Document:

Exhibit
10.13

 

EXECUTION
COPY

 

$94,641,000

 

SEMCO
ENERGY, INC.

 

73⁄4%
Senior Notes due 2013

 

PURCHASE
AGREEMENT

 

May 14, 2003

Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, NY 10010-3629

 

Ladies and Gentlemen:

 

1.                                       Introductory. 
SEMCO Energy, Inc., a Michigan corporation (the “Company”), proposes, subject to the terms
and conditions stated herein, to issue and exchange with Credit Suisse First
Boston LLC (“CSFB” or the “Purchaser”) $94,641,000 principal amount of its 73⁄4% Senior Notes due 2013 (the “Offered Securities”) to be issued under an
indenture, dated as of May 15, 2003 (the “Indenture”), between the
Company and Fifth Third Bank, a Michigan banking corporation, as trustee
(the “Trustee”).  The United States Securities Act of 1933 is
herein referred to as the “Securities Act.”

 

Holders (including subsequent transferees) of the Offered Securities
will have the registration rights set forth in the registration rights
agreement (the “Registration Rights Agreement”),
to be dated the Closing Date (as defined below), pursuant to which the Company
will agree to file with the Securities and Exchange Commission (the “Commission”) under the circumstances set
forth therein, (i) a registration statement under the Securities Act (the “Exchange Offer Registration Statement”)
relating to the Company’s 73⁄4%
Senior Notes due 2013 in a like aggregate principal amount as the Company
issued under the Indenture, identical in all material respects to the Offered
Securities and registered under the Securities Act (the “Exchange Securities”), to be
offered in exchange for the Offered Securities (such offer to exchange being
referred to as the “Exchange Offer”)
and (ii) a shelf registration statement pursuant to Rule 415 under the
Securities Act (the “Shelf Registration
Statement” and, together with the Exchange Offer Registration
Statement, the “Registration Statements”).  The Offered Securities and the Exchange
Securities are referred to collectively as the “Securities.”

 

The Company hereby agrees with the Purchaser as follows:

 

2.                                       Representations
and Warranties of the Company.  The Company
represents and warrants to, and agrees with, the Purchaser that:

 

(a)                                  A preliminary offering circular and
an offering circular relating to the Offered Securities and
(i) $55,359,000 principal amount of the Company’s 71/8%
Senior Notes due 2008 and (ii) $150,000,000 principal amount of the Company’s 73⁄4% Senior Notes due 2013 each to be
issued and sold pursuant to a Purchase Agreement (the “Other Purchase Agreement”)
dated the date hereof between the Company and the several initial purchasers
party thereto (together, the “Other Securities”) to be offered by the
Company have been prepared by the Company. Such preliminary offering circular
(the “Preliminary Offering Circular”)
and offering circular (the “Offering Circular”),
as supplemented as of the date of this Purchase Agreement (this “Agreement”), together with the information
incorporated by reference therein are hereinafter collectively referred to as
the “Offering Document.” On the date
of this Agreement, the Offering Document does not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Company by or through
CSFB specifically for use therein, it being understood and agreed that the only

 

 

such
information is that described as such in Section 7(b) hereof.  The Company’s Annual Report on
Form 10-K most recently filed with the Commission and all subsequent
reports (collectively, the “Exchange Act
Reports”) that have been filed by the Company with the Commission or
sent to shareholders pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”), when they were filed with
the Commission, conformed in all material respects to the requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.

 

(b)                                 The Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Michigan, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Document.  The Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent the failure to so
qualify or be in good standing would not reasonably be expected to have a
material adverse effect on the financial condition, business, properties or
results of operations of the Company and its subsidiaries taken as a whole (“Material
Adverse Effect”).

 

(c)                                  The entities listed on Schedule A
hereto are the only subsidiaries, direct or indirect, of the Company; each
subsidiary of the Company has been duly incorporated and is an existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document.  Each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent that the failure to so
qualify or be in good standing would not reasonably be expected to have a
Material Adverse Effect; all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized and validly issued and
is fully paid and nonassessable; and the capital stock of each subsidiary owned
by the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.

 

(d)                                 The Indenture has been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered by the Company and will conform to the description
thereof contained in the Offering Document; the Offered Securities have been
duly authorized by the Company and when the Offered Securities are executed and
authenticated in accordance with the provisions of the Indenture and delivered
and paid for pursuant to this Agreement on the Closing Date, such Offered
Securities will have been duly executed, authenticated, issued and delivered
and will conform to the description thereof contained in the Offering Document
and, assuming due authorization, execution and authentication by the Trustee,
the Indenture and such Offered Securities will constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

 

(e)                                  No consent, approval, authorization,
or order of, or filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by this
Agreement, the Indenture, the Registration Rights Agreement and, the exchange
agreement to be entered into prior to the Closing Date (the “Exchange Agreement”) between the Company
and CSFB, in connection with the issuance, sale and exchange of the Offered
Securities by the Company, except as may be required (i) under state securities
law and (ii) under federal securities laws with respect to the Company’s
obligations under the Registration Rights Agreement.

 

(f)                                    The execution, delivery and
performance by the Company of the Indenture, this Agreement, the Registration
Rights Agreement and the Exchange Agreement, and the issuance, sale and
exchange of the Offered Securities and compliance with the terms and provisions
thereof by the Company will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, any

 

2

 

rule,
regulation or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their respective properties, or any agreement or instrument
to which the Company or any such subsidiary is a party or by which the Company
or any such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject (except for such breaches, violations
or defaults as would not reasonably be expected to have a material adverse
effect on the financial condition, business, properties or results of
operations of any subsidiary of the Company), or the charter or by-laws of the
Company or any such subsidiary, and the Company has full power and authority to
authorize, issue, exchange and sell the Offered Securities as contemplated by
this Agreement.

