Document:

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                                                            EXHIBIT 4(y)

                             CMS ENERGY CORPORATION

                               GUARANTEE AGREEMENT

                              CMS ENERGY TRUST III

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                           Dated as of August 22, 2000

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                                TABLE OF CONTENTS
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                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.01        Definitions..............................................................2

                            ARTICLE II
                        TRUST INDENTURE ACT

SECTION 2.01        Trust Indenture Act; Application.........................................6
SECTION 2.02        Lists of Holders of Preferred Securities.................................7
SECTION 2.03        Reports by the Guarantee Trustee.........................................7
SECTION 2.04        Periodic Reports to the Guarantee Trustee................................7
SECTION 2.05        Evidence of Compliance with Conditions Precedent.........................8
SECTION 2.06        Events of Default; Waiver................................................8
SECTION 2.07        Disclosure of Information................................................8
SECTION 2.08        Conflicting Interest.....................................................9

                                   ARTICLE III
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 3.01        Powers and Duties of the Guarantee Trustee...............................9
SECTION 3.02        Certain Rights and Duties of the Guarantee Trustee......................10
SECTION 3.03        Not Responsible for Recitals or Issuance of Guarantee...................13
SECTION 3.04        The Guarantee Trustee May Own Preferred Securities......................13
SECTION 3.05        Moneys Received by the Guarantee Trustee to Be Held
                    in Trust Without Interest...............................................13
SECTION 3.06        Compensation and Expenses of Guarantee Trustee..........................13

                                   ARTICLE IV
                                GUARANTEE TRUSTEE

SECTION 4.01        Qualifications..........................................................14
SECTION 4.02        Appointment, Removal and Resignation of the Guarantee
                    Trustee.................................................................15

                                    ARTICLE V
                                    GUARANTEE

SECTION 5.01        Guarantee...............................................................16
SECTION 5.02        Waiver of Notice........................................................16
SECTION 5.03        Obligations Not Affected................................................16
SECTION 5.04        Enforcement of Guarantee................................................18

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SECTION 5.05        Guarantee of Payment....................................................18
SECTION 5.06        Subrogation.............................................................18
SECTION 5.07        Independent Obligations.................................................19

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.01        Limitation of Transactions..............................................19
SECTION 6.02        Subordination...........................................................20

                                   ARTICLE VII
                                   TERMINATION

SECTION 7.01        Termination.............................................................21

                                  ARTICLE VIII
                    LIMITATION OF LIABILITY; INDEMNIFICATION

SECTION 8.01        Exculpation.............................................................21
SECTION 8.02        Indemnification.........................................................22
SECTION 8.03        Survive Termination.....................................................22

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.01        Successors and Assigns..................................................22
SECTION 9.02        Amendments..............................................................22
SECTION 9.03        Notices.................................................................23
SECTION 9.04        Genders.................................................................24
SECTION 9.05        Benefit.................................................................24
SECTION 9.06        Governing Law...........................................................24
SECTION 9.07        Counterparts............................................................24
SECTION 9.08        Exercise of Overallotment Option........................................24
SECTION 9.09        Limited Liability.......................................................24

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                               GUARANTEE AGREEMENT

                  This GUARANTEE AGREEMENT, dated as of August 22, 2000, is
executed and delivered by CMS Energy Corporation, a Michigan corporation (the
"Guarantor"), and The Bank of New York, a New York banking corporation, as the
initial Guarantee Trustee (as defined herein) for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of CMS Energy Trust III, a Delaware statutory business trust (the
"Issuer").

                  WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of August 22, 2000 among the trustees of the
Issuer named therein, CMS Energy Corporation, as Sponsor, and the Holders from
time to time of preferred undivided beneficial interests in the assets of the
Issuer, the Issuer may issue up to $250,000,000 aggregate liquidation amount of
its  % Trust Preferred Securities (the "Preferred Securities") representing
preferred undivided beneficial interests in the assets of the Issuer and having
the terms set forth in the Declaration, of which $220,000,000 liquidation amount
of Preferred Securities is being issued as of the date hereof. Up to the
remaining $30,000,000 liquidation amount of Preferred Securities may be issued
by the Issuer if and to the extent that the over-allotment option granted by the
Guarantor and the Issuer pursuant to the Underwriting Agreement (as defined in
the Declaration) is exercised by the Underwriters named in the Underwriting
Agreement; and

                  WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth herein, to pay to the Holders the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein;

                  NOW, THEREFORE, in consideration of the purchase by the
initial purchasers thereof of Preferred Securities, which purchase the Guarantor
hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers
this Guarantee Agreement for the benefit of the Holders from time to time.

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.01 Definitions.

                  (a) Capitalized terms used in this Guarantee Agreement but not
defined in the preamble or recitals above have the respective meanings assigned
to them in this Section 1.01.

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                  (b) A term defined anywhere in this Guarantee Agreement has
the same meaning throughout.

                  (c) All references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time.

                  (d) All references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified.

                  (e) A term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires.

                  (f) A reference to the singular includes the plural and vice
versa.

                  "Additional Amounts" has the meaning set forth in the
Indenture.

                  "Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control" of a Person shall mean the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.

                  "Business Day" has the meaning set forth in the Indenture.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer and having the terms
set forth in Article VII of the Declaration.

                  "Common Stock" means the common stock, $.01 par value per
share, of the Guarantor, including associated preferred share purchase rights.

                  "Declaration" has the meaning set forth in the recitals above.

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                  "Distributions" means the periodic distributions and other
payments payable to Holders in accordance with the terms of the Preferred
Securities set forth in Article VII of to the Declaration.

                  "Dollar" has the meaning set forth in the Indenture.

                  "Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee Agreement; provided,
however, that, except with respect to a default in payment of any Guarantee
Payment, any such default shall constitute an Event of Default only if the
Guarantor shall have received notice of such default and shall not have cured
such default within 60 days after receipt of such notice.

                  "Extension Period" has the meaning set forth in Section 2.8 of
the Fourth Supplemental Indenture.

                  "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accumulated
and unpaid Distributions, any Additional Amounts payable with respect to the
Preferred Securities in accordance with the terms thereof and the Redemption
Price, including all accumulated and unpaid Distributions and Additional Amounts
to the date of redemption, with respect to the Preferred Securities to be
redeemed by the Issuer but only if and to the extent that in each case the
Guarantor has made a payment to the Property Trustee of principal of, any
premium or interest on or any Additional Amounts with respect to the Notes and
(ii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of Notes to Holders
in exchange for Preferred Securities or the redemption of the Preferred
Securities in full upon the maturity or redemption of the Notes as provided in
the Declaration), the lesser of (a) the aggregate of the liquidation amount and
all accumulated and unpaid Distributions and Additional Amounts on the Preferred
Securities to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer as required
by applicable law.

                  "Guarantee Trustee" means The Bank of New York, a New York
banking corporation, until a Successor Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Guarantee Agreement,
and thereafter means each such Successor Guarantee Trustee.

                  "Holder" means any holder, as registered on the books and
records of the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the

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Guarantor or any Affiliate of the Guarantor.

                  "Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, and any officers, directors, shareholders,
members, partners, employees, representatives or agents of the Guarantee
Trustee.

                  "Indenture" means the Indenture dated as of June 1, 1997
between the Guarantor and The Bank of New York, as trustee, (including any
provisions of the TIA that are deemed to be incorporated therein), as the same
may be amended, modified or supplemented from time to time in accordance with
the terms thereof, pursuant to which the Notes are to be issued to the Property
Trustee.

                  "Majority of Outstanding Preferred Securities" means Holder(s)
of outstanding Preferred Securities, voting together as a single class, who are
the record owners of Preferred Securities representing more than 50% of the
outstanding Preferred Securities.

                  "Notes" means the series of unsecured subordinated notes
issued to the Property Trustee by the Guarantor under the Indenture and entitled
the "  % Subordinated Deferrable Notes due 2004."

                  "Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, the President or any Vice President (whether
or not designated by a number or numbers or a word or words added before or
after the title "Vice President") and by the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 2.04 shall be the principal
executive, financial or accounting officer of the Guarantor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee Agreement shall include:

                  (i) a statement that the person making such certificate has
         read such covenant or condition;

                  (ii) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate are based;

                  (iii) a statement that, in the opinion of such person, he has
         made

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         such examination or investigation as is necessary to enable him to
         express an informed opinion as to whether or not such covenant or
         condition has been complied with; and

                  (iv) a statement as to whether or not, in the opinion of such
         person, such condition or covenant has been complied with.

                  "Person" means any individual, corporation, partnership,
limited liability company, joint venture, incorporated or unincorporated
association, joint stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof or other entity of
any kind.

                  "Preferred Securities" has the meaning set forth in the
recitals above.

                  "Property Trustee" means the Person acting as Property Trustee
under the Declaration.

                  "Redemption Price" means the amount payable on redemption of
the Preferred Securities in accordance with the terms of the Preferred
Securities.

                  "Responsible Officer" means, when used with respect to the
Guarantee Trustee, any officer within the corporate trust department of the
Guarantee Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any other officer of
the Guarantee Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such Person's
knowledge of and familiarity with the particular subject and, in either case,
who shall have direct responsibility for the administration of this Guarantee
Agreement.

                  "Senior Indebtedness" has the meaning specified in the
Indenture.

                  "Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as a Guarantee Trustee under
Section 4.01.

                  "Fourth Supplemental Indenture" has the meaning specified in
the definition of Indenture.

                  "Trust Enforcement Event" has the meaning specified in the
Declaration.

                  "Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.

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                                   ARTICLE II
                               TRUST INDENTURE ACT

         SECTION 2.01 Trust Indenture Act; Application.

                  (a) This Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Guarantee Agreement
and shall, to the extent applicable, be governed by such provisions.

                  (b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

                  (c) The application of the Trust Indenture Act to this
Guarantee Agreement shall not affect the nature of the Preferred Securities as
equity securities representing preferred undivided beneficial interests in the
assets of the Issuer.

         SECTION 2.02 Lists of Holders of Preferred Securities.

                  (a) The Guarantor shall provide the Guarantee Trustee (unless
the Guarantee Trustee is the registrar of the Preferred Securities) (i) within
14 days after each record date for payment of Distributions, a list, in such
form as the Guarantee Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of such date, and (ii) at any other time,
within 30 days of receipt by the Guarantor of a written request for a List of
Holders as of a date no more than 15 days before such List of Holders is given
to the Guarantee Trustee; provided that in each case the Guarantor shall not be
obligated to provide such List of Holders at any time that the List of Holders
does not differ from the most recent List of Holders given to the Guarantee
Trustee by the Guarantor. The Guarantee Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in the Lists of
Holders given to it; provided that the Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

                  (b) The Guarantee Trustee shall comply with its obligations
under Section 312(b) of the Trust Indenture Act.

         SECTION 2.03 Reports by the Guarantee Trustee.

                  Within 60 days after June 15 of each year, commencing June 15,
2001,

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the Guarantee Trustee shall deliver to the Holders such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form, in the manner
and at the times provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the other requirements of Section 313
of the Trust Indenture Act. A copy of each such report shall, at the time of
such transmission to the Holders, be filed by the Guarantee Trustee with the
Guarantor, with each stock exchange or quotation system upon which any Preferred
Securities are listed or traded (if so listed or traded) and also with the
Commission. The Guarantor agrees to notify the Guarantee Trustee when any
Preferred Securities become listed on any stock exchange or quotation system and
of any delisting thereof.

         SECTION 2.04 Periodic Reports to the Guarantee Trustee.

                  The Guarantor shall provide to the Guarantee Trustee, the
Commission and the Holders, as applicable, such documents, reports and
information (if any) as required by Section 314(a)(1)-(3) of the Trust Indenture
Act and the compliance certificates required by Section 314(a)(4) and (c) of the
Trust Indenture Act, any such certificates to be provided in the form, in the
manner and at the times required by Section 314(a)(4) and (c) of the Trust
Indenture Act (provided that any certificate to be provided pursuant to Section
314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the
end of each fiscal year of the Issuer). Delivery of such reports, information
and documents to the Guarantee Trustee is for informational purposes only and
the Guarantee Trustee's receipt of such shall not constitute constructive notice
of any information contained therein, including the Guarantor's compliance with
any of its covenants hereunder (as to which the Guarantee Trustee is entitled to
rely exclusively on Officers' Certificates or on certificates provided pursuant
to this Section 2.04).

         SECTION 2.05 Evidence of Compliance with Conditions Precedent.

                  The Guarantor shall provide to the Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Guarantee Agreement which relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c) may be given in the form of an
Officers' Certificate.

         SECTION 2.06 Events of Default; Waiver.

                  (a) The Holders of a Majority of Outstanding Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default, or
impair any right consequent thereon.

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                  (b) The right of any Holder to receive payment of the
Guarantee Payments in accordance with this Guarantee Agreement, or to institute
suit for the enforcement of any such payment, shall not be impaired without the
consent of each such Holder.

         SECTION 2.07 Disclosure of Information.

                  The disclosure of information as to the names and addresses of
the Holders in accordance with Section 312 of the Trust Indenture Act,
regardless of the source from which such information was derived, shall not be
deemed to be a violation of any existing law, or any law hereafter enacted which
does not specifically refer to Section 312 of the Trust Indenture Act, nor shall
the Guarantee Trustee be held accountable by reason of mailing any material
pursuant to a request made under Section 312(b) of the Trust Indenture Act.

         SECTION 2.08 Conflicting Interest.

                  (a) The Declaration shall be deemed to be specifically
described in this Guarantee Agreement for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.

                  (b) The Guarantee Trustee shall comply with its obligations
under Sections 310(b) and 311 of the Trust Indenture Act.

                                   ARTICLE III
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 3.01 Powers and Duties of the Guarantee Trustee.

                  (a) This Guarantee Agreement shall be held by the Guarantee
Trustee in trust for the benefit of the Holders. The Guarantee Trustee shall not
transfer its right, title and interest in this Guarantee Agreement to any Person
except a Successor Guarantee Trustee on acceptance by such Successor Guarantee
Trustee of its appointment to act as Guarantee Trustee or to a Holder exercising
his or her rights pursuant to Section 5.04(iv). The right, title and interest of
the Guarantee Trustee to this Guarantee Agreement shall vest automatically in
each Person who may hereafter be appointed as Guarantee Trustee in accordance
with Article IV. Such vesting and

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cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.

                  (b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.

                  (c) This Guarantee Agreement and all moneys received by the
Guarantee Trustee in respect of the Guarantee Payments will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of, or
for the benefit of, the Guarantee Trustee or its agents or their creditors.

                  (d) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee, transmit by mail, first class postage prepaid, to the
Holders, as their names and addresses appear upon the List of Holders, notice of
all such Events of Default, unless such defaults shall have been cured before
the giving of such notice; provided that the Guarantee Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Guarantee Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders. The Guarantee Trustee shall
not be deemed to have knowledge of any Event of Default except any Event of
Default as to which the Guarantee Trustee shall have received written notice or
a Responsible Officer charged with the administration of this Guarantee
Agreement shall have obtained written notice of such Event of Default.

                  (e) The Guarantee Trustee shall continue to serve as a trustee
until a Successor Guarantee Trustee has been appointed and accepted that
appointment in accordance with Article IV.

         SECTION 3.02 Certain Rights and Duties of the Guarantee Trustee.

                  (a) The Guarantee Trustee, before the occurrence of an Event
of Default and after the curing or waiving of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee Agreement, and no implied covenants shall be read
into this Guarantee Agreement against the Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.06), the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Guarantee Agreement, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.

                  (b) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own

<PAGE>   13

negligent failure to act or its own willful misconduct, except that:

                  (i) prior to the occurrence of an Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                           (A) the duties and obligations of the Guarantee
                  Trustee shall be determined solely by the express provisions
                  of this Guarantee Agreement, and the Guarantee Trustee shall
                  not be liable except for the performance of such duties and
                  obligations as are specifically set forth in this Guarantee
                  Agreement, and no implied covenants or obligations shall be
                  read into this Guarantee Agreement against the Guarantee
                  Trustee; and

                           (B) in the absence of willful misconduct on the part
                  of the Guarantee Trustee, the Guarantee Trustee may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Guarantee Trustee
                  and conforming to the requirements of this Guarantee Agree
                  ment; provided, however, that in the case of any such
                  certificates or opinions that by any provision hereof or the
                  Trust Indenture Act are specifically required to be furnished
                  to the Guarantee Trustee, the Guarantee Trustee shall be under
                  a duty to examine the same to determine whether or not they
                  conform to the requirements of this Guarantee Agreement or the
                  Trust Indenture Act, as the case may be (but need not confirm
                  or investigate the accuracy of mathematical calcula tions or
                  other facts stated therein);

                  (ii) the Guarantee Trustee shall not be liable for any error
         of judgment made in good faith by a Responsible Officer of the
         Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
         was negligent in ascertaining the pertinent facts upon which such
         judgment was made;

                  (iii) the Guarantee Trustee shall not be liable with respect
         to any action taken or omitted to be taken by it in good faith in
         accordance with the direction of the Holders of a Majority of
         Outstanding Preferred Securities relating to the time, method and place
         of conducting any proceeding for any remedy available to the Guarantee
         Trustee, or exercising any trust or power conferred upon the Guarantee
         Trustee under this Guarantee Agreement; and

                  (iv) no provision of this Guarantee Agreement shall require
         the

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         Guarantee Trustee to expend or risk its own funds or otherwise incur
         personal financial liability in the performance of any of its duties or
         in the exercise of any of its rights or powers, if it shall have
         reasonable grounds for believing that the repayment of such funds or
         liability is not reasonably assured to it under the terms of this
         Guarantee Agreement or indemnity reasonably satisfactory to it against
         such risk or liability is not reasonably assured to it.

