fees and other amounts) to the Assignor for amounts which have
accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

                  3. General Provisions. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Illinois.

                                      D-5
<PAGE>

                          ADMINISTRATIVE QUESTIONNAIRE

     (Schedule to be supplied by Closing Unit or Trading Documentation Unit)

    (For Forms for Primary Syndication call Peterine Svoboda at 312-732-8844)
      (For Forms after Primary Syndication call Jim Bartz at 312-732-1242)

                                      D-6
<PAGE>

              US AND NON-US TAX INFORMATION REPORTING REQUIREMENTS

     (Schedule to be supplied by Closing Unit or Trading Documentation Unit)

    (For Forms for Primary Syndication call Peterine Svoboda at 312-732-8844)
      (For Forms after Primary Syndication call Jim Bartz at 312-732-1242)

                                      D-7
<PAGE>

                                    EXHIBIT E

                             TERMS OF SUBORDINATION

                           [JUNIOR SUBORDINATED DEBT]

                                  ARTICLE ____
                                  SUBORDINATION

                  Section ___.1 Applicability of Article; Securities
Subordinated to Senior Indebtedness.

                  (a) This Article ____ shall apply only to the Securities of
any series which, pursuant to Section ___, are expressly made subject to this
Article. Such Securities are referred to in this Article ____ as "Subordinated
Securities."

                  (b) The Issuer covenants and agrees, and each Holder of
Subordinated Securities by his acceptance thereof likewise covenants and agrees,
that the indebtedness represented by the Subordinated Securities and the payment
of the principal and interest, if any, on the Subordinated Securities is
subordinated and subject in right, to the extent and in the manner provided in
this Article, to the prior payment in full of all Senior Indebtedness.

                  "Senior Indebtedness" means the principal of and premium, if
any, and interest on the following, whether outstanding on the date hereof or
thereafter incurred, created or assumed: (i) indebtedness of the Issuer for
money borrowed by the Issuer (including purchase money obligations) or evidenced
by debentures (other than the Subordinated Securities), notes, bankers'
acceptances or other corporate debt securities, or similar instruments issued by
the Issuer; (ii) all capital lease obligations of the Issuer; (iii) all
obligations of the Issuer issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Issuer and all obligations of
the Issuer under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) obligations with
respect to letters of credit; (v) all indebtedness of others of the type
referred to in the preceding clauses (i) through (iv) assumed by or guaranteed
in any manner by the Issuer or in effect guaranteed by the Issuer; (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of the Issuer (whether or
not such obligation is assumed by the Issuer), except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Notes, as the case may be, including all other debt securities and
guaranties in respect of those debt securities, issued to any other trusts,
partnerships or other entities affiliated with the Issuer which act as a
financing vehicle of the Issuer in connection with the issuance of preferred
securities by such entity or other securities which rank pari passu with, or
junior to, the Preferred Securities, and (2) any indebtedness between or among
the Issuer and its affiliates; and/or (vii) renewals, extensions or refundings
of any of the indebtedness referred to in the preceding clauses unless, in the
case of any particular indebtedness, renewal, extension or refunding, under the
express provisions of the instrument creating or evidencing the same or the
assumption or guarantee of the same, or pursuant to which the same is
outstanding, such indebtedness or such renewal, extension or refunding thereof
is not superior in right of payment to the Subordinated Securities.

                                      E-1
<PAGE>

                  This Article shall constitute a continuing obligation to all
Persons who, in reliance upon such provisions become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder and
they and/or each of them may enforce such provisions.

                  Section ___.2 Issuer Not to Make Payments with Respect to
Subordinated Securities in Certain Circumstances.

                  (a) Upon the maturity of any Senior Indebtedness by lapse of
time, acceleration or otherwise, all principal thereof and premium and interest
thereon shall first be paid in full, or such payment duly provided for in cash
in a manner satisfactory to the holders of such Senior Indebtedness, before any
payment is made on account of the principal of, or interest on, Subordinated
Securities or to acquire any Subordinated Securities or on account of any
sinking fund provisions of any Subordinated Securities (except payments made in
capital stock of the Issuer or in warrants, rights or options to purchase or
acquire capital stock of the Issuer, sinking fund payments made in Subordinated
Securities acquired by the Issuer before the maturity of such Senior
Indebtedness, and payments made through the exchange of other debt obligations
of the Issuer for such Subordinated Securities in accordance with the terms of
such Subordinated Securities, provided that such debt obligations are
subordinated to Senior Indebtedness at least to the extent that the Subordinated
Securities for which they are exchanged are so subordinated pursuant to this
Article ____).