 

(g)                                 This Agreement has been duly
authorized, executed and delivered by the Company.

 

(h)                                 Except as disclosed in the Offering
Document or as would not be reasonably expected to have a Material Adverse
Effect, the Company and its subsidiaries have good and marketable title to all
real properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would affect the value thereof
or interfere with the use made or to be made thereof by them; and hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would interfere with the use made or to be made thereof by
them.

 

(i)                                     The Company and its subsidiaries
possess adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate be reasonably expected to have a Material Adverse Effect.

 

(j)                                     No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that would be reasonably expected to have a Material Adverse Effect.

 

(k)                                  The Company and its subsidiaries
own, possess or can acquire on reasonable terms, adequate trademarks, trade
names and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property (collectively, “intellectual
property rights”) necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of infringement
of, or conflict, with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.

 

(l)                                     Except as disclosed in the Offering
Document, neither the Company nor any of its subsidiaries is in violation of
any statute, any rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “environmental laws”), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim would individually or
in the aggregate be reasonably expected to have a Material Adverse Effect; and
the Company is not aware of any pending investigation that might lead to such a
claim.

 

(m)                               Except as disclosed in the Offering
Document, there are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties that if determined adversely to the Company or any of its
subsidiaries would individually or in the

 

3

 

aggregate
be reasonably expected to have a Material Adverse Effect, or would materially
and adversely affect the ability of the Company to perform its obligations
under the Indenture, this Agreement, the Other Purchase Agreement, the
Registration Rights Agreement or the Exchange Agreement, or that would
reasonably be expected to adversely effect the sale of the Offered Securities;
and no such actions, suits or proceedings are threatened or, to the Company’s
knowledge, contemplated.

 

(n)                                 The financial statements included in
the Offering Document present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and , except as otherwise
disclosed in the Offering Document, such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis.

 

(o)                                 Except as disclosed in the Offering
Document, since the date of the latest audited financial statements included in
the Offering Document there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
financial condition, business, properties or results of operations of the
Company and its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.

 

(p)                                 The Company is not an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the United
States Investment Company Act of 1940 (the “Investment
Company Act”); and the Company is not and, after giving effect to
the offering and sale of the Offered Securities and the Other Securities and
the application of the proceeds thereof as described in the Offering Document,
will not be an “investment company” as defined in the Investment Company Act.

 

(q)                                 No securities of the same class (within
the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered
Securities and the Other Securities are listed on any national securities
exchange registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system.

 

(r)                                    Assuming the accuracy of the
representations and warranties of the Purchaser contained in Section 4 hereof
and its compliance with the agreements set forth therein, and, assuming the
accuracy of the representations deemed to be made in the Offering Circular by
purchasers to whom the Purchaser initially resells the Offered Securities, the
offer, exchange and sale of the Offered Securities by the Company to the
Purchaser and the initial resale of the Offered Securities by the Purchaser, in
each case, in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act pursuant to the exemption from
registration under Section 4(2) thereof and Regulation S thereunder and it
is not necessary to qualify an indenture in respect of the Offered Securities
under the United States Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

 

(s)                                  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf (other than the
Purchaser, as to whom the Company makes no representation) (i) has, within
the six-month period prior to the date hereof, offered or sold in the United
States or to any U.S. person (as such terms are defined in Regulation S
under the Securities Act) the Offered Securities or any security of the same
class or series as the Offered Securities or (ii) has offered or will
offer or sell the Offered Securities (A) in the United States by means of
any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act or (B) with respect to any such securities
sold in reliance on Rule 903 of Regulation S (“Regulation S”) under the
Securities Act, by means of any directed selling efforts within the meaning of
Rule 902(c) of Regulation S.  The
Company, its affiliates and any person acting on its or their behalf (other
than the Purchaser, as to whom the Company makes no representation) have
complied

 

4

 

and
will comply with the offering restrictions requirement of Regulation S. The
Company has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for this
Agreement.

 

(t)                                    The Company is subject to Section 13
or 15(d) of the Exchange Act.

 

(u)                                 There is no “substantial U.S. market
interest” as defined in Rule 902(j) of Regulation S in the Company’s debt
securities.

 

(v)                                 On the Closing Date, the Exchange
Securities will have been duly authorized by the Company; and when the Exchange
Securities are issued, executed and authenticated and delivered in accordance
with the terms of the Registration Rights Agreement and the Indenture, and
assuming due authorization, execution and authentication by the Trustee, the
Exchange Securities will be the valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles.

 

(w)                               The Registration Rights Agreement
has been duly authorized by the Company and, on the Closing Date, will have
been duly executed and delivered by the Company.  When the Registration Rights Agreement has been duly executed and
delivered by the Company, and assuming due authorization, execution and
delivery by the Purchaser, the Registration Rights Agreement will be a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.  On the Closing Date, the Registration Rights
Agreement will conform as to legal matters to the description thereof in the
Offering Circular.

 

(x)                                   Neither the Company nor any of its
subsidiaries is in violation of its respective charter or by-laws or, except as
would not reasonably be likely to result in a Material Adverse Effect, in
default in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound.

 

(y)                                 Other than the Registration Rights
Agreement, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Securities registered pursuant to any Registration Statement.

 

(z)                                   Neither the Company nor any of its
subsidiaries nor any agent thereof acting on the behalf of them has taken, and
none of them will take, any action that might cause this Agreement or the
issuance or exchange and sale of the Offered Securities to violate Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System.  Less than 25% of the value
of the assets of the Company subject to the negative covenants of the Indenture
consist and will consist of “margin stock” within the meaning of Regulation U
or Regulation X of the Board of Governors of the Federal Reserve System at all
relevant times, and none of the proceeds of the Offered Securities will be
used, directly or indirectly, to make loans to any person that will be secured
by margin stock or will have the benefit of any arrangement restricting the
disposition or pledge of margin stock. 
None of the proceeds from the issuances of the ROARS (as defined
hereinafter), the 8.00% Senior Notes due 2004, the 7.20% Senior Notes due
2007 or the 8.32% Senior Notes due 2024 will be used for the purpose, whether
immediate, incidental or ultimate,

 

5

 

of buying or carrying “margin stock” within the
meaning of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.