         (c) Subject to the provisions of Section 3.02(a) and (b):

                  (i) whenever in the administration of this Guarantee
         Agreement, the Guarantee Trustee shall deem it desirable that a matter
         be proved or established prior to taking, suffering or omitting any
         action hereunder, the Guarantee Trustee (unless other evidence is
         herein specifically prescribed) may, in the absence of willful
         misconduct on its part, request and rely upon an Officers' Certificate,
         which, upon receipt of such request, shall be promptly delivered by the
         Guarantor;

                  (ii) the Guarantee Trustee (A) may consult with counsel (which
         may be counsel to the Guarantor or any of its Affiliates and may
         include any of its employees) selected by it in good faith and with due
         care and the advice or opinion of such counsel with respect to legal
         matters shall be full and complete authorization and protection in
         respect of any action taken, suffered or omitted by it hereunder in
         good faith and in reliance thereon and in accordance with such advice
         and opinion and (B) shall have the right at any time to seek, at the
         expense of the Guarantor, instructions concerning the administration of
         this Guarantee Agreement from any court of competent jurisdiction;

                  (iii) the Guarantee Trustee may execute any of the trusts or
         powers hereunder or perform any duties hereunder either directly or by
         or through agents or attorneys, and the Guarantee Trustee shall not be
         responsible for any willful misconduct or negligence on the part of any
         agent or attorney appointed by it in good faith and with due care;

                  (iv) the Guarantee Trustee shall be under no obligation to
         exercise any of the rights or powers vested in it by this Guarantee
         Agreement at the request or direction of any Holder, unless such Holder
         shall have offered to the Guarantee Trustee security and indemnity
         satisfactory to the Guarantee Trustee against the costs, expenses
         (including attorneys' fees and expenses) and liabilities that might be
         incurred by it in complying with such request or direction; provided
         that nothing contained in this clause (iv) shall relieve the Guarantee
         Trustee of the obligation, upon the occurrence of an Event of Default
         (which has not been cured or waived) to exercise such of the rights and
         powers vested in it by this Guarantee Agreement, and to use the same

<PAGE>   15

         degree of care and skill in this exercise as a prudent person would
         exercise or use under the circumstances in the conduct of his own
         affairs; and

                  (v) any action taken by the Guarantee Trustee or its agents
         hereunder shall bind the Holders, and the signature of the Guarantee
         Trustee or its agents alone shall be sufficient and effective to
         perform any such action; and no third party shall be required to
         inquire as to the authority of the Guarantee Trustee to so act, or as
         to its compliance with any of the terms and provisions of this
         Guarantee Agreement, both of which shall be conclusively evidenced by
         the Guarantee Trustee's or its agent's taking such action.

         SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee.

                  The recitals contained in this Guarantee Agreement shall be
taken as the statements of the Guarantor, and the Guarantee Trustee does not
assume any responsibil ity for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee Agreement.

         SECTION 3.04 The Guarantee Trustee May Own Preferred Securities.

                  The Guarantee Trustee, in its individual or any other
capacity, may become the owner or pledgee of Preferred Securities and may
otherwise deal with the Guarantor with the same rights it would have if it were
not the Guarantee Trustee.

         SECTION 3.05 Moneys Received by the Guarantee Trustee to Be Held in
                  Trust Without Interest.

                  All moneys received by the Guarantee Trustee in respect of
Guarantee Payments shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, but need not be segregated
from other funds except to the extent required by law. The Guarantee Trustee
shall be under no liability for interest on any moneys received by it hereunder
except such as it may agree in writing to pay thereon.

         SECTION 3.06 Compensation and Expenses of Guarantee Trustee.

                  The Guarantor covenants and agrees to pay to the Guarantee
Trustee from time to time, and the Guarantee Trustee shall be entitled to, such
compensation as the Guarantor and the Guarantee Trustee shall from time to time
agree in writing (which shall not be limited by any provision of law in regard
to the compensation of a Guarantee Trustee of an express trust) for all services
rendered by it in the exercise

<PAGE>   16

and performance of any of the powers and duties hereunder of the Guarantee
Trustee, and the Guarantor will pay or reimburse the Guarantee Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Guarantee Trustee in accordance with any of the provisions of this
Guarantee Agreement (including the reasonable compensation and the reasonable
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or willful misconduct. The Guarantor also covenants to indemnify
each of the Guarantee Trustee or any predecessor Guarantee Trustee and their
officers, agents, directors and employees for, and to hold them harmless
against, any and all loss, liability, damage, claim or expense including taxes
(other than taxes based upon, measured by or determined by the income, profit,
franchise or doing business of the Guarantee Trustee) incurred without
negligence or willful misconduct on the part of the Guarantee Trustee and
arising out of or in connection with the acceptance or administration of this
trust, including the reasonable costs and expenses of defending itself against
any claim (whether asserted by the Guarantor, any Holder or any other Person) of
liability in the premises. The provisions of this Section 3.06 shall survive the
termination of this Guarantee Agreement and resignation or removal of the
Guarantee Trustee.

                                   ARTICLE IV
                                GUARANTEE TRUSTEE

         SECTION 4.01 Qualifications.

                  There shall at all times be a Guarantee Trustee that shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a national banking association or corporation
         organized and doing business under the laws of the United States of
         America or any State or Territory thereof or of the District of
         Columbia, or a corporation or Person permitted by the Commission to act
         as an institutional trustee under the Trust Indenture Act, authorized
         under such laws to exercise corporate trust powers, having a combined
         capital and surplus of at least $50,000,000, and subject to supervision
         or examination by Federal, State, Territorial or District of Columbia
         authority. If such corporation publishes reports of condition at least
         annually, pursuant to law or to the requirements of the supervising or
         examining authority referred to above, then for the purposes of this
         clause (ii), the combined capital and surplus of such corporation shall
         be deemed to be its combined capital and surplus as set forth in its
         most recent report of condition so published.

<PAGE>   17

                  If at any time the Guarantee Trustee shall cease to satisfy
the require ments of clauses (i) and (ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02. If
the Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and
the Guarantor shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.

         SECTION 4.02 Appointment, Removal and Resignation of the Guarantee
Trustee.

                  (a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

                  (b) The Guarantee Trustee shall not be removed in accordance
with Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by written instrument executed by such
Successor Guarantee Trustee and delivered to the Guarantor and the Guarantee
Trustee being removed.

                  (c) The Guarantee Trustee appointed to office shall hold
office until its successor shall have been appointed or until its removal or
resignation.

                  (d) The Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument (a "Resignation Request")
in writing signed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01 has been appointed
and has accepted such appointment by instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

                  (e) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 60
days after delivery to the Guarantor of a Resignation Request or receipt of a
notice of removal by the Guarantee Trustee, the Guarantee Trustee resigning or
to be removed may, at the expense of the Guarantor petition any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon after such notice, if any, as it may deem proper, appoint a
Successor Guarantee Trustee.

<PAGE>   18

                                    ARTICLE V
                                    GUARANTEE

         SECTION 5.01 Guarantee.

                  The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counter claim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or to the
Guarantee Trustee for remittance to the Holders or by causing the Issuer to pay
such amounts to the Holders.

         SECTION 5.02 Waiver of Notice.

                  The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to extend the interest
payment period on the Notes and the Guarantor shall not be obligated hereunder
to make any Guarantee Payment during any Extension Period with respect to the
Distributions on the Preferred Securities.

         SECTION 5.03 Obligations Not Affected.

                  The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:

                  (a) the release or waiver, by operation of law or otherwise,
         of the performance or observance by the Issuer of any express or
         implied agreement, covenant, term or condition relating to the
         Preferred Securities to be performed or observed by the Issuer;

                  (b) the extension of time for the payment by the Issuer of all
         or any portion of the Distributions (other than an extension of time
         for payment of Distributions that result from any Extension Period),
         Redemption Price, Liquidation Distribution (as defined in the
         Declaration) or any other sums payable under the terms of the Preferred
         Securities or the extension of time for the performance of any other
         obligation under, arising out of, or in

<PAGE>   19

         connection with, the Preferred Securities (other than an extension of
         time for payment of Distributions that result from any Extension
         Period);

                  (c) any failure, omission, delay or lack of diligence on the
         part of the Guarantee Trustee or the Holders to enforce, assert or
         exercise any right, privilege, power or remedy conferred on the
         Guarantee Trustee or the Holders pursuant to the terms hereof or of the
         Preferred Securities, respectively, or any action on the part of the
         Issuer granting indulgence or extension of any kind;

                  (d) the voluntary or involuntary liquidation, dissolution,
         sale of any collateral, receivership, insolvency, bankruptcy,
         assignment for the benefit of creditors, reorganization, arrangement,
         composition or readjustment of debt of, or other similar proceedings
         affecting, the Issuer or any of the assets of the Issuer;

                  (e) any invalidity of, or defect or deficiency in, the
         Preferred Securities;

                  (f) the settlement or compromise of any obligation guaranteed
         hereby or hereby incurred; or

                  (g) any other circumstance whatsoever that might otherwise
         constitute a legal or equitable discharge or defense of a guarantor, it
         being the intent of this Section 5.03 that the obligations of the
         Guarantor with respect to the Guarantee Payments shall be absolute and
         unconditional under any and all circumstances.

                  There shall be no obligation of the Guarantee Trustee or the
Holders to give notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.

         SECTION 5.04 Enforcement of Guarantee.

                  The Guarantor and the Guarantee Trustee expressly acknowledge
and agree that (i) this Guarantee Agreement will be deposited with the Guarantee
Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee
has the right to enforce this Guarantee Agreement on behalf of the Holders;
(iii) Holders representing not less than a Majority of Outstanding Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of this
Guarantee Agreement or exercising any trust

<PAGE>   20

or other power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement as provided in clauses (ii) and (iii) above, any Holder may institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Issuer, the Guarantee Trustee or any other Person. Notwithstanding the
foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may
directly institute a proceeding against the Guarantor for enforcement of this
Guarantee Agreement for such payment without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other Person.

         SECTION 5.05 Guarantee of Payment.

                  This Guarantee Agreement creates a guarantee of payment and
not merely of collection. This Guarantee Agreement will not be discharged except
by payment of the Guarantee Payments in full (without duplication of amounts
theretofore paid by the Issuer) or upon the distribution of the Notes to the
Holders as provided in the Declaration.

         SECTION 5.06 Subrogation.

                  The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to the Holders by
the Guarantor under this Guarantee Agreement; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders or to the Guarantee Trustee for
remittance to the Holders.

         SECTION 5.07 Independent Obligations.

                  The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.03 hereof.

<PAGE>   21

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

         SECTION 6.01 Limitation of Transactions.

                  So long as any Preferred Securities remain outstanding, the
Guarantor shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock (which includes common and preferred stock), (ii)
make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Guarantor that rank pari passu
with or junior in right of payment to the Notes or (iii) make any guarantee
payments with respect to any guarantee by the Guarantor of any securities of any
subsidiary of the Guarantor if such guarantee ranks pari passu or junior in
right of payment to the Notes (other than in the case of clauses (i), (ii) and
(iii), (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, common stock of the Guarantor,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under this Guarantee Agreement, (d) as a result of a reclassification
of the Guarantor's capital stock solely into shares of one or more classes or
series of the Guarantor's capital stock or the exchange or the conversion of one
class or series of the Guarantor's capital stock for another class or series of
the Guarantor's capital stock, (e) the purchase of fractional interests in
shares of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of the Guarantor's common stock in connection with the
satisfaction by the Guarantor of its obligations (including purchases related to
the issuance of such common stock or rights) under any of the Guarantor's
benefit plans for its and its subsidiaries' directors, officers or employees or
any of the Guarantor's dividend reinvestment plans), if at such time (x) an
Event of Default, or an "Event of Default" as defined in the Indenture, shall
have occurred and be continuing or (y) the Guarantor shall have given notice of
its election of the exercise of its right to extend the interest payment period
pursuant to Section 2.8 of the Fourth Supplemental Indenture and any such
extension shall have commenced and not yet terminated.

         SECTION 6.02 Subordination.

                  (a) The obligations of the Guarantor under this Guarantee
Agreement will constitute unsecured obligations of the Guarantor and will rank
subordinate and junior in right of payment to all present and future Senior

<PAGE>   22

Indebtedness of the Guarantor to the extent and in the manner that the Notes are
subordinated to all present and future Senior Indebtedness pursuant to the
Indenture, it being understood that the terms of Article XII of the Indenture
shall apply to the obligations of the Guarantor under this Guarantee Agreement
as if (x) such Article XII were set forth herein in full and (y) such
obligations were substituted for the term "Securities" appearing in such Article
XII and pari passu with the Notes. The obligations of the Guarantor hereunder do
not constitute Senior Indebtedness (as defined in the Indenture) of the
Guarantor.

                  (b) The right of the Guarantor to participate in any
distribution of assets of any of its subsidiaries upon any such subsidiary's
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of that subsidiary, except to the extent the Guarantor may itself be
recognized as a creditor of that subsidiary. Accordingly, the Guarantor's
obligations under this Guarantee Agreement will be effectively subordinated to
all existing and future liabilities of the Guarantor's subsidiaries, and
claimants should look only to the assets of the Guarantor for payments
thereunder. This Guarantee Agreement does not limit the incurrence or issuance
of other secured or unsecured debt of the Guarantor, including Senior
Indebtedness of the Guarantor, under any indenture that the Guarantor may enter
into in the future or otherwise.

                  (c) If an Trust Enforcement Event has occurred and is
continuing under the Declaration, the rights of holders of the Common Securities
to receive Guarantee Payments will be subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments.

                                   ARTICLE VII
                                   TERMINATION

         SECTION 7.01 Termination.

                  This Guarantee Agreement shall terminate and be of no further
force and effect (i) upon full payment of the Redemption Price of all Preferred
Securities, (ii) upon the distribution of Notes to Holders and holders of Common
Securities in exchange for all of the Preferred Securities and Common Securities
or (iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Guarantee Agreement will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must restore payment of any sums paid
with respect to the Preferred Securities or under this Guarantee Agreement.

<PAGE>   23

                                  ARTICLE VIII
                    LIMITATION OF LIABILITY; INDEMNIFICATION

         SECTION 8.01 Exculpation.

                  (a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Holder for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Guarantee
Agreement and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee Agreement or by law, except that an Indemnified Person shall be liable
for any such loss, damage or claim incurred by reason of such Indemnified
Person's negligence or willful misconduct with respect to such acts or
omissions.

                  (b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.

         SECTION 8.02 Indemnification.

                  To the fullest extent permitted by applicable law, the
Guarantor shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage or claim incurred by such Indemnified Person by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Guarantee Agreement and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Guarantee Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of negligence or
willful misconduct with respect to such acts or omissions.

         SECTION 8.03 Survive Termination.

                  The provisions of Sections 8.01 and 8.02 shall survive the
termination of this Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.

<PAGE>   24

                                   ARTICLE IX
                                  MISCELLANEOUS

         SECTION 9.01 Successors and Assigns.

                  All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assignees, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Guarantee
Trustee and the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article IX of the Indenture, the Guarantor shall not assign its obligations
hereunder.

         SECTION 9.02 Amendments.

                  Except with respect to any changes which do not adversely
affect the rights of Holders in any material respect (in which case no consent
of Holders will be required), this Guarantee Agreement may only be amended with
the prior approval of the Guarantor, the Guarantee Trustee and the Holders of
not less than a Majority of Outstanding Preferred Securities. The provisions of
Section 11.2 of the Declaration concerning meetings of Holders shall apply to
the giving of such approval.

         SECTION 9.03 Notices.

                  Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, in English, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:

                  (a) if given to the Guarantor, to the address set forth below
         or such other address as the Guarantor may give notice of to the
         Holders:

                  CMS Energy Corporation
                  Fairlane Plaza South, Suite 1100
                  330 Town Center Drive
                  Dearborn, Michigan 48126
                  Attention: General Counsel
                  Telecopy: (313) 436-9258

                  (b) if given to the Guarantee Trustee, to the address set
         forth

<PAGE>   25

         below or such other address as the Guarantee Trustee may give notice
         of to the Holders:

                  The Bank of New York
                  101 Barclay Street
                  21 West
                  New York, New York 10286
                  Attention: Corporate Trust Trustee Administration
                  Facsimile:  (212) 815-5915

                  (c) if given to any Holder, at the address set forth on the
         books and records of the Issuer.