                  (b) Upon the happening and during the continuation of any
default in payment of the principal of, or interest on, any Senior Indebtedness
when the same becomes due and payable or in the event any judicial proceeding
shall be pending with respect to any such default, then, unless and until such
default shall have been cured or waived or shall have ceased to exist, no
payment shall be made by the Issuer with respect to the principal of, or
interest on, Subordinated Securities or to acquire any Subordinated Securities
or on account of any sinking fund provisions of Subordinated Securities (except
payments made in capital stock of the Issuer or in warrants, rights, or options
to purchase or acquire capital stock of the Issuer, sinking fund payments made
in Subordinated Securities acquired by the Issuer before such default and notice
thereof, and payments made through the exchange of other debt obligations of the
Issuer for such Subordinated Securities in accordance with the terms of such
Subordinated Securities, provided that such debt obligations are subordinated to
Senior Indebtedness at least to the extent that the Subordinated Securities for
which they are exchanged are so subordinated pursuant to this Article ____).

                  (c) In the event that, notwithstanding the provisions of this
Section ___.2, the Issuer shall make any payment to the Trustee on account of
the principal of or interest on Subordinated Securities, or on account of any
sinking fund provisions of such Securities, after the maturity of any Senior
Indebtedness as described in Section ___.2(a) above or after the happening of a
default in payment of the principal of or interest on any Senior Indebtedness as
described in Section ___.2(b) above, then, unless and until all Senior
Indebtedness which shall have matured, and all premium and interest thereon,
shall have been paid in full (or the declaration of acceleration thereof shall
have been rescinded or annulled), or such default shall have been cured or
waived or shall have ceased to exist, such payment (subject to the provisions of
Sections ___.6 and ___.7) shall be held by the Trustee, in trust for the benefit
of, and shall be

                                      E-2
<PAGE>

paid forthwith over and delivered to, the holders of such Senior Indebtedness
(pro rata as to each of such holders on the basis of the respective amounts of
Senior Indebtedness held by them) or their representative or the trustee under
the indenture or other agreement (if any) pursuant to which such Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of all such Senior Indebtedness remaining unpaid to
the extent necessary to pay the same in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness. The Issuer shall give prompt written notice to the Trustee
of any default in the payment of principal of or interest on any Senior
Indebtedness.

                  Section ___.3 Subordinated Securities Subordinated to Prior
Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization
of Issuer. Upon any distribution of assets of the Issuer in any dissolution,
winding up, liquidation or reorganization of the Issuer (whether voluntary or
involuntary, in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise):

                  (a) the holders of all Senior Indebtedness shall first be
entitled to receive payments in full of the principal thereof and premium and
interest due thereon, or provision shall be made for such payment, before the
Holders of Subordinated Securities are entitled to receive any payment on
account of the principal of or interest on such Securities;

                  (b) any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities (other than
securities of the Issuer as reorganized or readjusted or securities of the
Issuer or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article ____ with respect to Subordinated Securities, to the
payment in full without diminution or modification by such plan of all Senior
Indebtedness), to which the Holders of Subordinated Securities or the Trustee on
behalf of the Holders of Subordinated Securities would be entitled except for
the provisions of this Article ____ shall be paid or delivered by the
liquidating trustee or agent or other person making such payment or distribution
directly to the holders of Senior Indebtedness or their representative, or to
the trustee under any indenture under which Senior Indebtedness may have been
issued (pro rata as to each such holder, representative or trustee on the basis
of the respective amounts of unpaid Senior Indebtedness held or represented by
each), to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution or provision thereof to the holders of such Senior Indebtedness;
and