 

(aa)                             Except as disclosed in the Offering
Document, neither Moody’s Investors Service, Inc. nor Standard and Poor’s
Ratings Group (i) has imposed (or has informed the Company that it is
considering imposing) any condition (financial or otherwise) on the Company’s
retaining any rating assigned to the Company, any securities of the Company or
(ii) has indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (b)
any change in the outlook for any rating of the Company or any securities of
the Company.

 

(bb)                          Except as disclosed in the Offering
Document, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the
Company or Purchaser for a brokerage commission, finder’s fee or other like
payment in connection with the issuance, exchange and sale of the Offered
Securities to the Purchaser, other than as may be created under this Agreement.

 

(cc)                            The amended credit agreement between
the Company, Standard Federal Bank and the other parties thereto to be entered
into on or prior to the closing date under the Other Purchase Agreement (the “Amended Credit Agreement”) has been duly
authorized by the Company, and, when the Amended Credit Agreement has been duly
executed and delivered by the Company, and assuming due authorization,
execution and delivery by the other parties thereto, the Amended Credit
Agreement will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles.

 

(dd)                          The Exchange Agreement has been duly
authorized, duly executed and delivered by the Company, and assuming due
authorization, execution and delivery by the other parties thereto, the
Exchange Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’
rights and to general equity principles.

 

(ee)                            The Company is not and, after giving
effect to the offering, exchange and sale of the Offered Securities and the
offering and sale of the Other Securities and the application of the proceeds
thereof as described in the Offering Document, will not be subject to
regulation as a “public-utility company,” a “holding company,” an “affiliate”
of a “holding company” or a “subsidiary company” of a “holding company” as such
terms are defined under the Public Utility Holding Company Act, as amended.

 

(ff)                                The industry-related and
customer-related data under the captions “Offering Circular Summary” and
“Business” in the Offering Document are based on or derived from sources that
the Company believes to be reliable.

 

(gg)                          The Offering Document contains all
the information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Securities Act.

 

(hh)                          The Company and each of its
subsidiaries carry, or are covered by, insurance in such amounts and covering
such risks as is customary for companies engaged in similar businesses in
similar industries for the conduct of their respective businesses and the value
of their respective properties.

 

6

 

(ii)                                  No relationship, direct or indirect,
required to be described under Item 404 of Regulation S-K, exists between or
among the Company on the one hand, and the directors, officers or shareholders
of the Company on the other hand, that is not described in the Offering
Document.

 

(jj)                                  The Company is in compliance in all
material respects with all presently applicable provisions of ERISA; no
“reportable event” (as defined in ERISA), has occurred with respect to any
“pension plan” (as defined in ERISA), for which the Company would have any
material liability; the Company has not incurred and does not expect to incur
material liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the “Code”); and each “pension plan” for
which the Company would have any material liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, that
would cause the loss of such qualification.

 

(kk)                            Except as disclosed in the Offering
Document, the Company has filed all material federal, state and local income and
franchise tax returns required to be filed through the date hereof and has paid
all taxes due thereon, except where the same may be contested in good faith by
appropriate proceedings, and no tax deficiency has been determined adversely to
the Company or any of its subsidiaries that has had (nor does the Company have
any knowledge of any tax deficiency that, if determined adversely to the
Company or any of its subsidiaries, would reasonably be expected to have) a
Material Adverse Effect.

 

(ll)                                  Since December 31, 2002 through the
date hereof, and except as may otherwise be disclosed or contemplated in the
Offering Document, the Company has not (i) issued or granted any securities,
(ii) incurred any material liability or obligation, direct or contingent, other
than liabilities and obligations that were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course of
business or (iv) declared or paid any dividend on its capital stock.

 

(mm)                      The Company (i) makes and keeps
books and records that are accurate in all material respects and (ii) maintains
internal accounting controls that provide reasonable assurance that (A)
transactions are executed in accordance with management’s authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management’s authorization and (D)
the recorded accountability for its assets is compared with existing assets at
reasonable intervals.

 

(nn)                          Neither the Company nor any of its
subsidiaries, nor, to the Company’s knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.

 

3.                                       Purchase, Sale and
Delivery of Offered Securities.  On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell to the
Purchaser, and the Purchaser agrees, to purchase from the Company, at a
purchase price of 97.5% of the principal amount thereof, the Offered
Securities.

 

The obligation of the Purchaser to purchase, at a purchase price of
97.5% of the principal amount thereof, Offered Securities shall be satisfied by
CSFB by delivering to the Company in exchange for the Offered Securities
$77,000,000 aggregate principal amount of the Company’s 8.95% Remarketable or
Redeemable Securities due 2008 including the related remarketing option under
the Remarketing Agreement (as defined hereinafter) (Remarketing

 

7

 

Date: July 1, 2003) (including such remarketing
option, the “ROARS”) (or such
lesser amount of the ROARS as CSFB actually holds), in accordance with
arrangements established between the Company and CSFB.  The ROARS will be delivered on the Closing
Date through the facilities of the DTC to Bank One Trust Company, National
Association, as ROARS trustee, for the account of the Company.  Delivery of the ROARS will be deemed to have
occurred when the Company receives notice from the ROARS trustee that the ROARS
trustee’s (or its nominee’s) account with the DTC has been credited with the
ROARS.  Subsequently, the ROARS trustee,
in accordance with the Company’s instructions, will effect the retirement of
the ROARS.