                  All notices hereunder shall be deemed to have been given when
(i) received in person, (ii) telecopied with receipt confirmed, or (iii) mailed
by first class mail, postage prepaid, when received, except that if a notice or
other document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.

         SECTION 9.04 Genders.

                  The masculine, feminine and neuter genders used herein shall
include the masculine, feminine and neuter genders.

         SECTION 9.05 Benefit.

                  This Guarantee Agreement is solely for the benefit of the
Guarantee Trustee and the Holders and, subject to Section 3.01(a), is not
separately transferable from the Preferred Securities.

         SECTION 9.06 Governing Law.

                  THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO PRINCI PLES OF CONFLICTS OF LAWS).

         SECTION 9.07 Counterparts.

                  This Guarantee Agreement may be executed in counterparts, each
of which shall be an original; but such counterparts shall together constitute
one and the same instrument.

<PAGE>   26

         SECTION 9.08 Exercise of Overallotment Option.

                  If and to the extent that Preferred Securities are issued by
the Issuer upon exercise of the overallotment option referred to in the first
WHEREAS clause, the Guarantor agrees to give prompt notice thereof to the
Guarantee Trustee but the failure to give such notice shall not relieve the
Guarantor of any of its obligations hereunder.

         SECTION 9.09 Limited Liability.

                  Neither the Guarantee Trustee nor the Holders, in their
capacities as such, shall be personally liable for any liabilities or
obligations of the Guarantor arising out of this Guarantee Agreement. The
parties further hereby agree that the Holders, in their capacities as such,
shall be entitled to the same limitation of personal liability extended to the
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.

         THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

<PAGE>   27

                                    CMS ENERGY CORPORATION

                                    By:
                                        -----------------------------------
                                       Name:
                                             ------------------------------
                                       Title:
                                             ------------------------------

                                    THE BANK OF NEW YORK
                                             as Guarantee Trustee

                                    By:
                                        -----------------------------------
                                       Name:
                                             ------------------------------
                                       Title:
                                             ------------------------------<PAGE>   1
                                                                 EXHIBIT 4(z)

                             CMS ENERGY CORPORATION

                                       and

                  THE CHASE MANHATTAN BANK, as Collateral Agent

                                       and

              THE CHASE MANHATTAN BANK, as Securities Intermediary

                                       and

              THE BANK OF NEW YORK, as Purchase Contract Agent and

                       as attorney in fact for the Holders

                                PLEDGE AGREEMENT

                           Dated as of August 22, 2000

<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                <C>
Section 1.  Definitions.............................................................................2

Section 2.  Pledge..................................................................................6
         Section 2.1       Pledge...................................................................6
         Section 2.2       Control; Financing Statement.............................................7
         Section 2.3       Termination..............................................................7

Section 3.  Distributions on Pledged Collateral.....................................................7
         Section 3.1       Income Distributions.....................................................7
         Section 3.2       Principal Payments Following Termination Event...........................8
         Section 3.3       Principal Payments Prior To or On Purchase Contract
                           Settlement Date..........................................................8
         Section 3.4       Payments to Purchase Contract Agent......................................9
         Section 3.5       Assets Not Properly Released.............................................9

Section 4.  Control................................................................................10
         Section 4.1       Establishment of Collateral Account.....................................10
         Section 4.2       Treatment as Financial Assets...........................................10
         Section 4.3       Sole Control by Collateral Agent........................................10
         Section 4.4       Securities Intermediary's Location......................................11
         Section 4.5       No Other Claims.........................................................11
         Section 4.6       Investment and Release..................................................11
         Section 4.7       Statements and Confirmations............................................11
         Section 4.8       Tax Allocations.........................................................12
         Section 4.9       No Other Agreements.....................................................12
         Section 4.10      Powers Coupled With An Interest.........................................12

Section 5.  Initial Deposit; Establishment of Treasury PEPS Units and
            Re-establishment of PEPS Units.........................................................12
         Section 5.1       Initial Deposit of Trust Preferred Securities...........................12
         Section 5.2       Establishment of Treasury PEPS Units....................................13
         Section 5.3       Re-establishment of PEPS Units..........................................15
         Section 5.4       Termination Event.......................................................17
         Section 5.5       Cash Settlement.........................................................18
         Section 5.6       Early Settlement........................................................21
         Section 5.7       Application of Proceeds in Settlement of Purchase
                           Contracts...............................................................21
         Section 5.8       Tax Event Redemption....................................................24

</TABLE>

<PAGE>   3

<TABLE>
<S>                                                                                                <C>
Section 6.  Voting Rights - Trust Preferred Securities and Pledged Subordinated
            Deferrable Notes.......................................................................24

Section 7.  Rights and Remedies....................................................................26
         Section 7.1       Rights and Remedies of the Collateral Agent.............................26
         Section 7.2       Substitution of Subordinated Deferrable Notes...........................27
         Section 7.3       Tax Event Redemption....................................................27
         Section 7.4       Substitutions...........................................................28

Section 8.  Representations and Warranties; Covenants..............................................28
         Section 8.1       Representations and Warranties..........................................28

Section 9.  The Collateral Agent and the Securities Intermediary...................................30
         Section 9.1       Appointment, Powers and Immunities......................................30
         Section 9.2       Instructions of the Company.............................................31
         Section 9.3       Reliance by Collateral Agent and Securities
                           Intermediary............................................................31
         Section 9.4       Rights in Other Capacities..............................................32
         Section 9.5       Non-Reliance on Collateral Agent and Securities
                           Intermediary............................................................32
         Section 9.6       Compensation and Indemnity..............................................33
         Section 9.7       Failure to Act..........................................................33
         Section 9.8       Resignation of Collateral Agent and Securities
                           Intermediary............................................................34
         Section 9.9       Right to Appoint Agent or Advisor.......................................36
         Section 9.10      Survival................................................................36
         Section 9.11      Exculpation.............................................................37

Section 10.  Amendment.............................................................................37
         Section 10.1      Amendment Without Consent of Holders....................................37
         Section 10.2      Amendment With Consent of Holders.......................................38
         Section 10.3      Execution of Amendments.................................................39
         Section 10.4      Effect of Amendments....................................................39
         Section 10.5      Reference to Amendments.................................................39

Section 11.  Miscellaneous.........................................................................40
         Section 11.1      No Waiver...............................................................40
         Section 11.2      Governing Law...........................................................40
         Section 11.3      Notices.................................................................40
         Section 11.4      Successors and Assigns..................................................41
         Section 11.5      Counterparts............................................................41
         Section 11.6      Severability............................................................41
         Section 11.7      Expenses, etc...........................................................41
</TABLE>
<PAGE>   4
<TABLE>
<S>                                                                                               <C>
         Section 11.8      Security Interest Absolute..............................................42
         Section 11.9      Notice of Tax Event, Tax Event Redemption and
                           Termination Event.......................................................43

EXHIBIT A         INSTRUCTION FROM PURCHASE CONTRACT]
                  AGENT TO COLLATERAL AGENT (Establishment
                  of Treasury PEPS Units) ........................................................A-1

EXHIBIT B         INSTRUCTION FROM COLLATERAL AGENT TO
                  SECURITIES INTERMEDIARY (Establishment of
                  Treasury PEPS Units)............................................................B-1

EXHIBIT C         INSTRUCTION FROM PURCHASE CONTRACT
                  AGENT TO COLLATERAL AGENT (Reestablishment
                  of PEPS Units ) ................................................................C-1

EXHIBIT D         INSTRUCTION FROM COLLATERAL AGENT TO
                  SECURITIES INTERMEDIARY (Reestablishment of
                  PEPS Units).....................................................................D-1

EXHIBIT E         NOTICE OF CASH SETTLEMENT FROM SECURITIES
                  INTERMEDIARY TO PURCHASE CONTRACT AGENT
                  (Cash Settlement Amounts) ......................................................E-1
</TABLE>

<PAGE>   5

                                PLEDGE AGREEMENT

         PLEDGE AGREEMENT, dated as of August 22, 2000, among CMS Energy
Corporation, a Michigan corporation (the "COMPANY"), The Chase Manhattan Bank, a
New York banking corporation, as collateral agent (in such capacity, together
with its successors in such capacity, the "COLLATERAL AGENT") and as securities
intermediary with respect to the Collateral Account (in such capacity, together
with its successors in such capacity, the "SECURITIES INTERMEDIARY"), and The
Bank of New York, a New York banking corporation, as purchase contract agent and
as attorney-in-fact of the Holders from time to time of the Securities under the
Purchase Contract Agreement (in such capacity, together with its successors in
such capacity, the "PURCHASE CONTRACT AGENT").

                                    RECITALS

         The Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement dated as of the date hereof (as modified and supplemented and
in effect from time to time, the "PURCHASE CONTRACT AGREEMENT"), pursuant to
which there may be issued up to 10,000,000 Premium Equity Participating Security
Units--PEPS(SM) Units (the "SECURITIES") (including 1,200,000 Securities
relating to the over-allotment option granted to the underwriters pursuant to
the Underwriting Agreement).

         Each PEPS Unit, at issuance, consists of a unit comprised of (a) a
stock purchase contract (the "PURCHASE CONTRACT") under which the Holder will
purchase from the Company on the Purchase Contract Settlement Date, for an
amount equal to $25 (the "STATED AMOUNT"), a number of shares of CMS Energy
Corporation common stock, par value $0.01 ("COMMON STOCK"), equal to the
Settlement Rate, and (b) beneficial ownership of a Trust Preferred Security (a
"PREFERRED SECURITY") issued by CMS Energy Trust III (the "TRUST"), having a
liquidation amount equal to the Stated Amount and maturing on August 18, 2004.

         Pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders of the Securities have irrevocably authorized
the Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral Account to secure the
Obligations.

         Accordingly, the Company, the Collateral Agent, the Securities
Intermediary and the Purchase Contract Agent, on its own behalf and as
attorney-in-fact of the Holders from time to time of the Securities, agree as
follows:

<PAGE>   6

SECTION 1.        DEFINITIONS.

         For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:

         (a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

         (b) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Exhibit or other subdivision;

         (c) the following terms which are defined in the UCC shall have the
meanings set forth therein: "CERTIFICATED SECURITY," "CONTROL," "FINANCIAL
ASSET," "ENTITLEMENT ORDER," "SECURITIES ACCOUNT" and "SECURITY ENTITLEMENT;"

         (d) the following terms have the meanings assigned to them in the
Purchase Contract Agreement: "ACT," "BANKRUPTCY CODE," "BOARD RESOLUTION,"
"BUSINESS DAY," "CASH MERGER EARLY SETTLEMENT," "CASH MERGER EARLY SETTLEMENT
DATE," "CASH MERGER EVENT," "CASH SETTLEMENT," "CERTIFICATE," "EARLY
SETTLEMENT," "EARLY SETTLEMENT AMOUNT," "EARLY SETTLEMENT DATE," "HOLDER,"
"OFFICERS' CERTIFICATE," "OPINION OF COUNSEL," "OUTSTANDING SECURITIES," "PEPS
UNIT," "PURCHASE CONTRACT," "PURCHASE CONTRACT SETTLEMENT DATE," "PURCHASE
PRICE," "REMARKETING AGENT," "REMARKETING AGREEMENT," "SUBORDINATED DEFERRABLE
NOTES," "SETTLEMENT RATE," "TERMINATION EVENT," "TREASURY PEPS UNIT," and
"UNDERWRITING AGREEMENT;"

         (e) the following terms have the meanings assigned to them in the
Amended and Restated Declaration of Trust of CMS Energy Trust III, of even date
herewith (the "DECLARATION"): "APPLICABLE OWNERSHIP INTEREST," "APPLICABLE
PRINCIPAL AMOUNT," "CASH MERGER EARLY REDEMPTION," "CASH MERGER EARLY REDEMPTION
DATE," "FAILED REMARKETING," "INDENTURE," "INDENTURE TRUSTEE," "PRIMARY TREASURY
DEALER," "PROPERTY TRUSTEE," "QUOTATION AGENT," "REDEMPTION AMOUNT," "REDEMPTION
PRICE," "TAX EVENT," "TAX EVENT REDEMPTION," "TAX EVENT REDEMPTION DATE," and
"TREASURY PORTFOLIO;" and

         (f) the following terms have the meanings given to them in this Section
1(f):

                  "AGREEMENT" means this Pledge Agreement, as the same may be

<PAGE>   7

         amended, modified or supplemented from time to time.

                  "CASH" means any coin or currency of the United States as at
         the time shall be legal tender for payment of public and private debts.

                  "COLLATERAL ACCOUNT" means the collective reference to:

                  (1) the securities account of The Chase Manhattan Bank, as
         Collateral Agent, maintained by the Securities Intermediary and
         designated "The Chase Manhattan Bank, as Collateral Agent of CMS Energy
         Corporation, as pledgee of The Bank of New York, as the Purchase
         Contract Agent on behalf of and as attorney-in-fact for the Holders";

                  (2) all investment property and other financial assets from
         time to time credited to the Collateral Account, including, without
         limitation, (A) the Preferred Securities and security entitlements
         relating thereto which are a component of the PEPS Units from time to
         time, (B) the Applicable Ownership Interests (as specified in Clause
         (A) of the definition of such term) of the Holders with respect to the
         Treasury Portfolio which are a component of the PEPS Units from time to
         time; (C) the Subordinated Deferrable Notes and security entitlements
         relating thereto which are a component of the PEPS Units from time to
         time, (D) any Treasury Securities and security entitlements relating
         thereto delivered from time to time upon establishment of Treasury PEPS
         Units in accordance with Section 5.2 hereof and (E) payments made by
         Holders pursuant to Section 5.5 hereof;

                  (3) all Proceeds of any of the foregoing (whether such
         Proceeds arise before or after the commencement of any proceeding under
         any applicable bankruptcy, insolvency or other similar law, by or
         against the pledgor or with respect to the pledgor); and

                  (4) all powers and rights now owned or hereafter acquired
         under or with respect to the Collateral Account

         [((2), (3) and (4), being collectively referred to as the
"COLLATERAL")].

         "COMPANY" means the Person named as the "COMPANY" in the first
paragraph of this instrument until a successor shall have become such, and
thereafter "COMPANY" shall mean such successor.

         "OBLIGATIONS" means, with respect to each Holder, the collective
reference to all obligations and liabilities of such Holder under such Holder's
Purchase Contract,

<PAGE>   8

the Purchase Contract Agreement, and this Agreement or any other document made,
delivered or given in connection herewith or therewith, in each case whether on
account of principal, interest (including, without limitation, interest accruing
before and after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding, relating to such Holder,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the Company or the
Collateral Agent or the Securities Intermediary that are required to be paid by
the Holder pursuant to the terms of any of the foregoing agreements).

         "PERMITTED INVESTMENTS" means any one of the following which shall
mature not later than the next succeeding Business Day:

(1) any evidence of indebtedness with an original maturity of 365 days or less
issued, or directly and fully guaranteed or insured, by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support of the timely
payment thereof or such indebtedness constitutes a general obligation of it);
(2) deposits, certificates of deposit or acceptances with an original maturity
of 365 days or less of any institution which is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $200.0 million at the time of deposit (and which may include the Collateral
Agent); (3) investments with an original maturity of 365 days or less of any
Person that is fully and unconditionally guaranteed by a bank referred to in
clause (2); (4) repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued or unconditionally guaranteed by the
United States Government or issued by any agency thereof and backed as to timely
payment by the full faith and credit of the United States Government; (5)
investments in commercial paper, other than commercial paper issued by the
Company or its affiliates, of any corporation incorporated under the laws of the
United States or any State thereof, which commercial paper has a rating at the
time of purchase at least equal to "A-1" by Standard & Poor's Ratings Services
("S&P") or at least equal to "P-1" by Moody's Investors Service, Inc.
("MOODY'S"); and (6) investments in money market funds (including, but not
limited to, money market funds managed by the Collateral Agent or an affiliate
of the Collateral Agent) registered under the Investment Company Act of 1940, as
amended, rated in the highest applicable rating category by S&P or Moody's.

         "PERSON" means any legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, limited
liability company, trust, unincorporated organization or government or any
agency or political

<PAGE>   9

subdivision thereof.

         "PLEDGE" means the lien and security interest created by this
Agreement.

         "PLEDGED PREFERRED SECURITIES" means the Preferred Securities and
security entitlements with respect thereto from time to time credited to the
Collateral Account and not then released from the Pledge.

         "PLEDGED SUBORDINATED DEFERRABLE NOTES" means Subordinated Deferrable
Notes and security entitlements with respect thereto from time to time credited
to the Collateral Account and not then released from the Pledge.

         "PLEDGED TREASURY SECURITIES" means Treasury Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

         "PROCEEDS" has the meaning ascribed thereto in the UCC and includes,
without limitation, all interest, dividends, cash, instruments, securities,
financial assets (as defined in ss. 8-102(a)(9) of the UCC) and other property
received, receivable or otherwise distributed upon the sale, exchange,
collection or disposition of any financial assets from time to time held in the
Collateral Account.