                  (c) in the event that notwithstanding the foregoing provisions
of this Section ___.3, any payment or distribution of assets of the Issuer of
any kind or character, whether in cash, property or securities (other than
securities of the Issuer as reorganized or readjusted or securities of the
Issuer or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article ____ with respect to Subordinated Securities, to the
payment in full without diminution or modification by such plan of all Senior
Indebtedness), shall be received by the Trustee or the Holders of the
Subordinated Securities on account of principal of or interest on the
Subordinated Securities before all Senior Indebtedness is paid in full, or
effective provision made for its payment, such payment or distribution (subject
to the provisions of Section ___.6 and ___.7)

                                      E-3

<PAGE>

shall be received and held in trust for and shall be paid over to the holders of
the Senior Indebtedness remaining unpaid or unprovided for or their
representative, or to the trustee under any indenture under which such Senior
Indebtedness may have been issued (pro rata as provided in subsection (b)
above), for application to the payment of such Senior Indebtedness until all
such Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution or provision therefor to the holders of
such Senior Indebtedness.

                  The Issuer shall give prompt written notice to the Trustee of
any dissolution, winding up, liquidation or reorganization of the Issuer.

                  The consolidation of the Issuer with, or the merger of the
Issuer into, another corporation or the liquidation or dissolution of the Issuer
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article ____ hereof shall not be deemed a
dissolution, winding up, liquidation or reorganization for the purposes of this
Section ___.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated such in
Article ____.

                  Section ___.4 Holders of Subordinated Securities to be
Subrogated to Right of Holders of Senior Indebtedness. Subject to the payment in
full of all Senior Indebtedness, the Holders of Subordinated Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Issuer applicable to the Senior
Indebtedness until all amounts owing on Subordinated Securities shall be paid in
full, and for the purposes of such subrogation no payments or distributions to
the holders of the Senior Indebtedness by or on behalf of the Issuer or by or on
behalf of the Holders of Subordinated Securities by virtue of this Article ____
which otherwise would have been made to the Holders of Subordinated Securities
shall, as between the Issuer, its creditors other than holders of Senior
Indebtedness and the Holders of Subordinated Securities, be deemed to be payment
by the Issuer to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article ____ are and are intended solely for the
purpose of defining the relative rights of the Holders of the Subordinated
Securities, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.

                  Section ___.5 Obligation of the Issuer Unconditional. Nothing
contained in this Article ____ or elsewhere in this Indenture or in any
Subordinated Security is intended to or shall impair, as among the Issuer, its
creditors other than holders of Senior Indebtedness and the Holders of
Subordinated Securities, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders of Subordinated Securities the principal
of, and interest on, Subordinated Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of Subordinated Securities and
creditors of the Issuer other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Subordinated Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article ____ of the holders of Senior Indebtedness in respect of
cash, property or securities of the Issuer received upon the exercise of any
such remedy. Upon any payment or distribution of assets of the Issuer referred
to in this Article ____, the Trustee and Holders of Subordinated Securities
shall be entitled to rely upon any order or

                                      E-4
<PAGE>

decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or, subject
to the provisions of Section ___ and ___, a certificate of the receiver, trustee
in bankruptcy, liquidating trustee or agent or other Person making such payment
or distribution to the Trustee or the Holders of Subordinated Securities, for
the purposes of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Issuer, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
____.

                  Nothing contained in this Article ____ or elsewhere in this
Indenture or in any Subordinated Security is intended to or shall affect the
obligation of the Issuer to make, or prevent the Issuer from making, at any time
except during the pendency of any dissolution, winding up, liquidation or
reorganization proceeding, and, except as provided in subsections (a) and (b) of
Section ___.2, payments at any time of the principal of, or interest on,
Subordinated Securities.