 

The Company will deliver against payment of the purchase price (which
shall be the delivery of the ROARS as described above), the Offered Securities
to be offered and sold by the Purchaser in reliance on Regulation S (the “Regulation S Securities”) in the form of
one or more permanent global Securities in registered form without interest
coupons (the “Regulation S Global
Securities”) that will be deposited with the Trustee as custodian
for The Depository Trust Company (“DTC”)
for the respective accounts of the DTC participants for Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System (“Euroclear”), and Clearstream Banking,
société anonyme (“Clearstream, Luxembourg”)
and registered in the name of Cede & Co., as nominee for DTC. The
Regulation S Global Securities with respect to the 2008 Securities and the
Restricted Global Securities with respect to the 2008 Securities shall be
assigned separate CUSIP numbers.  The
Regulation S Global Securities with respect to the 2013 Securities and the
Restricted Global Securities with respect to the 2013 Securities shall be
assigned separate CUSIP numbers.  The
Company will deliver against payment of the purchase price (which shall be the
delivery of the ROARS as described above), the Offered Securities to be
purchased by the Purchaser hereunder and to be offered and sold by the
Purchaser in reliance on Rule 144A under the Securities Act (the “144A Securities”) in the form of one
permanent global security in definitive form without interest coupons (the “Restricted Global Securities”) deposited
with the Trustee as custodian for DTC and registered in the name of Cede &
Co., as nominee for DTC. The Regulation S Global Securities and the Restricted
Global Securities shall be assigned separate CUSIP numbers. The Restricted
Global Securities shall include the legend regarding restrictions on transfer
set forth under “Transfer Restrictions” in the Offering Document. Until the
termination of the restricted period (as defined in Regulation S) with respect
to the offering of the Offered Securities, interests in the Regulation S Global
Securities may only be held by the DTC participants for Euroclear and
Clearstream, Luxembourg. Interests in any permanent global Securities will be
held only in book-entry form through Euroclear, Clearstream, Luxembourg or DTC,
as the case may be, except in the limited circumstances described in the
Offering Document.

 

Delivery of the ROARS as described above as payment of the purchase
price for the Regulation S Securities and the 144A Securities shall be made by
the Purchaser at 9:00 A.M. (New York time), on May 15, 2003, or at such other
time not later than seven full business days thereafter as CSFB and the Company
determine, such time being herein referred to as the “Closing Date,” against delivery to the
Trustee as custodian for DTC of (i) the Regulation S Global
Securities representing all of the Regulation S Securities for the respective
accounts of the DTC participants for Euroclear and Clearstream, Luxembourg and
(ii) the Restricted Global Securities representing all of the 144A
Securities.  Copies of the Regulation S
Global Securities and the Restricted Global Securities will be made available
for checking at the office of Latham & Watkins LLP, 885 Third Avenue, New
York, New York 10022, as soon as practicable prior to the Closing Date.

 

4.                                       Representations by Purchaser; Resale by Purchaser.

 

(a)                                  The Purchaser represents and
warrants to the Company that it is an “accredited investor” within the meaning
of Regulation D under the Securities Act.

 

(b)                                 The Purchaser acknowledges that the
Offered Securities have not been registered under the Securities Act and may
not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.  The
Purchaser represents and agrees that it has only offered, and will only offer
and resell the Offered Securities (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 or Rule 144A
under the Securities Act (“Rule 144A”).

 

8

 

Accordingly,
neither the Purchaser nor its affiliates, nor any persons acting on its or
their behalf, have engaged or will engage in any directed selling efforts with
respect to the Offered Securities, and the Purchaser, its affiliates and all
persons acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. The Purchaser agrees that,
at or prior to confirmation of sale of the Offered Securities, other than a
sale pursuant to Rule 144A, the Purchaser will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases the Offered Securities from it during the restricted period a
confirmation or notice to substantially the following effect:

 

“The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may
not be offered or sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the date of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms used
above have the meanings given to them by Regulation S.”

 

Terms used in this subsection (b) have the meanings
given to them by Regulation S.

 

(c)                                  The Purchaser agrees that it and
each of its affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities except
with the prior written consent of the Company.

 

(d)                                 The Purchaser agrees that it and
each of its affiliates will not offer or sell the Offered Securities in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.  The Purchaser agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.

 

(e)                                  The Purchaser represents and agrees
that (i) it has not offered or sold and prior to the date six months after
the date of issue of the Offered Securities will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Offered Securities in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Offered Securities to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued or passed on.

 

5.                                       Certain Agreements
of the Company.  The Company agrees with the Purchaser that:

 

(a)                                  The Company will advise CSFB
promptly of any proposal to amend or supplement the Offering Document and will
not effect such amendment or supplementation without CSFB’s consent (it being
understood that the filing of any documents with the Commission pursuant to
Sections 13(a), 13(c),

 

9

 

14
or 15(d) of the Exchange Act prior to the completion of the resale of the
Offered Securities shall be deemed to be such an amendment or supplementation),
such consent not to be unreasonably withheld. If, at any time prior to the
completion of the resale of the Offered Securities by the Purchaser, any event
occurs as a result of which the Offering Document as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
if it is necessary at any such time to amend or supplement the Offering
Document to comply with any applicable law, the Company promptly will notify
CSFB of such event and promptly will prepare, at its own expense, an amendment
or supplement that will correct such statement or omission or effect such
compliance. Neither CSFB’s consent to, nor the Purchaser’s delivery to offerees
or investors of, any such amendment or supplement shall constitute a waiver of
any of the conditions set forth in Section 6 hereof.  In the event that the Company does not
issue, and the Purchasers (as defined in the Other Purchase Agreement) do not
purchase, the Other Securities on the Closing Date (as defined in the Other
Purchase Agreement) in accordance with the terms and conditions of the Other
Purchase Agreement, the Company shall, at its own expense, amend, supplement or
otherwise revise the Offering Document as may be reasonably requested by CSFB
to assist it in reselling and distributing the Offered Securities and as Latham
& Watkins LLP concludes is necessary to render an opinion that the Offering
Document does not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.  The Company shall
cause Gibson, Dunn & Crutcher LLP, or another firm reasonably acceptable to
CSFB, to render such an opinion on the date of such amended, supplemented or
otherwise revised offering document and/or on the closing date of any
re-offering of the Offered Securities by CSFB as CSFB reasonably requests; provided, however, that any such
opinion shall not be required to be delivered on more than two occasions unless
the Company otherwise agrees to cause such opinion to be delivered.