         "PURCHASE CONTRACT AGENT" has the meaning specified in the paragraph
preceding the recitals of this Agreement.

         "TRADES" means the Treasury/Reserve Automated Debt Entry System
maintained by the Federal Reserve Bank of New York pursuant to the TRADES
Regulations.

         "TRADES REGULATIONS" means the regulations of the United States
Department of the Treasury, published at 31 C.F.R. Part 357, an amended from
time to time. Unless otherwise defined herein, all terms defined in the TRADES
Regulations are used herein as therein defined.

         "TRANSFER" means in the case of certificated securities in registered
form, delivery as provided in ss. 8-301(a) of the UCC, indorsed to the
transferee or in blank by an effective endorsement; in the case of Treasury
Securities, registration of the transferee as the owner of such Treasury
Securities on TRADES; and in the case of security entitlements, including,
without limitation, security entitlements with respect to Treasury Securities, a
securities intermediary indicating by book entry that such security entitlement
has been credited to the transferee's securities account.

<PAGE>   10

         "TREASURY SECURITIES" means zero-coupon U.S. treasury securities (Cusip
No. 912820BG1) which mature on August 15, 2003.

         "UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.

         "VALUE" means, with respect to any item of Collateral on any date, as
to (1) Cash, the face amount thereof and (2) Treasury Securities, the aggregate
principal amount thereof at maturity and (3) the Preferred Securities, the
liquidation amount thereof.

SECTION 2.        PLEDGE.

         SECTION 2.1       PLEDGE.

         Each Holder, acting through the Purchase Contract Agent as such
Holder's attorney-in-fact, and the Purchase Contract Agent each hereby pledges
and grants to the Collateral Agent, as agent of and for the benefit of the
Company to secure the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations, a
continuing first priority security interest in and to, and a lien upon and right
of set-off against, all right, title and interest of such Holders and the
Purchase Contract Agent in and to (a) in the Preferred Securities constituting a
part of the Securities and any Treasury Securities delivered in exchange for any
Preference Shares and any Preference Shares delivered in exchange for any
Treasury Securities, in accordance with Section 5.3 hereof, in each case that
have been Transferred to or received by the Collateral Agent and not released by
the Collateral Agent to such Holders under the provisions of this Agreement; (b)
in payments made by Holders pursuant to Section 5.5; (c) in the Collateral
Account and all securities, financial assets, Cash and other property credited
thereto and all security entitlements related thereto; and (d) all Proceeds of
the foregoing [(all of the foregoing, collectively, the "COLLATERAL")]. The
Collateral Agent shall have all of the rights, remedies and recourses with
respect to the Collateral afforded a secured party by the UCC, in addition to,
and not in limitation of, the other rights, remedies and recourses afforded to
the Collateral Agent by this Agreement.

         SECTION 2.2       CONTROL; FINANCING STATEMENT.

         (a) The Collateral Agent shall have control of the Collateral Account
pursuant to the provisions of Section 4 of this Agreement. The Holders from time
to

<PAGE>   11

time acting through the Purchase Contract Agent as their attorney in fact and
the Purchase Contract Agent each hereby authorize and direct the Securities
Intermediary (without any further consent of the Purchase Contract Agent or any
Holder) to comply with instructions and entitlement orders relating to the
Collateral Account and any securities entitlements with respect thereto issued
by the Collateral Agent as provided in Section 4 hereof.

         (b) Subsequent to the date of initial issuance of the Securities, the
Purchase Contract Agent shall deliver to the Collateral Agent a financing
statement prepared by the Company for filing in the Office of the Secretary of
State of Michigan and any other jurisdictions which the Company deems necessary,
signed by the Purchase Contract Agent, as attorney-in-fact for the Holders, as
Debtors, and describing the Collateral.

         SECTION 2.3       TERMINATION.

         As to each Holder, this Agreement and the Pledge created hereby shall
terminate upon the satisfaction of such Holder's Obligations. Upon such
termination, the Securities Intermediary shall Transfer such Holder's portion of
the Collateral to the Purchase Contract Agent for distribution to such Holder in
accordance with his interest, free and clear of any lien, pledge or security
interest created hereby.

SECTION 3.        DISTRIBUTIONS ON PLEDGED COLLATERAL.

         SECTION 3.1       INCOME DISTRIBUTIONS.

         All income distributions received by the Securities Intermediary on
account of the Preferred Securities, the Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, the Subordinated Deferrable Notes or Permitted Investments from time
to time held in the Collateral Account shall be distributed to the Purchase
Contract Agent (ABA No. 021000018, GLA No. 111-565, A/C No. o, Re: CMS Energy
Corp.) for the benefit of the applicable Holders as provided in the Purchase
Contracts or Purchase Contract Agreement.

         SECTION 3.2       PRINCIPAL PAYMENTS FOLLOWING TERMINATION EVENT.

         All payments received by the Securities Intermediary following a
Termination Event of the liquidation or redemption amount of Pledged Preferred
Securities or securities entitlements thereto, or (2) the Applicable Ownership
Interests (as specified in Clause (A) of the definition thereof) of the Treasury
Portfolio, (3) the aggregate principal amount or redemption amount of the
Pledged Subordinated Deferrable

<PAGE>   12

Notes or securities entitlements thereto, or (4) the principal amount of the
Pledged Treasury Securities, shall be distributed to the Purchase Contract Agent
for the benefit of the applicable Holders for distribution to such Holders in
accordance with their respective interests.

         SECTION 3.3       PRINCIPAL PAYMENTS PRIOR TO OR ON PURCHASE CONTRACT
                           SETTLEMENT DATE.

         (a) Subject to the provisions of Section 7.2, and except as provided in
clause 3.3(b) below, if no Termination Event shall have occurred, all payments
received by the Securities Intermediary of (1) the liquidation or redemption
amount with respect to the Pledged Preferred Securities or security entitlements
with respect thereto, (2) Applicable Ownership Interests (as specified in Clause
(A) of the definition thereof) of the Treasury Portfolio, (3) the aggregate
principal amount or redemption amount with respect to the Pledged Subordinated
Deferrable Notes or security entitlements with respect thereto or (4) the
principal amount of Pledged Treasury Securities, shall be held and invested in
Permitted Investments until the Purchase Contract Settlement Date and on the
Purchase Contract Settlement Date distributed to the Company as provided in
Section 5.7 hereof. Any balance remaining in the Collateral Account shall be
distributed to the Purchase Contract Agent for the benefit of the applicable
Holders for distribution to such Holders in accordance with their respective
interests. Upon the request of the Securities Intermediary, the Company shall
instruct the Securities Intermediary as to the type of Permitted Investments in
which any payments made under this Section shall be invested, provided, however,
that if the Company fails to deliver such instructions by 10:30 a.m. (New York
City time), the Securities Intermediary shall invest such payments in the
Permitted Investments described in clause 6 of the definition of Permitted
Investments.

         (b) All payments received by the Securities Intermediary of (1) the
liquidation or redemption amount of Preferred Securities or security
entitlements with respect thereto, (2) Applicable Ownership interests (as
specified in Clause (A) of the definition thereof) of the Treasury Portfolio,
(3) the aggregate principal amount or redemption amount with respect to the
Subordinated Deferrable Notes or security entitlements with respect thereto or
(4) the principal amount of Treasury Securities or security entitlements with
respect thereto, that, in each case, have been released from the Pledge shall be
distributed to the Purchase Contract Agent for the benefit of the applicable
Holders for distribution to such Holders in accordance with their respective
interests.

<PAGE>   13

         SECTION 3.4       PAYMENTS TO PURCHASE CONTRACT AGENT.

         The Securities Intermediary shall use all commercially reasonable
efforts to deliver payments to the Purchase Contract Agent hereunder to the
account designated by the Purchase Contract Agent for such purpose not later
than 12:00 p.m. (New York City time) on the Business Day such payment is
received by the Securities Intermediary; provided, however, that if such payment
is received on a day that is not a Business Day or after 11:00 A.M. (New York
City time) on a Business Day, then the Securities Intermediary shall use all
commercially reasonable efforts to deliver such payment no later than 10:30 a.m.
(New York City time) on the next succeeding Business Day.

         SECTION 3.5       ASSETS NOT PROPERLY RELEASED.

         If the Purchase Contract Agent or any Holder shall receive any
principal payments on account of financial assets credited to the Collateral
Account and not released therefrom in accordance with this Agreement, the
Purchase Contract Agent or such Holder shall hold the same as trustee of an
express trust for the benefit of the Company and, upon receipt of an Officers'
Certificate of the Company so directing, promptly deliver the same to the
Securities Intermediary for credit to the Collateral Account or to the Company
for application to the Obligations of the Holders, and the Purchase Contract
Agent and Holders shall acquire no right, title or interest in any such payments
of principal amounts so received.

SECTION 4.        CONTROL

         SECTION 4.1       ESTABLISHMENT OF COLLATERAL ACCOUNT.

         The Securities Intermediary hereby confirms that:

                  (1) the Securities Intermediary has established the Collateral
         Account;

                  (2) the Collateral Account is a securities account;

                  (3) subject to the terms of this Agreement, the Securities
         Intermediary shall treat the Purchase Contract Agent as entitled to
         exercise the rights that comprise any financial asset credited to the
         Collateral Account;

                  (4) all property delivered to the Securities Intermediary
         pursuant to this Agreement or the Purchase Contract Agreement will be
         credited promptly to the Collateral Account;

<PAGE>   14

                  (5) all securities or other property underlying any financial
         assets credited to the Collateral Account shall be registered in the
         name of the Securities Intermediary, indorsed to the Securities
         Intermediary or in blank, or credited to another securities account
         maintained in the name of the Securities Intermediary, and in no case
         will any financial asset credited to the Collateral Account be
         registered in the name of the Purchase Contract Agent or any Holder,
         payable to the order of the Purchase Contract Agent or any Holder or
         specially indorsed to the Purchase Contract Agent or any Holder.

         SECTION 4.2       TREATMENT AS FINANCIAL ASSETS.

         Each item of property (whether investment property, financial asset,
security, instrument or cash) credited to the Collateral Account shall be
treated as a financial asset.

         SECTION 4.3       SOLE CONTROL BY COLLATERAL AGENT.

         Except as provided in Section 6, at all times prior to the termination
of the Pledge, the Collateral Agent shall have sole control of the Collateral
Account, and the Securities Intermediary shall take instructions and directions
with respect to the Collateral Account solely from the Collateral Agent. If at
any time the Securities Intermediary shall receive an entitlement order issued
by the Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Purchase Contract Agent or any Holder or any other Person. Until termination
of the Pledge, the Securities Intermediary will not comply with any entitlement
orders issued by the Purchase Contract Agent or any Holder.

         SECTION 4.4       SECURITIES INTERMEDIARY'S LOCATION.

         The Collateral Account, and the rights and obligations of the
Securities Intermediary, the Collateral Agent, the Purchase Contract Agent and
the Holders with respect thereto, shall be governed by the laws of the State of
New York. Regardless of any provision in any other agreement, for purposes of
the UCC, New York shall be deemed to be the Securities Intermediary's location.

         SECTION 4.5       NO OTHER CLAIMS.

         Except for the claims and interest of the Collateral Agent and of the
Purchase Contract Agent and the Holders in the Collateral Account, the
Securities Intermediary

<PAGE>   15

(without making any investigation) does not know of any claim to, or interest
in, the Collateral Account or in any financial asset credited thereto. If any
person asserts any lien, encumbrance or adverse claim (including any writ,
garnishment, judgment, warrant of attachment, execution or similar process)
against the Collateral Account or in any financial asset carried therein, the
Securities Intermediary will promptly notify the Collateral Agent and the
Purchase Contract Agent.

         SECTION 4.6       INVESTMENT AND RELEASE.

         All proceeds of financial assets from time to time deposited in the
Collateral Account shall be invested and reinvested as provided in this
Agreement. At all times prior to termination of the Pledge, no property shall be
released from the Collateral Account except in accordance with this Agreement or
upon written instructions of the Collateral Agent.

         SECTION 4.7       STATEMENTS AND CONFIRMATIONS.

         The Securities Intermediary will promptly send copies of all
statements, confirmations and other correspondence concerning the Collateral
Account and any financial assets credited thereto simultaneously to each of the
Purchase Contract Agent and the Collateral Agent at their addresses for notices
under this Agreement.

         SECTION 4.8       TAX ALLOCATIONS.

         The Purchase Contract Agent shall report all items of income, gain,
expense and loss recognized in the Collateral Account, to the extent such
reporting is required by law, to the Internal Revenue Service and all state and
local taxing authorities under the names and taxpayer identification numbers of
the Holders which are the beneficial owners thereof. Neither the Securities
Intermediary nor the Collateral Agent shall have any tax reporting duties
hereunder.

         SECTION 4.9       NO OTHER AGREEMENTS.

         The Securities Intermediary has not entered into, and prior to the
termination of the Pledge will not enter into, any agreement with any other
Person relating to the Collateral Account or any financial assets credited
thereto, including, without limitation, any agreement to comply with entitlement
orders of any Person other than the Collateral Agent.

<PAGE>   16

         SECTION 4.10      POWERS COUPLED WITH AN INTEREST.

         The rights and powers granted in this Section 4 to the Collateral Agent
have been granted in order to perfect its security interests in the Collateral
Account, are powers coupled with an interest and will be affected neither by the
bankruptcy of the Purchase Contract Agent or any Holder nor by the lapse of
time. The obligations of the Securities Intermediary under this Section 4 shall
continue in effect until the termination of the Pledge.

SECTION 5.        INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY PEPS UNITS AND RE-
                  ESTABLISHMENT OF PEPS UNITS

         SECTION 5.1       INITIAL DEPOSIT OF TRUST PREFERRED SECURITIES.

         Prior to or concurrently with the execution and delivery of this
Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the
PEPS Units, shall Transfer to the Securities Intermediary, for credit to the
Collateral Account, the Preferred Securities or security entitlements relating
thereto, and the Securities Intermediary shall indicate by book-entry that a
securities entitlement to such Preferred Securities has been credited to the
Collateral Account.

         SECTION 5.2       ESTABLISHMENT OF TREASURY PEPS UNITS.

         (a) So long as no Tax Event Redemption shall have occurred and the
Trust shall not have been dissolved and liquidated, at any time prior to or on
the seventh Business Day immediately preceding August 18, 2003, a Holder of PEPS
Units shall have the right to establish or reestablish Treasury PEPS Units by
substitution of Treasury Securities or security entitlements with respect
thereto for the Pledged Preferred Securities comprising a part of such Holder's
PEPS Units in integral multiples of 40 PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Treasury Securities or security entitlements
         with respect thereto having a Value equal to the aggregate liquidation
         amount of the Pledged Preferred Securities to be released, accompanied
         by a notice, substantially in the form of Exhibit C to the Purchase
         Contract Agreement, whereupon the Purchase Contract Agent shall deliver
         to the Collateral Agent a notice, substantially in the form of Exhibit
         A hereto, (A) stating that such Holder has Transferred Treasury
         Securities or security entitlements with respect thereto to the
         Securities Intermediary for credit to the Collateral Account, (B)
         stating the Value of the Treasury Securities or security entitlements
         with respect thereto Transferred by such Holder and (C) requesting that
         the Collateral Agent release from the Pledge the Pledged

<PAGE>   17

         Preferred Securities that are a component of such PEPS Units; and

                  (2) delivering the related PEPS Units to the Purchase Contract
         Agent.

         Upon receipt of such notice and confirmation that Treasury Securities
or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Preferred Securities from the Pledge
by Transfer to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created hereby.

         (b) If a Tax Event Redemption has occurred and the Treasury Portfolio
has become a component of the PEPS Units, a Holder of PEPS Units shall not have
the right to establish or reestablish Treasury PEPS Units.

         (c) If no Tax Event Redemption shall have occurred, but the Trust shall
have been dissolved and liquidated, and the Subordinated Deferrable Notes have
become a component of the PEPS Units, at any time on or prior to the seventh
Business Day immediately preceding August 18, 2003, a Holder of PEPS Units shall
have the right to substitute Treasury Securities or security entitlements with
respect thereto for the Pledged Subordinated Deferrable Notes comprising a part
of such Holder's PEPS Units in integral multiples of 40 PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Treasury Securities or security entitlements
         with respect thereto having a Value equal to the aggregate principal
         amount at maturity of Pledged Subordinated Deferrable Notes to be
         released, accompanied by a notice, substantially in the form of Exhibit
         C to the Purchase Contract Agreement, whereupon the Purchase Contract
         Agent shall deliver to the Collateral Agent a notice, substantially in
         the form of Exhibit A hereto, (A) stating that such Holder has
         Transferred Treasury Securities or security entitlements with respect
         thereto to the Securities Intermediary for credit to the Collateral
         Account, (B) stating the Value of the Treasury Securities or securities
         entitlements with respect thereto Transferred by such Holder and (C)
         requesting that the Collateral Agent release from the Pledge the
         Pledged Subordinated Deferrable Notes that are a component of such PEPS
         Units; and

                  (2) delivering the related PEPS Units to the Purchase Contract
         Agent.