                  Section ___.6 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice. The Issuer shall give prompt written notice to
the Trustee of any fact known to the Issuer which would prohibit the making of
any payment or distribution to or by the Trustee in respect of the Subordinated
Securities. Notwithstanding the provisions of this Article ____ or any provision
of this Indenture, the Trustee shall not at any time be charged with knowledge
of the existence of any facts which would prohibit the making of any payment or
distribution to or by the Trustee, unless at least two Business Days prior to
the making of any such payment, the Trustee shall have received written notice
thereof from the Issuer or from one or more holders of Senior Indebtedness or
from any representative thereof or from any trustee therefor, together with
proof satisfactory to the Trustee of such holding of Senior Indebtedness or of
the authority of such representative or trustee; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections ___
and ___, shall be entitled to assume conclusively that no such facts exist. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a
representative or trustee on behalf of the holder) to establish that such notice
has been given by a holder of Senior Indebtedness (or a representative of or
trustee on behalf of any such holder). In the event that the Trustee determines,
in good faith, that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in any payments or
distribution pursuant of this Article ____, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, as to the extent to which
such Person is entitled to participate in such payment or distribution, and as
to other facts pertinent to the rights of such Person under this Article ____,
and if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The Trustee, however, shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and nothing in this Article ____
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section ___.

                  Section ___.7 Application by Trustee of Monies or Government
Obligations Deposited with It. Money or Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Section ____ shall be
for the sole benefit of Securityholders

                                      E-5
<PAGE>

and, to the extent allocated for the payment of Subordinated Securities, shall
not be subject to the subordination provisions of this Article ____, if the same
are deposited in trust prior to the happening of any event specified in Section
___.2. Otherwise, any deposit of monies or Government Obligations by the Issuer
with the Trustee or any paying agent (whether or not in trust) for the payment
of the principal of, or interest on, any Subordinated Securities shall be
subject to the provisions of Section ___.1, ___.2 and ___.3 except that, if
prior to the date on which by the terms of this Indenture any such monies may
become payable for any purposes (including, without limitation, the payment of
the principal of, or the interest, if any, on any Subordinated Security) the
Trustee shall not have received with respect to such monies the notice provided
for in Section ___.6, then the Trustee or the paying agent shall have full power
and authority to receive such monies and Government Obligations and to apply the
same to the purpose for which they were received, and shall not be affected by
any notice to the contrary which may be received by it on or after such date.
This Section ___.7 shall be construed solely for the benefit of the Trustee and
paying agent and, as to the first sentence hereof, the Securityholders, and
shall not otherwise effect the rights of holders of Senior Indebtedness.

                  Section ___.8 Subordination Rights Not Impaired by Acts or
Omissions of Issuer or Holders of Senior Indebtedness. No rights of any present
or future holders of any Senior Indebtedness to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Issuer or by any act or failure to act,
in good faith, by any such holders or by any noncompliance by the Issuer with
the terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with.

                  Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Issuer may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Subordinated Securities, without incurring responsibility to the
Holders of the Subordinated Securities and without impairing or releasing the
subordination provided in this Article ____ or the obligations hereunder of the
Holders of the Subordinated Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection for such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Issuer, as the case may be, and any other
Person.

                  Section ___.9 Securityholders Authorize Trustee to Effectuate
Subordination of Securities. Each Holder of Subordinated Securities by his
acceptance thereof authorizes and expressly directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article ____ and appoints the Trustee his
attorney-in-fact for such purpose, including in the event of any dissolution,
winding up, liquidation or reorganization of the Issuer (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise) the immediate filing of a claim for the unpaid balance
of his Subordinated Securities in the form required in said proceedings and
causing said claim to be approved. If the Trustee does not file a proper claim
or

                                      E-6
<PAGE>

proof of debt in the form required in such proceeding prior to 30 days before
the expiration of the time to file such claim or claims, then the holders of
Senior Indebtedness have the right to file and are hereby authorized to file an
appropriate claim for and on behalf of the Holders of said Securities.

                  Section ___.10 Right of Trustee to Hold Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all of the rights
set forth in this Article ____ in respect of any Senior Indebtedness at any time
held by it to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.

                  With respect to the holders of Senior Indebtedness of the
Issuer, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article ____,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Sections ___.2 and ___.3,
the Trustee shall not be liable to any holder of such Senior Indebtedness if it
shall pay over or deliver to Holders of Subordinated Securities, the Issuer or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article ____ or otherwise.

                  Section ___.11 Article ____ Not to Prevent Events of Defaults.
The failure to make a payment on account of principal or interest by reason of
any provision in this Article ____ shall not be construed as preventing the
occurrence of an Event of Default under Section ____.