 

(b)                                 The Company will furnish to CSFB
copies of any preliminary offering circular, the Offering Document and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as CSFB reasonably requests, and the Company will
furnish to CSFB on the date hereof three copies of the Offering Document signed
by a duly authorized officer of the Company, one of which will include the
independent accountants’ reports therein manually signed by such independent
accountants.  So long as the Securities
are outstanding, at any time when the Company is not subject to Section 13
or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be
furnished to CSFB and, upon request of holders and prospective purchasers of
the Offered Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective purchasers of
the Offered Securities pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) in order to permit compliance with
Rule 144A in connection with resales by such holders of the Offered
Securities.  The Company will pay the
expenses of printing and distributing to the Purchaser all such documents.

 

(c)                                  The Company will arrange for the
qualification of the Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in the United
States and Canada as CSFB designates and will continue such qualifications in
effect so long as required for the resale of the Offered Securities by the
Purchaser; provided that the Company will not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
such state.

 

(d)                                 So long as the Securities remain
outstanding, upon request, the Company will furnish to CSFB, as soon as
practicable after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and, upon request, the Company will furnish to CSFB
(i) as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange Act or
mailed to shareholders, and (ii) from time to time, such other information
concerning the Company as CSFB may reasonably request.

 

10

 

(e)                                  During the period of two years after
the Closing Date, the Company will, upon request, furnish to CSFB and any
holder of Offered Securities a copy of the restrictions on transfer applicable
to the Offered Securities.

 

(f)                                    During the period of two years after
the Closing Date, the Company will not, and will not permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to, resell
any of the Offered Securities that have been reacquired by any of them.

 

(g)                                 During the period of two years after
the Closing Date, the Company will not be or become, an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.

 

(h)                                 The
Company will pay all expenses incidental to the performance of its obligations
under this Agreement, the Indenture, the Registration Rights Agreement and the
Exchange Agreement, including (i) the fees and expenses of the Trustee and its
professional advisers; (ii) all expenses in connection with the execution,
issue, authentication, packaging and initial delivery of the Offered Securities
and, as applicable, the Exchange Securities, the preparation and printing of
this Agreement, the Registration Rights Agreement, the Offered Securities, the
Indenture, the Exchange Agreement and the Offering Document and any amendments
and supplements thereto, and any other document relating to the issuance,
offer, sale, and exchange and delivery of the Offered Securities, and as
applicable, the Exchange Securities; (iii) the cost of qualifying the Offered
Securities for trading in The PortalSM Market (“PORTAL”) and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Company in connection
with the issue of the Offered Securities; (v) any expenses (including
reasonable fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities or the Exchange Securities for sale
under the laws of such jurisdictions in the United States and Canada as CSFB
designates and the printing of memoranda relating thereto; (vi) any fees
charged by investment rating agencies for the rating of the Offered Securities
or the Exchange Securities; and (vii) any expenses incurred in distributing
preliminary offering circulars and the Offering Document (including any
amendments and supplements thereto) to the Purchaser.  The Company will also pay or reimburse the Purchaser (to the
extent incurred by them) for (x) all expenses of CSFB to be paid to CSFB by the
Company pursuant to the terms of the letter agreement dated April 26, 2003
between the Company and CSFB, (y) all reasonable travel expenses of the
Purchaser and the Company’s officers and employees and (z) any other reasonable
expenses of the Purchaser and the Company in connection with attending or
hosting meetings with prospective purchasers of the Offered Securities from the
Purchaser.

 

(i)                                     In connection with the offering,
until CSFB shall have notified the Company, which notification shall be
promptly provided upon the written request of the Company, of the completion of
the resale of the Offered Securities, neither the Company nor any of its
affiliates has or will, either alone or with one or more other persons, bid for
or purchase for any account in which it or any of its affiliates has a
beneficial interest any Offered Securities or attempt to induce any person to
purchase any Offered Securities; and neither it nor any of its affiliates will
make bids or purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Offered Securities.

 

(j)                                     Until the earlier of (i) the closing
of the initial offering of the Other Securities by the Purchasers (as defined
in the Other Purchase Agreement) or (ii) July 5, 2003, the Company will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any United States dollar-denominated debt securities issued or
guaranteed by the Company and having a maturity of more than one year from the
date of issue, or publicly disclose the intention to make any such offer, sale,
contract, pledge or disposition, without the prior written consent of CSFB,
other than with respect to any debt financings under the Company’s credit
facilities; provided, however,
the foregoing shall not apply to the remarketing or the redemption of the
Company’s ROARS in accordance with the provisions of the Remarketing
Agreement.  The Company will not at any
time offer, sell, contract to sell, pledge or otherwise dispose of,

 

11

 

directly
or indirectly, any securities under circumstances where such offer, sale,
contract, pledge or disposition would cause the exemption afforded by Section
4(2) of the Securities Act or the safe harbor of Regulation S thereunder to
cease to be applicable to the offer and sale of the Offered Securities.

 

(k)                                  Upon delivery of the ROARS from CSFB
to the ROARS trustee, the Company shall instruct the ROARS trustee to effect
the retirement of such ROARS.