<PAGE>   18

         Upon receipt of such notice and confirmation that Treasury Securities
or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Subordinated Deferrable Notes from the
Pledge by Transfer to the Purchase Contract Agent for distribution to such
Holder free and clear of any lien, pledge or security interest created hereby.

         (d) Upon credit to the Collateral Account of Treasury Securities or
security entitlements with respect thereto delivered by a Holder of PEPS Units
and receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release the Pledged Preferred Securities or the Pledged
Subordinated Deferrable Notes, as the case may be, and shall promptly transfer
the same to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created hereby.

         SECTION 5.3       RE-ESTABLISHMENT OF PEPS UNITS.

         (a) So long as no Tax Event Redemption shall have occurred and the
Trust shall not have been dissolved and liquidated, at any time on or prior to
the seventh Business Day immediately preceding August 18, 2003, a Holder of
Treasury PEPS Units shall have the right to reestablish PEPS Units by
substitution of Preferred Securities or security entitlements with respect
thereto for Pledged Treasury Securities in integral multiples of 40 Treasury
PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Preferred Securities or security entitlements
         with respect thereto having a liquidation amount equal to the Value of
         the Pledged Treasury Securities to be released, accompanied by a
         notice, substantially in the form of Exhibit C to the Purchase Contract
         Agreement, whereupon the Purchase Contract Agent shall deliver to the
         Collateral Agent a notice, substantially in the form of Exhibit C
         hereto, stating that such Holder has Transferred Trust Preferred
         Securities or security entitlements with respect thereto to the
         Securities Intermediary for credit to the Collateral Account and
         requesting that the Collateral Agent release from the Pledge the
         Pledged Treasury Securities related to such Treasury PEPS Units; and

                  (2) Delivering the related Treasury PEPS Units to the Purchase
         Contract Agent.

<PAGE>   19

         Upon receipt of such notice and confirmation that Preferred Securities
or security entitlements thereto have been credited to the Collateral Account as
described in such notice, the Collateral Agent shall instruct the Securities
Intermediary by a notice in the form provided in Exhibit D to release such
Pledged Treasury Securities from the Pledge by Transfer to the Purchase Contract
Agent for distribution to such Holder, free and clear of any lien, pledge or
security interest created hereby.

         (b) If a Tax Event Redemption has occurred and the Treasury Portfolio
has become a component of the PEPS Units, a holder of a Treasury PEPS Unit shall
not have the right to reestablish a PEPS Unit.

         (c) If no Tax Event Redemption shall have occurred, but the Trust shall
have been dissolved and liquidated, and the Subordinated Deferrable Notes have
become a component of the PEPS Units, at any time on or prior to the seventh
Business Day immediately preceding August 18, 2003, a Holder of Treasury PEPS
Units shall have the right to reestablish PEPS Units by substitution of
Subordinated Deferrable Notes or security entitlements with respect thereto for
Pledged Treasury Securities in integral multiples of 40 Treasury PEPS Units by:

                  (1) Transferring to the Securities Intermediary for credit to
         the Collateral Account Subordinated Deferrable Notes or security
         entitlements with respect thereto having a principal amount equal to
         the Value of the Pledged Treasury Securities to be released,
         accompanied by a notice, substantially in the form of Exhibit C to the
         Purchase Contract Agreement, whereupon the Purchase Contract Agent
         shall deliver to the Collateral Agent a notice, substantially in the
         form of Exhibit C hereto, stating that such Holder has Transferred the
         Subordinated Deferrable Notes or security entitlements with respect
         thereto to the Securities Intermediary for credit to the Collateral
         Account and requesting that the Collateral Agent release from the
         Pledge the Pledged Treasury Securities related to such Treasury PEPS
         Units; and

                  (2) delivering the related Treasury PEPS Units to the Purchase
         Contract Agent.

         Upon receipt of such notice and confirmation that Subordinated
Deferrable Notes or security entitlements with respect thereto have been
credited to the Collateral Account as described in such notice, the Collateral
Agent shall instruct the Securities Intermediary by a notice in the form
provided in Exhibit D to release such Pledged Treasury Securities from Pledge by
Transfer to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest

<PAGE>   20

created hereby.

         (d) Upon credit to the Collateral Account of Preferred Securities or
security entitlements with respect thereto or Subordinated Deferrable Notes or
security entitlements with respect thereto, as the case may be, delivered by a
Holder of Treasury PEPS Units and receipt of the related instruction from the
Collateral Agent, the Securities Intermediary shall release the Pledged Treasury
Securities and shall promptly transfer the same to the Purchase Contract Agent
for distribution to such Holder, free and clear of any lien, pledge or security
interest created hereby.

         SECTION 5.4       TERMINATION EVENT.

         (a) Upon receipt by the Collateral Agent of written notice from the
Company or the Purchase Contract Agent that a Termination Event has occurred,
the Collateral Agent shall release all Collateral from the Pledge and shall
promptly Transfer:

                  (1) any Pledged Preferred Securities or security entitlements
         with respect thereto or the Applicable Ownership Interest (as specified
         in clause (A) of the definition of such term) of the Treasury Portfolio
         (if a Tax Event Redemption has occurred and the Treasury Portfolio has
         become a component of the PEPS Units) or the Pledged Subordinated
         Deferrable Notes (if the Trust has been dissolved and liquidated, and
         the Subordinated Deferrable Notes or security entitlements with respect
         thereto have become a component of the PEPS Units);

                  (2) any Pledged Treasury Securities, and

                  (3) payments by Holders (or the Permitted Investments of such
         payments) pursuant to Section 5.5 hereof,

to the Purchase Contract Agent for the benefit of the Holders for distribution
to such Holders in accordance with their respective interests, free and clear of
any lien, pledge or security interest or other interest created hereby;
provided, however, if any Holder shall be entitled to receive less than $1,000
with respect to his interest in the Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio, the
Purchase Contract Agent shall have the right to dispose of such interest for
cash and deliver to such Holder cash in lieu of delivering the Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio.

<PAGE>   21

         (b) If such Termination Event shall result from the Company's becoming
a debtor under the Bankruptcy Code, and if the Collateral Agent shall for any
reason fail promptly to effectuate the release and Transfer of all Pledged
Preferred Securities, the Applicable Ownership Interest (as specified in clause
(A) of the definition of such term) of the Treasury Portfolio, the Pledged
Subordinated Deferrable Notes, the Pledged Treasury Securities or payments by
Holders (or the Permitted Investments of such payments) pursuant to Section 5.5
hereof, as the case may be, as provided by this Section 5.4, the Purchase
Contract Agent shall:

                  (1) use its best efforts to obtain an opinion of a nationally
         recognized law firm reasonably acceptable to the Collateral Agent to
         the effect that, as a result of the Company's being the debtor in such
         a bankruptcy case, the Collateral Agent will not be prohibited from
         releasing or Transferring the Collateral as provided in this Section
         5.4, and shall deliver such opinion to the Collateral Agent within ten
         days after the occurrence of such Termination Event, and if (A) the
         Purchase Contract Agent shall be unable to obtain such opinion within
         ten days after the occurrence of such Termination Event or (B) the
         Collateral Agent shall continue, after delivery of such opinion, to
         refuse to effectuate the release and Transfer of all Preferred
         Securities, Applicable Ownership Interest (as specified in clause (A)
         of the definition of such term) of the Treasury Portfolio, all the
         Pledged Subordinated Deferrable Notes, the Pledged Treasury Securities,
         the payments by Holders or the Permitted Investments of such payments
         pursuant to Section 5.5 hereof or the Proceeds of any of the foregoing,
         as the case may be, as provided in this Section 5.4, then the Purchase
         Contract Agent shall within fifteen days after the occurrence of such
         Termination Event commence an action or proceeding in the court having
         jurisdiction of the Company's case under the Bankruptcy Code seeking an
         order requiring the Collateral Agent to effectuate the release and
         transfer of all Pledged Preferred Securities, Applicable Ownership
         Interest (as specified in clause (A) of the definition of such term) of
         the Treasury Portfolio, all the Pledged Subordinated Deferrable Notes,
         the Pledged Treasury Securities, or the payments by Holders or the
         Permitted Investments of such payments pursuant to Section 5.5 hereof,
         or as the case may be, as provided by this Section 5.4; or

                  (2) commence an action or proceeding like that described in
         clause 5.4(b)(1) hereof within ten days after the occurrence of such
         Termination Event.

<PAGE>   22

         SECTION 5.5       CASH SETTLEMENT.

         (a) Upon receipt by the Collateral Agent of (1) a notice from the
Purchase Contract Agent promptly after the receipt by the Purchase Contract
Agent of a notice from a Holder of PEPS Units that such Holder has elected, in
accordance with the procedures specified in Section 5.02(a)(i) or (d)(i) of the
Purchase Contract Agreement, respectively, to effect a Cash Settlement and (2)
payment by such Holder by deposit in the Collateral Account (i) in the event of
a Cash Settlement that is not made in connection with a Cash Merger Early
Settlement, prior to or on 11:00 a.m. (New York City time) on the fifth Business
Day immediately preceding the Purchase Contract Settlement Date, in the case of
a PEPS Unit, unless a Tax Event Redemption has occurred, or on the Business Day
prior to August 18, 2003 in the case of Treasury PEPS or a PEPS Unit, if a Tax
Event Redemption has occurred, or (ii) in the event of a Cash Settlement that is
made in connection with a Cash Merger Early Settlement, by 5:00 p.m. (New York
City time) on the last Business Day of the Early Settlement Week, of the
Purchase Price in lawful money of the United States by certified or cashier's
check or wire transfer of immediately available funds payable to or upon the
order of the Securities Intermediary, then the Collateral Agent shall:

                  (1) instruct the Securities Intermediary promptly to invest
         any such Cash in Permitted Investments;

                  (2) release from the Pledge the PEPS Unit holder's or the
         Treasury PEPS Unit holder's related Pledged Preferred Securities,
         Applicable Ownership Interest (as specified in clause (A) of the
         definition of such term) of the Treasury Portfolio, the Pledged
         Subordinated Deferrable Notes or Pledged Treasury Securities, as
         applicable, as to which such Holder has elected to effect a Cash
         Settlement pursuant to this Section 5.5(a); and

                  (3) instruct the Securities Intermediary to Transfer all such
         Pledged Preferred Securities, Applicable Ownership Interest (as
         specified in clause (A) of the definition of such term) of the Treasury
         Portfolio, Pledged Subordinated Deferrable Notes or the Pledged
         Treasury Securities, as the case may be, to the Purchase Contract Agent
         for the benefit of such Holder, in each case free and clear of the
         Pledge created hereby, for distribution to such Holder.

         Upon the request of the Securities Intermediary, the Company shall
instruct the Securities Intermediary as to the type of Permitted Investments in
which any such Cash shall be invested; provided, however, that if the Company
fails to deliver such instructions by 10:30 a.m. (New York City time), the
Securities Intermediary shall invest such Cash in the Permitted Investments
described in clause 6 of the definition of Permitted Investments.

<PAGE>   23

         Upon receipt of the proceeds upon the maturity of the Permitted
Investments on, in the case of a Purchase Contract not to be settled in
connection with a Cash Merger Early Settlement, the Purchase Contract Settlement
Date, and, in the case of a Purchase Contract to be settled in connection with
a Cash Merger Early Settlement, the Cash Merger Early Settlement Date, the
Collateral Agent shall (A) instruct the Securities Intermediary to pay the
portion of such proceeds and deliver any certified or cashier's checks received,
in an aggregate amount equal to the Purchase Price, to the Company on the same
day, and (B) instruct the Securities Intermediary to release any amounts in
excess of the Purchase Price earned from such Permitted Investments to the
Purchase Contract Agent for distribution to such Holder.

         (b) If a Holder of PEPS Units (if a Tax Event Redemption shall not have
occurred) notifies the Purchase Contract Agent as provided in paragraph
5.02(a)(i) of the Purchase Contract Agreement of its intention to pay the
Purchase Price in cash, but fails to make such payment as required by paragraph
5.02(a)(ii) of the Purchase Contract Agreement, such failure shall constitute an
Event of Default under the Purchase Contract Agreement and hereunder and such
Holder shall be deemed to have consented to the disposition of such Holder's
Pledged Preferred Securities or Pledged Subordinated Deferrable Notes in
accordance with paragraph 5.02(a)(iii) of the Purchase Contract Agreement.

         (c) If a Holder of a Treasury PEPS Unit or a Holder of PEPS Unit (if a
Tax Event Redemption shall have occurred) notifies the Purchase Contract Agent
as provided in paragraph 5.02(d)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by paragraph 5.02(d)(ii) of the Purchase Contract Agreement, except
with respect to Cash Merger Early Settlements, such failure shall constitute an
Event of Default under the Purchase Contract Agreement and hereunder and such
Holder shall be deemed to have elected to pay the Purchase Price in accordance
with paragraph 5.02(d)(iii) of the Purchase Contract Agreement.

         (d) As soon as practicable after 11:00 a.m. (New York City time) on the
fifth Business Day immediately preceding the Purchase Contract Settlement Date
in the case of Cash Settlements that are not Cash Merger Settlements, and in the
case of a Cash Merger Early Settlement as soon as practicable after 5:00 p.m.
(New York City time) on the last Business Day of the applicable Settlement Week
the Securities Intermediary shall deliver to the Purchase Contract Agent a
notice, substantially in the form of Exhibit E hereto, stating (i) the amount of
cash that it has received with respect to the Cash Settlement of PEPS Units and
(ii) the amount of cash that it has received with respect to the Cash Settlement
of Treasury PEPS Units.

<PAGE>   24

         SECTION 5.6       EARLY SETTLEMENT.

         Upon receipt by the Collateral Agent of a notice from the Purchase
Contract Agent that a Holder of Securities has elected to effect Early
Settlement of its obligations under the Purchase Contracts forming a part of
such Securities in accordance with the terms of the Purchase Contracts and
Section 5.9 of the Purchase Contract Agreement (which notice shall set forth the
number of such Purchase Contracts as to which such Holder has elected to effect
Early Settlement), and that the Purchase Contract Agent has received from such
Holder, and paid to the Company as confirmed in writing by the Company, the
related Early Settlement Amounts pursuant to the terms of the Purchase Contracts
and the Purchase Contract Agreement and that all conditions to such Early
Settlement have been satisfied, then the Collateral Agent shall release from the
Pledge, (1) Pledged Preferred Securities or the appropriate Applicable Ownership
Interest (as specified in clause (A) of the definitions at such term) of the
Treasury Portfolio or Pledged Subordinated Deferrable Notes in the case of a
Holder of PEPS Units or (2) Pledged Treasury Securities, in the case of a Holder
of Treasury PEPS Units, with a Value equal to the product of (x) the Stated
Amount times (y) the number of Purchase Contracts as to which such Holder has
elected to effect Early Settlement, and shall instruct the Securities
Intermediary to Transfer all such Pledged Preferred Securities or the
appropriate Applicable Ownership Interest (as specified in clause (A) of the
definitions at such term) of the Treasury Portfolio or Pledged Subordinated
Deferrable Notes or Pledged Treasury Securities, as the case may be, to the
Purchase Contract Agent for the benefit of such Holder, in each case free and
clear of the Pledge created hereby, for distribution to such Holder. A Treasury
PEPS Unit holder may settle early only in integral multiples of 40 Purchase
Contracts.

         SECTION 5.7       APPLICATION OF PROCEEDS IN SETTLEMENT OF PURCHASE
                           CONTRACTS.

         (i) If, in the case of a Cash Settlement that is not a Cash Merger
Event Early Settlement, a Holder of PEPS Units (if a Tax Event Redemption has
not occurred) has not elected to make an effective Cash Settlement by notifying
the Purchase Contract Agent in the manner provided for in Section 5.02(a)(i) in
the Purchase Contract Agreement or has given such notice but failed to deliver
the required cash prior to 11:00 A.M. (New York City time) on the fifth Business
Day immediately preceding the Purchase Contract Settlement Date, such failure
shall constitute an Event of Default under the Purchase Contract Agreement and
hereunder and such Holder shall be deemed to have elected to pay for the shares
of Common Stock to be issued under such Purchase Contracts from the Proceeds of
the

<PAGE>   25

remarketing of the related Pledged Preferred Securities or Pledged
Subordinated Deferrable Notes.

         (ii) If, in the case of a Cash Settlement that is a Cash Merger Early
Settlement, a Holder of PEPS Units (if a Tax Event Redemption has not occurred)
has elected to make an effective Cash Settlement by notifying the Purchase
Contract Agent in the manner provided for in Section 5.02(a)(i) in the Purchase
Contract Agreement but failed to deliver the required cash prior to 5:00 P.M.
(New York City time) on the last Business Day of the applicable Early Settlement
Week, such failure shall constitute an Event of Default under the Purchase
Contract Agreement and hereunder and such Holder shall be deemed to have elected
to pay for the shares of Common Stock to be issued under such Purchase Contracts
from the Proceeds of the sale or redemption of the related Pledged Preferred
Securities or Pledged Subordinated Deferrable Notes.