                                      E-7
<PAGE>
                                    EXHIBIT F

                             TERMS OF SUBORDINATION

                    [GUARANTY OF HYBRID PREFERRED SECURITIES]

                  SECTION ___. This Guarantee will constitute an unsecured
obligation of the Guarantor and will rank subordinate and junior in right of
payment to all other liabilities of the Guarantor and pari passu with any
guarantee now or hereafter entered into by the Guarantor in respect of the
securities representing common beneficial interests in the assets of the Issuer
or of any preferred or preference stock of any affiliate of the Guarantor.

                                      F-1
<PAGE>
                                    EXHIBIT G

                         FORM OF BOND DELIVERY AGREEMENT

                             BOND DELIVERY AGREEMENT

                            CONSUMERS ENERGY COMPANY

                                       TO

                             BANK ONE, NA, AS AGENT

                            Dated as of July 12, 2002

                                 ---------------

                                   Relating to
                              First Mortgage Bonds,

                     Collateral Series (Zero Rate) due 2003

                                       and

                  Collateral Series (Interest Bearing) due 2003

                                 ---------------

                                      G-1
<PAGE>
         THIS BOND DELIVERY AGREEMENT (this "Agreement"), dated as of July 12,
2002, is between Consumers Energy Company (the "Company"), and Bank One, NA, as
agent (the "Agent") under the 364 Day Credit Agreement (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement") dated as of
July 12, 2002, among the Company, the financial institutions parties thereto
(the "Banks"), and the Agent. Capitalized terms used but not otherwise defined
herein have the respective meanings assigned to such terms in the Credit
Agreement.

         Whereas, the Company has entered into the Credit 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,
Collateral Series (Interest Bearing) due 2003 and its First Mortgage Bonds,
Collateral Series (Zero Rate) due 2003, in the aggregate principal amount of
$250,000,000 (collectively, the "Bonds"), to be issued under and in accordance
with the Eighty-first Supplemental Indenture dated as of July 12, 2002 (the
"Supplemental Indenture"), to the Indenture of the Company to JPMorgan Chase
Bank (formerly known as The Chase Manhattan Bank) dated as of September 1, 1945
(as amended and supplemented, the "Indenture"); and

         Whereas, the Company proposes to issue and deliver to the Agent, for
the benefit of the Banks, 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
Obligations of the Company arising under the Credit 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 Agent 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 Obligations of the Company under
the Credit Agreement as aforesaid, the Company hereby delivers to the Agent the
Bonds in the aggregate principal amount of $250,000,000, maturing on July __,
2003 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 Obligations, all as
set forth in the Bonds and in Section 1 of the Supplemental Indenture.

         The Bonds are registered in the name of the Agent and shall be owned
and held by the Agent, subject to the provisions of this Agreement, for the
benefit of the Banks, and the Company shall have no interest therein. The Agent
shall be entitled to exercise all rights of bondholders under the Indenture with
respect to the Bonds.

                                      G-2
<PAGE>
         The Agent hereby acknowledges receipt of the Bonds.

Section 1.2 Payments on the Bonds.

         Any payments received by the Agent 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 Obligations, and such payments shall be distributed by the Agent
to the Banks in accordance with the provisions of the Credit Agreement
applicable to payments received by the Agent in respect of the Obligations (and
the Company hereby consents to such distributions).

                                   ARTICLE II

                    NO TRANSFER OF BONDS; SURRENDER OF BONDS

Section 2.1  No Transfer of the Bonds.

         The Agent shall not sell, assign or otherwise transfer any Bonds
delivered to it under this Agreement except to a successor administrative agent
under the Credit 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 Agent shall forthwith surrender to or upon the order of the
Company all Bonds held by it at the first time at which the Commitments shall
have been terminated and all Obligations shall have been paid in full.

         (b) Upon any permanent reduction in the Aggregate Commitment pursuant
to the terms of the Credit Agreement, the Agent 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 Agent over the
Aggregate Commitment; provided that the Agent shall not surrender Interest
Bearing Bonds at any time that Zero Rate Bonds are outstanding.

                                   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]

                                      G-3
<PAGE>
         IN WITNESS WHEREOF, the Company and the Agent have caused this
Agreement to be executed and delivered as of the date first above written.