 

6.                                       Conditions of the
Obligation of the Purchaser.  The obligation of the Purchaser to purchase
and pay for the Offered Securities (by delivery of the ROARS as described in
Section 3 hereof) will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of officers of the Company made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:

(a)                                  CSFB shall have received a letter,
addressed to CSFB and the Purchasers (as defined in the Other Purchase
Agreement) dated the date of this Agreement, of PricewaterhouseCoopers LLP, in
form and substance satisfactory to CSFB and the Purchasers (as defined in the
Other Purchase Agreement) concerning the financial information with respect to
the Company set forth in the Offering Document and stating that the procedures
carried out by such firm extended to at least two days prior to the date of
this Agreement.

 

(b)                                 Subsequent to the execution and
delivery of this Agreement, there shall not have occurred (i) any change, or
any development or event involving a prospective change, in the financial
condition, business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise that, in the reasonable judgment of CSFB,
is material and adverse and makes it impractical or inadvisable to proceed with
completion of the offering or the sale of and payment for the Offered
Securities; (ii) except as disclosed in the Offering Document, any downgrading
in the rating of any debt securities of the Company by any “nationally
recognized statistical rating organization” (as defined for purposes of Rule
436(g) under the Securities Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt securities
of the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating) or any announcement that the Company has been placed on negative
outlook; (iii) any change in U.S. or international financial, political or
economic conditions or currency exchange rates or exchange controls as would,
in the reasonable judgment of the Purchaser, be likely to prejudice materially
the success of the proposed issue, sale or distribution of the Offered
Securities, whether in the primary market or in respect of dealings in the
secondary market; (iv) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange or any setting
of minimum prices for trading on such exchange, or any material suspension of
trading of any securities of the Company on any exchange or in the
over-the-counter market; (v) any banking moratorium declared by U.S. Federal or
New York authorities; (vi) any major disruption of settlements of securities or
(vii) any attack on, outbreak or escalation of hostilities or act of terrorism
involving the United States, any declaration of war by Congress or any other
national or international calamity or emergency if, in the reasonable judgment
of the Purchaser, the effect of any such attack, outbreak, escalation, act,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the offering or the sale of and payment for the
Offered Securities.

 

(c)                                  The Purchaser shall have received an
opinion, dated the Closing Date, of Gibson, Dunn & Crutcher LLP, special
counsel for the Company, that:

 

(i)                                     The Indenture constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.

 

12

 

(ii)                                  The Registration Rights Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

 

(iii)                               The Exchange Agreement, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.

 

(iv)                              The Offered Securities, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Purchaser in accordance with the terms
contained herein, will be legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, and will be
entitled to the benefits of the Indenture and the Registration Rights
Agreement.

 

(v)                                 The Company is not and, after giving
effect to the offering, exchange and sale of the Offered Securities and the
offer and sale of the Other Securities and the application of the proceeds
thereof as described in the Offering Document, will not be required to be
registered as an “investment company” within the meaning of the Investment Company
Act.

 

(vi)                              The issuance, exchange and sale of
the Offered Securities, and the execution, delivery and performance by the
Company of the Indenture, this Agreement, the Exchange Agreement and the
Registration Rights Agreement, do not and will not violate, or require any
filing with, consent, authorization or approval of any governmental authority
or regulatory body of the State of New York or the United States of America
under, any law, rule or regulation of the State of New York or the United
States of America applicable to the Company that, in such counsel’s experience,
is generally applicable to transactions in the nature of those contemplated by
the Indenture, this Agreement, the Exchange Agreement and the Registration
Rights Agreement, except for such filings, consents, authorizations or
approvals (i) as already have been obtained or (ii) that, if not obtained,
would not have a material adverse effect on the Company and its subsidiaries
taken as a whole or expose the Purchaser to any liability.

 

(vii)                           Assuming the accuracy of the
representations and warranties of the Company and the Purchaser and compliance
by them and their agreements contained herein, no registration of the Offered
Securities under the Securities Act, and no qualification of the Indenture
under the Trust Indenture Act, is required for the offer, exchange, sale and
delivery of the Offered Securities to the Purchaser on the date hereof or
resales by the Purchaser in the manner contemplated by this Agreement and the
Offering Document, it being understood that such counsel expresses no opinion
as to any subsequent resale of the Offered Securities.

 

(viii)                        The statements contained in the
Offering Document under the caption “Description of Other Indebtedness,”
insofar as such statements constitute a general summary of provisions of
documents referred to therein, are accurate in all material respects and fairly
summarize the matters referred to therein.

 

(ix)                                The statements under the caption
“Important Federal Income Tax Consideration,” insofar as such statements
constitute matters of United States law, are accurate in all material respects,
subject to the qualifications and limitations set forth therein.

 

(x)                                   As issued and delivered pursuant to
the Purchase Agreement, the Offered Securities are not of the same class
(within the meaning of Rule 144A under the Securities Act) as any securities of
the Company or any of its subsidiaries that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.

 

13

 

(xi)                                The issuance, exchange and sale to
and resale by the Purchaser of the Offered Securities and the issuance and sale
to and resale by the Purchasers (as defined in the Other Purchase Agreement) of
the Other Securities in accordance with the provisions of this Agreement and
the Other Purchase Agreement and the application of the proceeds thereof by the
Company as described in the Offering Document do not and will not result in a
violation of Regulations U or X of the Board of Governors of the Federal
Reserve System.

 

(xii)                             The Indenture, the Offered
Securities, the Exchange Agreement, the Purchase Agreement and the Registration
Rights Agreement conform in all material respects with the descriptions thereof
contained in the Offering Document.

 

(d)                                 The Purchaser shall have received an
opinion, dated the Closing Date, of Dickinson Wright, counsel for the Company,
that:

 

(i)                                     The Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Michigan, with corporate power and authority to own its properties
and conduct its business as described in the Offering Document; and based on
the certificates of state officials, the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business
requires such qualification.

 

(ii)                                  The Indenture has been duly
authorized, executed and delivered by the Company.