         (iii) In the case described under paragraph (i) above, upon notice of
such event from the Purchase Contract Agent, the Collateral Agent shall instruct
the Securities Intermediary to Transfer the related Pledged Preferred Securities
or Pledged Subordinated Deferrable Notes to the Remarketing Agent for
remarketing. Upon receiving such Pledged Preferred Securities or Pledged
Subordinated Deferrable Notes, the Remarketing Agent, pursuant to the terms of
the Remarketing Agreement, will use reasonable efforts to remarket such Pledged
Preferred Securities or Pledged Subordinated Deferrable Notes. The Remarketing
Agent will deposit the Proceeds of such remarketing (less $0.125 per each
Preferred Security remarketed, which shall be retained by the Remarketing Agent
as a fee for its services in the Remarketing) in the Collateral Account, and the
Securities Intermediary shall invest the Proceeds of the remarketing in
Permitted Investments in clause 6 of the definition of Permitted Investments. On
the Purchase Contract Settlement Date, the Purchase Contract Agent shall give
written direction to the Collateral Agent specifying the instruction the
Collateral Agent shall give to the Securities Intermediary in order to apply a
portion of the Proceeds from such remarketing equal to the aggregate liquidation
amount of the Preferred Securities or aggregate principal amount of such Pledged
Subordinated Deferrable Note to satisfy in full such Holder's obligations to pay
the Purchase Price to purchase the shares of Common Stock under the related
Purchase Contracts and the balance of the Proceeds from the remarketing, if any,
that shall be transferred to the Purchase Contract Agent for the benefit of such
Holder for distribution to such Holder.

                  If the Remarketing Agent advises the Collateral Agent in
writing that there has been a Failed Remarketing, thus resulting in a further
event of default under the Purchase Contract Agreement and hereunder, the
Collateral Agent, for the benefit of the Company shall, at the written direction
of the Company, dispose of the Pledged

<PAGE>   26

Preferred Securities or Pledged Subordinated Deferrable Notes in accordance with
applicable law and satisfy in full, from such disposition, such Holder's
obligations to pay the Purchase Price for the shares of Common Stock.

         In the case described under paragraph (ii) of this Section 5.7(a), upon
notice of such event from the Purchase Contract Agent, the Collateral Agent
shall instruct the Securities Intermediary to hold such Pledged Preferred
Securities or Pledged Subordinated Deferrable Notes until they may be redeemed
pursuant to Section 6 of this Agreement and in accordance with the terms of the
Declaration or the Fourth Supplemental Indenture, as the case may be, and then
to deposit the Proceeds of such redemption in the Collateral Account, and the
Purchase Contract Agent shall give written direction to the Collateral Agent
specifying the instruction the Collateral Agent shall give to the Securities
Intermediary in order to apply a portion of the Proceeds from such redemption
equal to the aggregate liquidation amount of such Preferred Securities or
aggregate principal amount of such Pledged Subordinated Deferrable Notes to
satisfy in full such Holder's obligations to pay the Purchase Price to purchase
the shares of Common Stock under the related Purchase Contracts and the balance
of the Proceeds from the redemption, if any, that shall be transferred to the
Purchase Contract Agent for the benefit of such Holder for distribution to such
Holder.

         (a) If a Holder of a Treasury PEPS Unit or a Holder of a PEPS Unit (if
a Tax Event Redemption has occurred) has not elected to make an effective Cash
Settlement by notifying the Purchase Contract Agent in the manner provided for
in Section 5.4(d)(i) of the Purchase Contract Agreement, or has given such
notice but failed to make such payment in the manner required by Section
5.02(d)(ii) of the Purchase Contract Agreement, except with respect to Cash
Merger Early Settlements, such failure shall constitute an Event of Default
under the Purchase Contract Agreement and hereunder and such Holder shall be
deemed to have elected to pay for the shares of Common Stock to be issued under
such Purchase Contracts from the Proceeds of the related Pledged Treasury
Securities or such Applicable Ownership Interest (as specified in clause (A) of
the definition of such term) of the Treasury Portfolio, as the case may be.
Promptly, after 11:00 a.m. (New York City time) on the Business Day immediately
prior to the Purchase Contract Settlement Date, the Securities Intermediary
shall invest the Cash Proceeds of the maturing Pledged Treasury Securities or
such Applicable Ownership Interest (as specified in clause (A) of the definition
of such term) of the Treasury portfolios, as the case may be, in Permitted
Investments in clause 6 of the definition of Permitted Investments, unless prior
to 10:30 a.m. (New York City time), the Company shall otherwise instruct the
Securities Intermediary as to the type of Permitted Investments in which any
such Cash Proceeds shall be invested. Without receiving any instruction from any

<PAGE>   27

such Holder, the Collateral Agent shall apply the Proceeds of the related
Pledged Treasury Securities or such Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio, as the
case may be, to the settlement of such Purchase Contracts on the Purchase
Contract Settlement Date. In the event the sum of the Proceeds from the related
Pledged Treasury Securities or such Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio as the
case may be, and the investment earnings from the investment in Permitted
Investments exceeds the aggregate Purchase Price of the Purchase Contracts being
settled thereby, the Collateral Agent shall instruct the Securities Intermediary
to distribute such excess, when received, to the Purchase Contract Agent for the
benefit of such Holder for distribution to such Holder.

         SECTION 5.8       TAX EVENT REDEMPTION.

         If the Securities Intermediary receives notice that a Tax Event
Redemption has occurred prior to the Purchase Contract Settlement Date, the
Securities Intermediary shall apply the Redemption Amount to purchase the
Treasury Portfolio and the Securities Intermediary shall credit the Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio to the Collateral Account and shall transfer the
Applicable Ownership Interest (as specified in clause (B) of the definition of
such term) of the Treasury Portfolio to the Purchase Contract Agent for
distribution to the Holders of the PEPS Units. Upon credit to the Collateral
Account of the Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio having a Value equal to the
liquidation amount of the Pledged Preferred Securities or the aggregate
principal amount of the Pledged Subordinated Deferrable Notes, the Securities
Intermediary shall release the Pledged Preferred Securities or the Pledged
Subordinated Deferrable Notes, as applicable, from the Collateral Account and
shall promptly transfer the Pledged Preferred Securities to the Trust and the
Pledged Subordinated Deferrable Notes to the Company, as applicable.

         SECTION 6.        VOTING RIGHTS - TRUST PREFERRED SECURITIES AND
                           PLEDGED SUBORDINATED DEFERRABLE NOTES

         So long as no Event of Default under the Purchase Contract Agreement or
hereunder exists, except with respect to a "Cash Merger Event Offer," as such
term is defined in the Declaration (a "Declaration Cash Merger Event Offer"),
and a "Cash Merger Event Offer," as such term is defined in the Fourth
Supplemental Indenture (an "Indenture Cash Merger Event Offer"), the Purchase
Contract Agent may exercise, or refrain from exercising, any and all voting and
other consensual rights pertaining to the Pledged Preferred Securities or the
Pledged Subordinated Deferrable

<PAGE>   28
Notes or any part thereof for any purpose not inconsistent with the terms of
this Agreement and in accordance with the terms of the Purchase Contract
Agreement; provided, that the Purchase Contract Agent shall not exercise or
shall not refrain from exercising such right, as the case may be, if, in the
judgment of the Company or the Collateral Agent, such action would impair or
otherwise have a material adverse effect on the value of all or any of the
Pledged Preferred Securities or the Pledged Subordinated Deferrable Notes; and
provided, further, that the Purchase Contract Agent shall give the Company and
the Collateral Agent at least five Business Days' prior written notice of the
manner in which it intends to exercise, or its reasons for refraining from
exercising, any such right. Upon receipt of any notices and other communications
in respect of any Pledged Preferred Securities or the Pledged Subordinated
Deferrable Notes, including notice of any meeting at which holders of the
Preferred Securities or the Pledged Subordinated Deferrable Notes are entitled
to vote or solicitation of consents, waivers or proxies of holders of the
Preferred Securities or Subordinated Deferrable Notes, the Collateral Agent
shall use reasonable efforts to send promptly to the Purchase Contract Agent
such notice or communication, and as soon as reasonably practicable after
receipt of a written request therefor from the Purchase Contract Agent, execute
and deliver to the Purchase Contract Agent such proxies and other instruments in
respect of such Pledged Preferred Securities or the Pledged Subordinated
Deferrable Notes (in form and substance satisfactory to the Collateral Agent) as
are prepared by the Purchase Contract Agent with respect to the Pledged
Preferred Securities or the Pledged Subordinated Deferrable Notes.

         The Collateral Agent shall have the power to elect to have the Pledged
Preferred Securities or Pledged Subordinated Deferrable Notes redeemed in
connection with a Declaration Cash Merger Event Offer or an Indenture Cash
Merger Event Offer, as the case may be. With respect to Pledged Preferred
Securities, the Collateral Agent shall, in accordance with the procedures set
forth in the Declaration, elect to redeem exactly those Pledged Preferred
Securities which correspond to PEPS Units (i) whose holders have elected to make
a Cash Settlement in connection with a Cash Merger Early Settlement and (ii) in
respect of whose settlement obligations there is an Event of Default under
Section 5.5(b) of this Agreement. With respect to Pledged Subordinated
Deferrable Notes, the Collateral Agent shall, in accordance with the procedures
set forth in the Fourth Supplemental Indenture, elect to redeem exactly those
Subordinated Deferrable Notes which correspond to PEPS Units (i) whose holders
have elected to make a Cash Settlement in connection with a Cash Merger Early
Settlement and (ii) in respect of whose settlement obligations there is an Event
of Default under Section 5.5(b) of this Agreement.

<PAGE>   29
SECTION 7.        RIGHTS AND REMEDIES.

         SECTION 7.1       RIGHTS AND REMEDIES OF THE COLLATERAL AGENT.

         (a) In addition to the rights and remedies specified in Section 5.7
hereof or otherwise available at law or in equity, after an event of default (as
specified in Section 7.1(b) below) hereunder, the Collateral Agent shall have
all of the rights and remedies with respect to the Collateral of a secured party
under the UCC (whether or not the UCC is in effect in the jurisdiction where the
rights and remedies are asserted) and the TRADES Regulations and such additional
rights and remedies to which a secured party is entitled under the laws in
effect in any jurisdiction where any rights and remedies hereunder may be
asserted. Without limiting the generality of the foregoing, such remedies may
include, to the extent permitted by applicable law, (1) retention of the Pledged
Preferred Securities, Pledged Subordinated Deferrable Notes, Pledged Treasury
Securities or the appropriate Applicable Ownership Interest (as specified in
clause (A) of the definition of such term) in full satisfaction of the Holders'
obligations under the Purchase Contracts and the Purchase Contract Agreement or
(2) sale of the Pledged Preferred Securities, Pledged Subordinated Deferrable
Notes, Pledged Treasury Securities or the appropriate Applicable Ownership
Interest (as specified in clause (A) of the definition of such term) in one or
more public or private sales.

         (b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments to the Company on account of the appropriate Applicable
Ownership Interest (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, or on account of principal payments of any Pledged
Treasury Securities as provided in Section 3 hereof, in satisfaction of the
Obligations of the Holder of the PEPS Units (if a Tax Event Redemption has
occurred) of which such appropriate Applicable Ownership Interest (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio or the
Holder of the Treasury PEPS Units of which such Pledged Treasury Securities, as
applicable, is a part under the related Purchase Contracts, the inability to
make such payments shall constitute an event of default hereunder and the
Collateral Agent shall have and may exercise, with reference to such Pledged
Treasury Securities or the appropriate Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as applicable, any and all of the rights and remedies available to a
secured party under the UCC and the TRADES Regulations after default by a
debtor, and as otherwise granted herein or under any other law.

         (c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
<PAGE>   30

authorized to receive and collect all payments of (i) the liquidation or
redemption amount of the Pledged Preferred Securities, (ii) the principal amount
or redemption amount of the Pledged Subordinated Deferrable Notes, (iii) the
principal amount of the Pledged Treasury Securities and (iv) the principal
amount of the Applicable Ownership Interest (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio, subject, in each case, to
the provisions of Section 3 hereof, and as otherwise granted herein.

         (d) The Purchase Contract Agent and each Holder of Securities agrees
that, from time to time, upon the written request of the Collateral Agent or the
Purchase Contract Agent, such Holder shall execute and deliver such further
documents and do such other acts and things as the Collateral Agent may
reasonably request in order to maintain the Pledge, and the perfection and
priority thereof, and to confirm the rights of the Collateral Agent hereunder.
The Purchase Contract Agent shall have no liability to any Holder for executing
any documents or taking any such acts requested by the Collateral Agent
hereunder, except for liability for its own negligent acts, its own negligent
failure to act or its own willful misconduct.

         SECTION 7.2       SUBSTITUTION OF SUBORDINATED DEFERRABLE NOTES.

         If the Trust shall have been dissolved and liquidated prior to the
Purchase Contract Settlement Date, the Securities Intermediary shall transfer to
the Collateral Agent Subordinated Deferrable Notes having a Value equal to the
liquidation amount of the Pledged Preferred Securities for credit to the
Collateral Account. Upon credit to the Collateral Account of such Subordinated
Deferrable Notes, the Collateral Agent shall release the Pledged Preferred
Securities from the Collateral Account and shall promptly transfer the same to
the Trust.

         SECTION 7.3       TAX EVENT REDEMPTION.

         Upon the occurrence of a Tax Event Redemption prior to the Purchase
Contract Settlement Date, the Redemption Price payable on the Tax Event
Redemption Date with respect to the Applicable Principal Amount shall be
credited to the Collateral Account by the Property Trustee or, in case there has
been a dissolution of the Trust and the distribution of the related Subordinated
Deferrable Notes, by the Indenture Trustee, on or prior to 12:30 p.m., New York
City time on such Tax Event Redemption date, by federal funds check or wire
transfer of immediately available funds. The Collateral Agent is hereby
authorized to present the Pledged Preferred Securities or the Pledged
Subordinated Deferrable Notes for payment as may be required by their respective
terms. Upon receipt of such funds, the Pledged Preferred Securities or Pledged
Subordinated Deferrable Notes, as the case

<PAGE>   31

may be, shall be released from the Collateral Account. In the event such funds
are credited to the Collateral Account, the Collateral Agent, at the written
direction of the Company, shall instruct the Securities Intermediary to (a)
apply an amount equal to the Redemption Amount of such Redemption Price to
purchase the Treasury Portfolio from the Quotation Agent for credit to the
Collateral Account and (b) promptly remit the remaining portion of such
Redemption Price, if any, to the Purchase Contract Agent for payment to the
Holders of PEPS Units.

         SECTION 7.4       SUBSTITUTIONS.

         Whenever a Holder has the right to substitute Treasury Securities,
Trust Preferred Securities, Subordinated Deferrable Notes or security
entitlements for any of them or the appropriate Applicable Ownership Interest of
the Treasury Portfolio, as the case may be, for financial assets held in the
Collateral Account, such substitution shall not constitute a novation of the
security interest created hereby.

SECTION 8.        REPRESENTATIONS AND WARRANTIES; COVENANTS.

         SECTION 8.1       REPRESENTATIONS AND WARRANTIES.

         Each Holder from time to time, acting through the Purchase Contract
Agent as attorney-in-fact (it being understood that the Purchase Contract Agent
shall not be liable for any representation or warranty made by or on behalf of a
Holder), hereby represents and warrants to the Collateral Agent (with respect to
such Holder's interest in the Collateral), which representations and warranties
shall be deemed repeated on each day a Holder Transfers Collateral that:

                  (1) such Holder has the power to grant a security interest in
         and lien on the Collateral;

                  (2) such Holder is the sole beneficial owner of the Collateral
         and, in the case of Collateral delivered in physical form, is the sole
         holder of such Collateral and is the sole beneficial owner of, or has
         the right to Transfer, the Collateral it Transfers to the Securities
         Intermediary for credit to the Collateral Account, free and clear of
         any security interest, lien, encumbrance, call, liability to pay money
         or other restriction other than the security interest and lien granted
         under Section 2 hereof;

                  (3) upon the Transfer of the Collateral to the Securities
         Intermediary for credit to the Collateral Account, the Collateral
         Agent, for the benefit of the Company, will have a valid and perfected
         first priority security

<PAGE>   32

         interest therein (assuming that any central clearing operation or any
         securities intermediary or other entity not within the control of the
         Holder involved in the Transfer of the Collateral, including the
         Collateral Agent and the Securities Intermediary, gives the notices and
         takes the action required of it hereunder and under applicable law for
         perfection of that interest and assuming the establishment and exercise
         of control pursuant to Section 4 hereof); and

                  (4) the execution and performance by the Holder of its
         obligations under this Agreement will not result in the creation of any
         security interest, lien or other encumbrance on the Collateral other
         than the security interest and lien granted under Section 2 hereof or
         violate any provision of any existing law or regulation applicable to
         it or of any mortgage, charge, pledge, indenture, contract or
         undertaking to which it is a party or which is binding on it or any of
         its assets.