CONSUMERS ENERGY COMPANY

----------------------------------

Name:
Title:

BANK ONE, NA, as Agent

----------------------------------

Name:
Title:

                                      G-4
<PAGE>
                                PRICING SCHEDULE

<TABLE>
<CAPTION>
  ==================== ============== =============== =============== ================ ============== ===============
     APPLICABLE           LEVEL I        LEVEL II       LEVEL III        LEVEL IV         LEVEL V        LEVEL VI
       MARGIN             STATUS          STATUS          STATUS          STATUS           STATUS          STATUS
  -------------------- -------------- --------------- --------------- ---------------- -------------- ---------------
<S>                       <C>            <C>              <C>             <C>             <C>            <C>
      Eurodollar          1.500%         2.000 %          2.000%          2.500%          2.750%         3.000 %
         Rate
  -------------------- -------------- --------------- --------------- ---------------- -------------- ---------------
     Alternate            0.500%         1.000 %          1.000%          1.500%          1.750%         2.000 %
     Base Rate
  ==================== ============== =============== =============== ================ ============== ===============

<CAPTION>
  ==================== ============== =============== =============== ================ ============== ===============
    APPLICABLE            LEVEL I        LEVEL II       LEVEL III        LEVEL IV         LEVEL V        LEVEL VI
     FEE RATE             STATUS          STATUS          STATUS          STATUS           STATUS          STATUS
  ==================== ============== =============== =============== ================ ============== ===============
<S>                       <C>            <C>              <C>             <C>             <C>             <C>
      Commitment          0.375%         0.375 %          0.375%          0.500%          0.500%          0.500%
       Fee Rate
  ==================== ============== =============== =============== ================ ============== ===============
</TABLE>

         For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:

         "Level I Status" exists at any date if, on such date, the Company's
Moody's Rating is Baa1 or better and the Company's S&P Rating is BBB+ or better.

         "Level II Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status and (ii) the Company's Moody's Rating is
Baa2 or better and the Company's S&P Rating is BBB or better.

         "Level III Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status or Level II Status and (ii) the Company's
Moody's Rating is Baa3 or better and the Company's S&P Rating is BBB- or better.

         "Level IV Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Company's Moody's Rating is Ba1 or better and the Company's S&P Rating
is BB+ or better.

         "Level V Status" exists at any date if, on such date, (i) the Company
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Company's Moody's Rating is Ba2 or better and the
Company's S&P Rating is BB or better.

         "Level VI Status" exists at any date if, on such date, the Company has
not qualified for Level I Status, Level II Status, Level III Status, Level IV
Status or Level V Status.

         "Moody's Rating" means, at any time, the rating issued by Moody's and
then in effect with respect to the Company's Senior Debt.

                                      G-5
<PAGE>
         "S&P Rating" means, at any time, the rating issued by S&P and then in
effect with respect to the Company's Senior Debt.

         "Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status, Level V Status or Level VI Status.

         The Applicable Margin and Commitment Fee Rate shall be determined in
accordance with the foregoing table based on the Company's Status as determined
from its then-current Moody's and S&P Ratings. So long as the Company has Level
III Status or above, Status shall be determined by the higher of the Moody's and
S&P Ratings (or the midpoint Status in the event the Moody's and S&P Ratings are
separated by more than one Status level); so long as the Company has Level IV
Status or below, Status shall be determined by the lower of the Moody's and S&P
Ratings. The credit rating in effect on any date for the purposes of this
Schedule is that in effect at the close of business on such date. If at any time
the Company has no Moody's Rating or no S&P Rating, Level VI Status shall exist.

                                      G-6
<PAGE>
                               COMMITMENT SCHEDULE

<Table>
<Caption>
   BANK                                                      COMMITMENT
   ----                                                      ----------

<S>                                                        <C>
   Bank One, NA                                            $ 47,000,000

   Citibank, N.A.                                          $ 47,000,000

   JPMorgan Chase Bank                                     $ 47,000,000

   Barclays Bank PLC                                       $ 47,000,000

   Union Bank of California, N.A.                          $ 47,000,000

   Comerica Bank                                           $ 15,000,000

   AGGREGATE COMMITMENT                                    $250,000,000
</Table>

                                      G-7

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