 

(iii)                               The Purchase Agreement, the
Registration Rights Agreement and the Exchange Agreement have each been duly
authorized, executed and delivered by the Company.

 

(iv)                              The Offered Securities have been
duly authorized, executed, issued and delivered by the Company.

 

(v)                                 The Exchange Securities have been
duly authorized by the Company.

 

(vi)                              There are no pending actions, suits
or proceedings against or affecting the Company, any of its subsidiaries or any
of their respective properties that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect, or would materially and adversely affect the ability of the
Company to perform its obligations under the Indenture, the Purchase Agreement,
the Other Purchase Agreement, the Registration Rights Agreement or the Exchange
Agreement, or that are otherwise material in the context of the sale of the
Offered Securities; and no such actions, suits or proceedings are threatened
or, to such counsel’s knowledge, contemplated.

 

(vii)                           There are no contracts, agreements
or understandings between the Company and any person (other than the
Registration Rights Agreement) granting such person the right to require the
Company to file a registration statement under the Securities Act with respect
to any securities of the Company owned by such person or to require the Company
to include such securities with the Offered Securities and the Other Securities
registered pursuant to the Registration Rights Agreement or in any securities
being registered pursuant to any other registration statement filed by the
Company under the Securities Act.

 

(viii)                        The execution, delivery and
performance of the Indenture, the Purchase Agreement, the Registration Rights
Agreement and the Exchange Agreement and the issuance,

 

14

 

exchange
and sale of the Offered Securities and compliance with the terms and provisions
thereof will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, any rule, regulation
or order of any governmental agency or body or any court having jurisdiction
over the Company or any subsidiary of the Company or any of their properties,
or any material agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound
or to which any of the properties of the Company or any such subsidiary is
subject, or the charter or by-laws of the Company or any such subsidiary, and
the Company has full power and authority to authorize, issue, exchange and sell
the Offered Securities as contemplated by the Purchase Agreement.

 

(e)                                  The Purchaser shall have received
from Latham & Watkins LLP, counsel for the Purchaser, such opinion or
opinions, dated the Closing Date, with respect to the validity of the Offered
Securities, the exemption from registration for the offer, sale and exchange of
the Offered Securities by the Company to the Purchaser and the resales by the
Purchaser as contemplated hereby and other related matters as CSFB may require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.

 

(f)                                    The Purchaser shall have received an
opinion, dated the Closing Date, of Loomis, Ewert, Parsley, Davis &
Gotting, A Professional Corporation, special Michigan regulatory counsel for
the Company, that:

 

(i)                                     The statements contained in the
Offering Document under the captions “Business— Regulatory Matters — Michigan”
and “Business — Regulatory Matters — Environmental Matters,” insofar as they
describe the laws, rules, regulations and documents referred therein, are
accurate in all material respects.

 

(g)                                 The Purchaser shall have received an
opinion, dated the Closing Date, of Ashburn & Mason, special Alaska
regulatory counsel for the Company, that:

 

(i)                                     The statements contained in the
Offering Document under the caption “Business—Regulatory Matters—Alaska,”
insofar as they describe the laws, rules, regulations and documents referred
therein, are accurate in all material respects.

 

(h)                                 The Purchaser shall have received an
opinion, dated the Closing Date, of LeBoeuf, Lamb, Greene & MacRae, LLP,
special federal regulatory counsel for the Company, that:

 

(i)                                     The Company is not, and after giving
effect to, and solely as a result of, the offering and sale of the Offered
Securities and the Other Securities and the application of the proceeds thereof
as described in the Offering Document, will not, be required to register as a
“holding company” under the Public Utility Holding Company Act of 1935 (“PUHCA”)
and is not and will not be subject to regulation as a “holding company” or an
“affiliate” or a “subsidiary company” of a “holding company” required to
register under PUCHA, as such terms are defined under PUHCA.

 

(ii)                                  The statements contained in the
Offering Document under the caption “Business-Regulatory Matters,” insofar as
they describe the absence of regulation by the Federal Energy Regulatory
Commission, are accurate in all material respects.

 

(iii)                               The statements contained in the
Offering Document under the caption “Business-Regulatory Matters-Safety
Regulations,” insofar as they describe the laws, rules and regulations
described therein, are accurate in all material respects.

 

15

 

(i)                                     The Purchaser shall have received a
certificate, dated the Closing Date, of the President or any Vice President and
a principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable investigation, shall
state that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date, and that, subsequent to the dates of the most
recent financial statements in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective material
adverse change, in the financial condition, business, properties or results of
operations of the Company and its subsidiaries taken as a whole except as set
forth in or contemplated by the Offering Document or as described in such
certificate.

 

(j)                                     The
Purchaser shall have received an opinion, dated the Closing Date, of Mark
Prendeville, general counsel of the Company, that:

 

(i)                                     The statements contained in the
Company’s proxy statement, dated March 10, 2003, under the caption
“Compensation of Executive Officers and Directors—Employment and Related
Agreements” and incorporated by reference in the Offering Document, insofar as
they describe the documents referred therein, are accurate in all material
respects.

 

(ii)                                  The statements contained in the
Offering Document under the caption “Business—Gas Distribution Business—Gas
Supply Agreements,” insofar as they describe the documents referred therein,
are accurate in all material respects.

 

(iii)                               The statements contained in the
Offering Document under the caption “Business—Legal Proceedings,” insofar as
they describe the complaint of Triad Energy Resources Corp., et. al. v. NiSource
Inc., et. al (filed March 18, 2003) (U.S. Dist. Ct., DC), are accurate in all
material respects.

 

(k)                                  The Purchaser shall have received
the Registration Rights Agreement duly executed and delivered by the Company.