         SECTION 8.2       COVENANTS.

         The Holders from time to time, acting through the Purchase Contract
Agent as their attorney-in-fact (it being understood that the Purchase Contract
Agent shall not be liable for any covenant made by or on behalf of a Holder),
hereby covenant to the Collateral Agent that for so long as the Collateral
remains subject to the Pledge:

                  (1) neither the Purchase Contract Agent nor such Holders will
         create or purport to create or allow to subsist any mortgage, charge,
         lien, pledge or any other security interest whatsoever over the
         Collateral or any part of it other than pursuant to this Agreement; and

                  (2) neither the Purchase Contract Agent nor such Holders will
         sell or otherwise dispose (or attempt to dispose) of the Collateral or
         any part of it except for the beneficial interest therein, subject to
         the Pledge hereunder, transferred in connection with the Transfer of
         the Securities.

SECTION 9.        THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY.

         It is hereby agreed as follows:

         SECTION 9.1       APPOINTMENT, POWERS AND IMMUNITIES.

         The Collateral Agent shall act as agent for the Company hereunder with
such powers as are specifically vested in the Collateral Agent by the terms of
this

<PAGE>   33

Agreement, together with such other powers as are reasonably incidental thereto.
The Collateral Agent shall:

                  (1) have no duties or responsibilities except those expressly
         set forth in this Agreement and no implied covenants or obligations
         shall be inferred from this Agreement against the Collateral Agent, nor
         shall the Collateral Agent be bound by the provisions of any agreement
         by any party hereto beyond the specific terms hereof;

                  (2) not be responsible for any recitals contained in this
         Agreement, or in any certificate or other document referred to or
         provided for in, or received by it under, this Agreement, the
         Securities or the Purchase Contract Agreement, or for the value,
         validity, effectiveness, genuineness, enforceability or sufficiency of
         this Agreement (other than as against the Collateral Agent), the
         Securities or the Purchase Contract Agreement or any other document
         referred to or provided for herein or therein or for any failure by the
         Company or any other Person (except the Collateral Agent) to perform
         any of its obligations hereunder or thereunder or for the perfection,
         priority or, except as expressly required hereby, maintenance of any
         security interest created hereunder;

                  (3) not be required to initiate or conduct any litigation or
         collection proceedings hereunder (except pursuant to directions
         furnished under Section 9.2 hereof, subject to Section 9.6 hereof);

                  (4) not be responsible for any action taken or omitted to be
         taken by it hereunder or under any other document or instrument
         referred to or provided for herein or in connection herewith or
         therewith, except for its own negligence or willful misconduct; and

                  (5) not be required to advise any party as to selling or
         retaining, or taking or refraining from taking any action with respect
         to, any securities or other property deposited hereunder.

Subject to the foregoing, during the term of this Agreement, the Collateral
Agent shall take all reasonable action in connection with the safekeeping and
preservation of the Collateral hereunder.

         No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent be liable for any

<PAGE>   34

amount in excess of the Value of the Collateral. Notwithstanding the foregoing,
each of the Collateral Agent and the Securities Intermediary in its individual
capacity hereby waives any right of setoff, bankers' lien, liens or perfection
rights as securities intermediary or any counterclaim with respect to any of the
Collateral.

         SECTION 9.2       INSTRUCTIONS OF THE COMPANY.

         The Company shall have the right, by one or more written instruments
executed and delivered to the Collateral Agent, to direct the time, method and
place of conducting any proceeding for the realization of any right or remedy
available to the Collateral Agent, or of exercising any power conferred on the
Collateral Agent, or to direct the taking or refraining from taking of any
action authorized by this Agreement; provided, however, that (i) such direction
shall not conflict with the provisions of any law or of this Agreement and (ii)
the Collateral Agent shall be adequately indemnified as provided herein. Nothing
contained in this Section 9.2 shall impair the right of the Collateral Agent in
its discretion to take any action or omit to take any action which it deems
proper and which is not inconsistent with such direction.

         SECTION 9.3       RELIANCE BY COLLATERAL AGENT AND SECURITIES
                INTERMEDIARY.

         Each of the Securities Intermediary and the Collateral Agent shall be
entitled to rely upon any certification, order, judgment, opinion, notice or
other written communication (including, without limitation, any thereof by
e-mail or similar electronic means, telecopy, telex or facsimile) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons (without being required to determine the correctness of
any fact stated therein) and consult with and rely upon advice, opinions and
statements of legal counsel and other experts selected by the Collateral Agent
and the Securities Intermediary. As to any matters not expressly provided for by
this Agreement, the Collateral Agent and the Securities Intermediary shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with instructions given by the Company in accordance with this
Agreement.

         SECTION 9.4       RIGHTS IN OTHER CAPACITIES.

         The Collateral Agent and the Securities Intermediary and their
affiliates may (without having to account therefor to the Company) accept
deposits from, lend money to, make their investments in and generally engage in
any kind of banking, trust or other business with the Purchase Contract Agent,
any other Person interested herein and any Holder of Securities (and any of
their respective subsidiaries or

<PAGE>   35

affiliates) as if it were not acting as the Collateral Agent or the Securities
Intermediary, as the case may be, and the Collateral Agent, the Securities
Intermediary and their affiliates may accept fees and other consideration from
the Purchase Contract Agent and any Holder of Securities without having to
account for the same to the Company; provided that each of the Securities
Intermediary and the Collateral Agent covenants and agrees with the Company that
it shall not accept, receive or permit there to be created in favor of itself
and shall take no affirmative action to permit there to be created in favor of
any other Person, any security interest, lien or other encumbrance of any kind
in or upon the Collateral other than the lien created by the Pledge.

         SECTION 9.5       NON-RELIANCE ON COLLATERAL AGENT AND SECURITIES
                INTERMEDIARY.

         Neither the Securities Intermediary nor the Collateral Agent shall be
required to keep itself informed as to the performance or observance by the
Purchase Contract Agent or any Holder of Securities of this Agreement, the
Purchase Contract Agreement, the Securities or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Purchase Contract Agent or any Holder of Securities. Neither the Collateral
Agent nor the Securities Intermediary shall have any duty or responsibility to
provide the Company with any credit or other information concerning the affairs,
financial condition or business of the Purchase Contract Agent or any Holder of
Securities (or any of their respective affiliates) that may come into the
possession of the Collateral Agent or the Securities Intermediary or any of
their respective affiliates.

         SECTION 9.6       COMPENSATION AND INDEMNITY.

         The Company agrees to:

                  (1) pay the Collateral Agent and the Securities Intermediary
         from time to time such compensation as shall be agreed in writing
         between the Company and the Collateral Agent or the Securities
         Intermediary, as the case may be, for all services rendered by them
         hereunder;

                  (2) indemnify and hold harmless the Collateral Agent, the
         Securities Intermediary and each of their respective directors,
         officers, agents and employees (collectively, the "Indemnitees"),
         harmless from and against any and all claims, liabilities, losses,
         damages, fines, penalties and expenses (including reasonable fees and
         expenses of counsel) (collectively, "Losses" and individually, a
         "Loss") that may be imposed on, incurred by, or asserted

<PAGE>   36

         against, the Indemnitees or any of them for following any instructions
         or other directions upon which either the Collateral Agent or the
         Securities Intermediary is entitled to rely pursuant to the terms of
         this Agreement; and

                  (3) in addition to and not in limitation of paragraph (2)
         immediately above, indemnify and hold the Indemnitees and each of them
         harmless from and against any and all Losses that may be imposed on,
         incurred by or asserted against, the Indemnitees or any of them in
         connection with or arising out of the Collateral Agent's or the
         Securities Intermediary's acceptance or performance of its powers and
         duties under this Agreement, provided the Collateral Agent or the
         Securities Intermediary has not acted with negligence or engaged in
         willful misconduct or bad faith with respect to the specific Loss
         against which indemnification is sought.

         SECTION 9.7       FAILURE TO ACT.

         In the event of any ambiguity in the provisions of this Agreement or
any dispute between or conflicting claims by or among the parties hereto or any
other Person with respect to any funds or property deposited hereunder, then at
its sole option, each of the Collateral Agent and the Securities Intermediary
shall be entitled, after prompt notice to the Company and the Purchase Contract
Agent, to refuse to comply with any and all claims, demands or instructions with
respect to such property or funds so long as such dispute or conflict shall
continue, and the Collateral Agent and the Securities Intermediary shall not be
or become liable in any way to any of the parties hereto for its failure or
refusal to comply with such conflicting claims, demands or instructions. The
Collateral Agent and the Securities Intermediary shall be entitled to refuse to
act until either:

                  (1) such conflicting or adverse claims or demands shall have
         been finally determined by a court of competent jurisdiction or settled
         by agreement between the conflicting parties as evidenced in a writing
         satisfactory to the Collateral Agent or the Securities Intermediary; or

                  (2) the Collateral Agent or the Securities Intermediary shall
         have received security or an indemnity satisfactory to it sufficient to
         save it harmless from and against any and all loss, liability or
         reasonable out-of-pocket expense which it may incur by reason of its
         acting.

The Collateral Agent and the Securities Intermediary may in addition elect to
commence an interpleaderaction or seek other judicial relief or orders as the

<PAGE>   37

Collateral Agent or the Securities Intermediary may deem necessary.
Notwithstanding anything contained herein to the contrary, neither the
Collateral Agent nor the Securities Intermediary shall be required to take any
action that is in its opinion contrary to law or to the terms of this Agreement,
or which would in its opinion subject it or any of its officers, employees or
directors to liability.

         SECTION 9.8       RESIGNATION OF COLLATERAL AGENT AND SECURITIES
                INTERMEDIARY.

         (a)      Subject to the appointment and acceptance of a successor
Collateral Agent as provided below:

                  (1) the Collateral Agent may resign at any time by giving
         notice thereof to the Company and the Purchase Contract Agent as
         attorney-in-fact for the Holders of Securities;

                  (2) the Collateral Agent may be removed at any time by the
         Company; and

                  (3) if the Collateral Agent fails to perform any of its
         material obligations hereunder in any material respect for a period of
         not less than 20 days after receiving written notice of such failure by
         the Purchase Contract Agent and such failure shall be continuing, the
         Collateral Agent may be removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Collateral Agent pursuant to clause (3) of the immediately preceding
sentence. Upon any such resignation or removal, the Company shall have the right
to appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been so appointed and shall have accepted such appointment within 30 days
after the retiring Collateral Agent's giving of notice of resignation or the
Company or the Purchase Contract Agent giving notice of such removal, then the
retiring Collateral Agent may petition any court of competent jurisdiction for
the appointment of a successor Collateral Agent. The Collateral Agent shall be a
bank or a national banking association which has an office (or an agency office)
in New York City with a combined capital and surplus of at least $50,000,000 and
shall not be the Purchase Contract Agent or any of its affiliates. Upon the
acceptance of any appointment as Collateral Agent hereunder by a successor
Collateral Agent, such successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent, and the retiring Collateral Agent shall take all appropriate
action to transfer any money and property held by it

<PAGE>   38

hereunder (including the Collateral) to such successor Collateral Agent. The
retiring Collateral Agent shall, upon such succession, be discharged from its
duties and obligations as Collateral Agent hereunder. After any retiring
Collateral Agent's resignation hereunder as Collateral Agent, the provisions of
this Section 9 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 Collateral
Agent.

         (b)      Subject to the appointment and acceptance of a successor
Securities Intermediary as provided below:

                  (1) the Securities Intermediary may resign at any time by
         giving notice thereof to the Company and the Purchase Contract Agent as
         attorney-in-fact for the Holders of Securities;

                  (2) the Securities Intermediary may be removed at any time by
         the Company; and

                  (3) if the Securities Intermediary fails to perform any of its
         material obligations hereunder in any material respect for a period of
         not less than 20 days after receiving written notice of such failure by
         the Purchase Contract Agent and such failure shall be continuing, the
         Securities Intermediary may be removed by the Purchase Contract Agent.

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Securities Intermediary pursuant to clause (3) of the immediately preceding
sentence. Upon any such resignation or removal, the Company shall have the right
to appoint a successor Securities Intermediary. If no successor Securities
Intermediary shall have been so appointed and shall have accepted such
appointment within 30 days after the retiring Securities Intermediary's giving
of notice of resignation or the Company or the Purchase Contract Agent giving
notice of such removal, then the retiring Securities Intermediary may petition
any court of competent jurisdiction for the appointment of a successor
Securities Intermediary. The Securities Intermediary shall be a bank or a
national banking association which has an office (or an agency office) in New
York City with a combined capital and surplus of at least $50,000,000 and shall
not be the Purchase Contract Agent or any of its affiliates. Upon the acceptance
of any appointment as Securities Intermediary hereunder by a successor
Securities Intermediary, such successor Securities Intermediary shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Securities Intermediary, and the retiring Securities
Intermediary shall take all appropriate action to transfer any money and
property held by it hereunder (including the Collateral) to such successor
Securities Intermediary. The retiring Securities

<PAGE>   39

Intermediary shall, upon such succession, be discharged from its duties and
obligations as Securities Intermediary hereunder. After any retiring Securities
Intermediary's resignation hereunder as Securities Intermediary, the provisions
of this Section 9 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 Securities
Intermediary.

         SECTION 9.9       RIGHT TO APPOINT AGENT OR ADVISOR.

         The Collateral Agent shall have the right to appoint agents or advisors
in connection with any of its duties hereunder, and the Collateral Agent shall
not be liable for any action taken or omitted by, or in reliance upon the advice
of, such agents or advisors selected in good faith. The appointment of agents
pursuant to this Section 9.9 shall be subject to prior consent of the Company,
which consent shall not be unreasonably withheld.

         SECTION 9.10      SURVIVAL.

         The provisions of this Section 9 shall survive termination of this
Agreement and the resignation or removal of the Collateral Agent or the
Securities Intermediary.

         SECTION 9.11      EXCULPATION.

         Anything contained in this Agreement to the contrary notwithstanding,
in no event shall the Collateral Agent or the Securities Intermediary or their
officers, directors, employees or agents be liable under this Agreement to any
third party for indirect, special, punitive, or consequential loss or damage of
any kind whatsoever, including, but not limited to, lost profits, whether or not
the likelihood of such loss or damage was known to the Collateral Agent or the
Securities Intermediary, or any of them.

SECTION 10.       AMENDMENT.

         SECTION 10.1      AMENDMENT WITHOUT CONSENT OF HOLDERS.

         Without the consent of any Holders, the Company, the Collateral Agent,
the Securities Intermediary and the Purchase Contract Agent, at any time and
from time to time, may amend this Agreement, in form satisfactory to the
Company, the Collateral Agent, the Securities Intermediary and the Purchase
Contract Agent, to:

                  (1) evidence the succession of another Person to the Company,
         and the assumption by any such successor of the covenants of the
         Company;

<PAGE>   40

                  (2) evidence and provide for the acceptance of appointment
         hereunder by a successor Collateral Agent, Securities Intermediary or
         Purchase Contract Agent;

                  (3) add to the covenants of the Company for the benefit of the
         Holders, or surrender any right or power herein conferred upon the
         Company, provided such covenants or such surrender do not adversely
         affect the validity, perfection or priority of the Pledge created
         hereunder; or

                  (4) cure any ambiguity (or formal defect), correct or
         supplement any provisions herein which may be inconsistent with any
         other such provisions herein, or make any other provisions with respect
         to such matters or questions arising under this Agreement, provided
         such action shall not adversely affect the interests of the Holders.

         SECTION 10.2      AMENDMENT WITH CONSENT OF HOLDERS.

         With the consent of the Holders of not less than a majority of the
Purchase Contracts at the time outstanding, by Act of such Holders delivered to
the Company, the Purchase Contract Agent, the Securities Intermediary or the
Collateral Agent, as the case may be, the Company, when duly authorized, the
Purchase Contract Agent, the Securities Intermediary and the Collateral Agent
may amend this Agreement for the purpose of modifying in any manner the
provisions of this Agreement or the rights of the Holders in respect of the
Securities; provided, however, that no such supplemental agreement shall,
without the unanimous consent of the Holders of each Outstanding Security
adversely affected thereby:

                  (1) Change the amount or type of Collateral underlying a
         Security (except for the rights of holders of PEPS Units to substitute
         the Treasury Securities for the Pledged Preferred Securities or the
         Pledged Subordinated Deferrable Notes, as the case may be, or the
         rights of Holders of Treasury PEPS Units to substitute Preferred
         Securities or Subordinated Deferrable Notes, as applicable, for the
         Pledged Treasury Securities), impair the right of the Holder of any
         Security to receive distributions on the underlying Collateral or
         otherwise adversely affect the Holder's rights in or to such
         Collateral; or

                  (2) otherwise effect any action that would require the consent
         of the Holder of each Outstanding Security affected thereby pursuant to
         the Purchase Contract Agreement if such action were effected by an
         agreement supplemental thereto; or

<PAGE>   41

                  (3) reduce the percentage of Purchase Contracts the consent of
         whose Holders is required for any such amendment;

provided that if any amendment or proposal referred to above would adversely
affect only the PEPS Units or only the Treasury PEPS Units, then only the
affected class of Holders as of the record date for the Holders entitled to vote
thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided, further, that the unanimous
consent of the Holders of each outstanding Purchase Contract of such class
affected thereby shall be required to approve any amendment or proposal
specified in clauses (1) through (3) above.

         It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance thereof.

         SECTION 10.3      EXECUTION OF AMENDMENTS.

         In executing any amendment permitted by this Section, the Collateral
Agent, the Securities Intermediary and the Purchase Contract Agent shall be
entitled to receive and (subject to Section 7.1 of the Purchase Contract
Agreement with respect to the Purchase Contract Agent) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent, if any, to the execution and delivery of such amendment have been
satisfied.

         SECTION 10.4      EFFECT OF AMENDMENTS.

         Upon the execution of any amendment under this Section, this Agreement
shall be modified in accordance therewith, and such amendment shall form a part
of this Agreement for all purposes; and every Holder of Certificates theretofore
or thereafter authenticated, executed on behalf of the Holders and delivered
under the Purchase Contract Agreement shall be bound thereby.

         SECTION 10.5      REFERENCE TO AMENDMENTS.

         Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any amendment pursuant to this Section may, and
shall if required by the Collateral Agent or the Purchase Contract Agent, bear a
notation in form approved by the Purchase Contract Agent and the Collateral
Agent as to any

<PAGE>   42

matter provided for in such amendment. If the Company shall so determine, new
Security Certificates so modified as to conform, in the opinion of the
Collateral Agent, the Purchase Contract Agent and the Company, to any such
amendment may be prepared and executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Purchase Contract Agent
in accordance with the Purchase Contract Agreement in exchange for Outstanding
Security Certificates.

SECTION 11.       MISCELLANEOUS.

         SECTION 11.1      NO WAIVER.

         No failure on the part of the Collateral Agent, the Securities
Intermediary or any of their respective agents to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent, the Securities Intermediary or any of their
respective agents of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

         SECTION 11.2      GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK. The Company, the Collateral Agent, the
Securities Intermediary, the Purchase Contract Agent and the Holders from time
to time of the Securities, acting through the Purchase Contract Agent as their
attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Company, the Collateral Agent, the Securities Intermediary, the
Purchase Contract Agent and the Holders from time to time of the Securities,
acting through the Purchase Contract Agent as their attorney-in-fact,
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

         SECTION 11.3      NOTICES.

         All notices, requests, consents and other communications provided for
herein

<PAGE>   43

(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made in writing (including, without
limitation, by telecopy) delivered to the intended recipient at the "ADDRESS FOR
NOTICES" specified below its name on the signature pages hereof or, as to any
party, at such other address as shall be designated by such party in a notice to
the other parties. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

         SECTION 11.4      SUCCESSORS AND ASSIGNS.

         This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the Company, the Collateral Agent, the
Securities Intermediary and the Purchase Contract Agent, and the Holders from
time to time of the Securities, by their acceptance of the same, shall be deemed
to have agreed to be bound by the provisions hereof and to have ratified the
agreements of, and the grant of the Pledge hereunder by, the Purchase Contract
Agent.

         SECTION 11.5      COUNTERPARTS.

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.

         SECTION 11.6      SEVERABILITY.

         If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.

         SECTION 11.7      EXPENSES, ETC.

         The Company agrees to reimburse the Collateral Agent and the Securities
Intermediary for:

                  (1) all reasonable costs and expenses of the Collateral Agent
         and the Securities Intermediary (including, without limitation, the
         reasonable fees and expenses of counsel to the Collateral Agent and the
         Securities

<PAGE>   44
         Intermediary), in connection with (i) the negotiation, preparation,
         execution and delivery or performance of this Agreement and (ii) any
         modification, supplement or waiver of any of the terms of this
         Agreement;

                  (2) all reasonable costs and expenses of the Collateral Agent
         and the Securities Intermediary (including, without limitation,
         reasonable fees and expenses of counsel) in connection with (i) any
         enforcement or proceedings resulting or incurred in connection with
         causing any Holder of Securities to satisfy its obligations under the
         Purchase Contracts forming a part of the Securities and (ii) the
         enforcement of this Section 11.7;

                  (3) all transfer, stamp, documentary or other similar taxes,
         assessments or charges levied by any governmental or revenue authority
         in respect of this Agreement or any other document referred to herein
         and all costs, expenses, taxes, assessments and other charges incurred
         in connection with any filing, registration, recording or perfection of
         any security interest contemplated hereby;

                  (4) all fees and expenses of any agent or advisor appointed by
         the Collateral Agent and consented to by the Company under Sections 9.3
         and 9.9 of this Agreement; and

                  (5) any other out-of-pocket costs and expenses reasonably
         incurred by the Collateral Agent and the Securities Intermediary in
         connection with the performance of their duties hereunder.

         SECTION 11.8      SECURITY INTEREST ABSOLUTE.

         All rights of the Collateral Agent and security interests hereunder,
and all obligations of the Holders from time to time hereunder, shall be
absolute and unconditional irrespective of:

                  (1) any lack of validity or enforceability of any provision of
         the Purchase Contracts or the Securities or any other agreement or
         instrument relating thereto;

                  (2) any change in the time, manner or place of payment of, or
         any other term of, or any increase in the amount of, all or any of the
         obligations of Holders of the Securities under the related Purchase
         Contracts, or any other amendment or waiver of any term of, or any
         consent to any departure from any requirement of, the Purchase Contract
         Agreement or any Purchase

<PAGE>   45
         Contract or any other agreement or instrument relating thereto; or

                  (3) any other circumstance which might otherwise constitute a
         defense available to, or discharge of, a borrower, a guarantor or a
         pledger.

         SECTION 11.9      NOTICE OF TAX EVENT, TAX EVENT REDEMPTION AND
                TERMINATION EVENT.

         Upon the occurrence of a Tax Event, a Cash Merger Event, a Tax Event
Redemption, Cash Merger Early Redemptions in connection with a specific Cash
Merger Event or a Termination Event, the Company shall deliver written notice to
the Collateral Agent and the Securities Intermediary. Upon the written request
of the Collateral Agent or the Securities Intermediary, the Company shall inform
such party whether or not a Tax Event, a Cash Merger Event, a Tax Event
Redemption, a Cash Merger Early Redemption or a Termination Event has occurred.

                       [SIGNATURES ON THE FOLLOWING PAGE]

<PAGE>   46

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

-------------------------------            --------------------------------
CMS ENERGY CORPORATION                     THE BANK OF NEW YORK as
                                           Purchase Contract Agent and as
                                           attorney-in-fact of the Holders
                                           from time to time of the Securities

By:                                        By:
   ----------------------------               -----------------------------
    Name:                                      Name:
    Title:   Vice President and Chief   Title:
             Financial Officer

Address for Notices:                       Address for Notices:

CMS Energy Corporation                     The Bank of New York
Fairlane Plaza South, Suite 1100           101 Barclay Street
330 Town Center Drive                      21 West
Dearborn, Michigan 48126                   New York, NY 10286
Attention: General Counsel                 Attention: Corporate Trust Trustee
Telecopy: (313) 436-9258                   Administration
                                           Telecopy: (212) 815-5915

<PAGE>   47

-------------------------------            --------------------------------
CHASE MANHATTAN BANK,                      CHASE MANHATTAN BANK,
as Collateral Agent                        as Securities Intermediary

By:                                        By:
   ----------------------------               -----------------------------
    Name:                                      Name:
    Title:                                     Title:

Address for Notices:                       Address for Notices:

The Chase Manhattan Bank                   The Chase Manhattan Bank
450 West 33rd Street, 15th Floor           450 West 33rd Street, 15th Floor
New York, New York 10001                   New York, New York 10001
Attention: Corporate Trust Department      Attention: Corporate Trust Department
Telecopy: (212) 946-8159                   Telecopy: (212) 946-8159

<PAGE>   48

                                                                       EXHIBIT A
                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                     (Establishment of Treasury PEPS Units)

The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8159

         Re:      PEPS Units of CMS Energy Corporation. (the "COMPANY") and CMS
                  Energy Trust III

                  The securities account of The Chase Manhattan Bank, as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Chase Manhattan Bank, as Collateral Agent
                  of CMS Energy Corporation, as pledgee of The Bank of New
                  York, as the Purchase Contract Agent on behalf of and as
                  attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

         Please refer to the Pledge Agreement, dated as of August 22, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent and as
Securities Intermediary, and the undersigned, as Purchase Contract Agent and as
attorney-in-fact for the holders of PEPS Units from time to time. Capitalized
terms used herein but not defined shall have the meaning set forth in the Pledge
Agreement.

         We hereby notify you in accordance with Section 5.2 of the Pledge
Agreement that the holder of securities named below (the "Holder") has elected
to substitute $           Value of Treasury Securities or security entitlements
thereto in exchange for [an equal Value of [Pledged Preferred Securities]
[Pledged Subordinated Deferrable Notes] relating to           PEPS Units] and
has delivered to the undersigned a notice stating that the Holder has
Transferred such Treasury Securities or security entitlements thereto to the
Securities Intermediary, for credit to the Collateral Account.

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Treasury Securities or security entitlements thereto have
been credited to the Collateral Account, to release to the undersigned [an equal
Value of

<PAGE>   49

[Pledged Preferred Securities] [Pledged Subordinated Deferrable Notes]] in
accordance with Section 5.2 of the Pledge Agreement. We also hereby confirm that
no Tax Event Redemption has occurred.

                                              THE BANK OF NEW YORK,
Date:                                         as Purchase Contract Agent and as
     ---------------
                               attorney-in-fact of the Holders from time
                               to time of the Securities

     By:
        ----------------------
     Name:
     Title:

Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements thereto for the [Pledged Preferred
Securities] [Pledged Subordinated Deferrable Notes]:

------------------------------
------------------------------
Name                                        Social Security or other
                                            Taxpayer Identification Number,
                                            if any

------------------------------
Address

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

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

<PAGE>   50

                                                                       EXHIBIT B

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                     (Establishment of Treasury PEPS Units)

The Chase Manhattan Bank, as Securities Intermediary
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8159

         Re:      PEPS Units of CMS Energy Corporation (the "Company") and CMS
                  Energy Trust III

                  The securities account of The Chase Manhattan Bank, as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Chase Manhattan Bank, as Collateral Agent
                  of CMS Energy Corporation, as pledgee of The Bank of New
                  York, as the Purchase Contract Agent on behalf of and as
                  attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

         Please refer to the Pledge Agreement, dated as of August 22, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The
Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the
holders of PEPS Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used herein but not defined shall have the meanings set
forth in the Pledge Agreement.

         When you have confirmed that $           Value of Treasury Securities
or security entitlements thereto has been credited to the Collateral Account by
or for the benefit of          , as Holder of PEPS Units (the "Holder"), you are
hereby instructed to release from the Collateral Account [an equal Value of
[Preferred

<PAGE>   51

Securities or security entitlements thereto] [Subordinated Deferrable Notes or
security entitlements thereto]] relating to       PEPS Units of the Holder] by
Transfer to the Purchase Contract Agent.

                                             THE CHASE MANHATTAN BANK,
                                             as Collateral Agent

Dated:                                       By:
       -------------------                      -----------------------------
                                                Name:
                                                     ------------------------
                                                Title:
                                                      -----------------------

Please print name and address of Holder:

--------------------------------               --------------------------------
            Name                               Social Security or other
                                               Taxpayer Identification Number,
                                               if any

--------------------------------
           Address

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

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

<PAGE>   52

                                                                       EXHIBIT C

                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                        (Reestablishment of PEPS Units )

The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8159

         Re:      PEPS Units of CMS Energy Corporation (the "Company")
                  and CMS Energy Trust III

                  The securities account of The Chase Manhattan Bank, as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Chase Manhattan Bank, as Collateral Agent
                  of CMS Energy Corporation, as pledgee of the Bank of New
                  York, as the Purchase Contract Agent on behalf of and as
                  attorney-in-fact for the Holders" (the "Collateral Account")

         Please refer to the Pledge Agreement dated as of August 22, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent and as
Securities Intermediary, and the undersigned, as Purchase Contract Agent and as
attorney-in-fact for the holders of PEPS Units from time to time. Capitalized
terms used herein but not defined shall have the meaning set forth in the Pledge
Agreement.

         We hereby notify you in accordance with Section 5.3(a) of the Pledge
Agreement that the holder of securities listed below (the "HOLDER") has elected
to substitute [$ Value of [Preferred Securities or security entitlements
thereto] [Subordinated Deferrable Notes or security entitlements thereto]] in
exchange for $           Value of Pledged Treasury Securities and has delivered
to the undersigned a notice stating that the holder has Transferred such
[Preferred Securities or security entitlements thereto] [Subordinated Deferrable
Notes or security entitlements thereto] to the Securities Intermediary, for
credit to the Collateral Account.

<PAGE>   53

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such [Preferred Securities or security entitlements thereto]
[Subordinated Deferrable Notes or security entitlements thereto] have been
credited to the Collateral Account, to release to the undersigned $
Value of Treasury Securities or security entitlements thereto related to
PEPS Units of such Holder in accordance with Section 5.3(a) of the Pledge
Agreement. We also hereby confirm that no Tax Event Redemption has occurred.

                                               THE BANK OF NEW YORK,
                                               as Purchase Contract Agent

Date:                                          By:
     ---------------------------                  ------------------------------
                                               Name:
                                                   -----------------------------
                                               Title:
                                                     ---------------------------

Please print name and address of Holder electing to substitute [Preferred
Securities or security entitlements thereto] [Pledged Subordinated Deferrable
Notes or security entitlements thereto] for Pledged Treasury Securities:

---------------------------------             --------------------------------
           Name                               Social Security or other
                                              Taxpayer Identification Number,
                                              if any

---------------------------------
           Address

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

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

<PAGE>   54

                                                                       EXHIBIT D

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                         (Reestablishment of PEPS Units)

The Chase Manhattan Bank, as Securities Intermediary
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8159

         Re:      PEPS Units of CMS Energy Corporation
                  (the "COMPANY") and CMS Energy Trust III

                  The securities account of The Chase Manhattan Bank, as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Chase Manhattan Bank, as Collateral Agent
                  of CMS Energy Corporation, as pledgee of the Bank of New
                  York, as the Purchase Contract Agent on behalf of and as
                  attorney-in-fact for the Holders" (the "COLLATERAL ACCOUNT")

         Please refer to the Pledge Agreement dated as of August 22, 2000 (the
"PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary, The
Bank of New York, as Purchase Contract Agent and as attorney-in-fact for the
holders of PEPS Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used herein but no defined shall have the meaning set
forth in the Pledge Agreement. When you have confirmed that $            Value
of [Preferred Securities or security entitlements thereto] [Subordinated
Deferrable Notes or security entitlements thereto] has been credited to the
Collateral Account by or for the benefit of                 , as Holder of PEPS
Units (the "Holder"), you are hereby instructed to release from the Collateral

<PAGE>   55

Account $                 Value of Treasury Securities or security entitlements
thereto by Transfer to the Purchase Contract Agent.

                                          CHASE MANHATTAN BANK,
                                          as Collateral Agent

Dated:                                    By:
     ---------------------------             ------------------------------
                                          Name:
                                               ----------------------------
                                          Title:
                                                ---------------------------

--------------------------------          --------------------------------
             Name                         Social Security or other
                                          Taxpayer Identification Number, if any

--------------------------------
            Address

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

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

<PAGE>   56

                                                                       EXHIBIT E

             NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
                           TO PURCHASE CONTRACT AGENT
                            (Cash Settlement Amounts)

The Bank of New York
101 Barclay Street
21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5915

         Re:                   PEPS Units of CMS Energy Corporation
               (the "Company") and CMS Energy Trust III

         Please refer to the Pledge Agreement dated as of August 22, 2000 (the
"PLEDGE AGREEMENT"), by and among you, the Company, The Chase Manhattan Bank, as
Collateral Agent and the undersigned, as Securities Intermediary. Unless
otherwise defined herein, terms defined in the Pledge Agreement are used herein
as defined therein.

         In accordance with Section 5.5(d) of the Pledge Agreement, we hereby
notify you that as of 11:00 a.m. (New York City time) on the fifth Business Day
immediately preceding [applicable Purchase Contract Settlement Date], we have
received (i) $                 in immediately available funds paid in an
aggregate amount equal to the Purchase Price to the Company on the Purchase
Contract Settlement Date with respect to                  PEPS Units and (ii) $
            in immediately available funds paid in an aggregate amount equal to
the Purchase Price to the Company on the Purchase Contract Settlement Date with
respect to        Treasury PEPS Units.

                                              THE CHASE MANHATTAN BANK,
                                              as Securities Intermediary,

Date:                                         By:
     -----------------------------               -------------------------------
                                                    Name:
                                                    Title:

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