 

(l)                                     CSFB shall have received a certificate,
substantially in the form of Exhibit A hereto, dated the date of this
Agreement, of the Vice President and Controller of the Company in which such
officer, to the best of his knowledge after reasonable investigation, states
that the financial data referenced in such certificate (i) agrees to the dollar
amounts in the Company’s audited consolidated financial statements for the
years ended December 31, 2001 and 2000 (the “AA
Statements”) or (ii) to the extent such financial data cannot be
compared directly to the AA Statements, agrees to the dollar and other amounts
in the Company’s accounting records for the years ended December 31, 2001 and
2000.

 

(m)                               The Purchaser shall have received
(i) the agreement duly executed and delivered by Banc of America Securities LLC
(“BAS”)
relating to the purchase by CSFB of BAS’s remarketing option under the
remarketing agreement dated as of June 29, 2000 between the Company and BAS
(the “Remarketing
Agreement”) in connection with the ROARS exchanged for the Offered Securities
pursuant to this Agreement, and (ii) the Company’s duly executed and delivered
Acknowledgment and Consent to the transactions described in the agreement to be
delivered pursuant to clause (i) of this paragraph (l).

 

The Company will furnish the Purchaser with such conformed copies of
such opinions, certificates, letters and documents as the Purchaser reasonably
requests. CSFB may in its sole discretion waive on behalf of the Purchaser
compliance with any conditions to the obligations of the Purchaser hereunder.

 

7.                                       Indemnification
and Contribution.  (a) 
The Company will indemnify and hold harmless the Purchaser, its
partners, directors and officers and each person, if any, who controls such
Purchaser within the meaning of

 

16

 

Section 15 of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which the Purchaser may become
subject, under the Securities Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Offering Document, or any amendment or
supplement thereto, or any related preliminary offering circular or the
Exchange Act Reports, or arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Company’s failure to perform its obligations
under Section 5(a) of this Agreement, and will reimburse the Purchaser for any
legal or other expenses reasonably incurred by the Purchaser in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser specifically for use therein, it being understood and
agreed that the only such information consists of the information described as
such in subsection (b) below; provided further, however, with respect to
any such untrue statement or alleged untrue statement in or omission or alleged
omission from the Preliminary Offering Circular, the indemnity agreement
contained in this paragraph (a) shall not inure to the benefit of the
Purchaser or any affiliate, partner, director, officer or controlling person
thereof to the extent that (i) a copy of the Offering Circular as then amended
or supplemented was not sent or given to a person to whom the Purchaser sold
the Offered Securities at or prior to the written confirmation of the sale of
such Offered Securities to such person and (ii) such loss, claim, damage or
liability of or with respect to such Purchaser or any affiliate, partner,
director, officer or controlling person thereof arises out of or is based upon
an untrue statement or alleged untrue statement in or omission or alleged
omission from such Preliminary Offering Circular that was corrected in the
Offering Circular as then amended or supplemented, unless such failure to
deliver the Offering Circular as then amended or supplemented was a result of
non-compliance by the Company with the provisions of Section 5(a), and so long
as the Offering Circular and any amendment or supplement thereto was provided
by the Company to the Purchaser in the requisite quantity and on a timely basis
to permit delivery on or prior to the written confirmation of the sale of such
Offered Securities.

 

(b)                                 The
Purchaser will indemnify and hold harmless the Company, its directors and
officers and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, against any losses, claims, damages or
liabilities to which the Company may become subject, under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser specifically for use therein,
and will reimburse any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by the Purchaser consists
of the following information in the Offering Document furnished on behalf of
the Purchaser: under the caption “Plan of Distribution” in the fourth
paragraph, the third sentence of the tenth paragraph, the twelfth paragraph,
the thirteenth paragraph and the first sentence of the fifteenth paragraph;
provided, however, that the Purchaser shall not be liable for any losses,
claims, damages or liabilities arising out of or based upon the Company’s failure
to perform its obligations under Section 5(a) of this Agreement.

 

(c)                                  Promptly
after receipt by an indemnified party under this Section of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under subsection (a) or
(b) above, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party otherwise than

 

17

 

under subsection (a) or (b) above. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes (i)
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or failure to act by or
on behalf of any indemnified party.

 

(d)  If the
indemnification provided for in this Section is unavailable or insufficient to
hold harmless an indemnified party under subsection (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Purchaser on the other from the offering of the Offered Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the Purchaser on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Purchaser on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total discounts and commissions received by the Purchaser from the
Company under this Agreement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Purchaser
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim that is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), the Purchaser shall not be required to
contribute any amount in excess of the amount by which the total discounts,
fees and commissions received by the Purchaser exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.

 

(e)                                  The
obligations of the Company under this Section shall be in addition to any
liability that the Company may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Purchaser within
the meaning of the Securities Act or the Exchange Act; and the obligations of
the Purchaser under this Section shall be in addition to any liability that the
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act.

 

8.                                       Survival of
Certain Representations and Obligations.  The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the Purchaser set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made
by or on behalf of the Purchaser, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities.  If this Agreement is terminated pursuant to
Section 8 hereof or if for any reason the purchase of the Offered
Securities by the Purchaser is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 hereof and the respective obligations of the Company and the
Purchaser

 

18

 

pursuant to Section 7 hereof shall remain in
effect.  If the purchase of the Offered
Securities by the Purchaser is not consummated for any reason other than solely
because of the termination of this Agreement pursuant to Section 8 hereof
or the occurrence of any event specified in clause (iv), (v), (vi) or (vii) of
Section 6(b) hereof, the Company will reimburse the Purchaser for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by it in connection with the offering of the Offered Securities.

 

9.                                       Notices. 
All communications hereunder will be in writing and, if sent to the
Purchaser will be mailed, delivered or facsimiled and confirmed to the
Purchaser at Credit Suisse First Boston LLC, Eleven Madison Avenue, New York,
New York 10010-3629, Facsimile: (212) 325-8278, Attention: Investment Banking
Department — Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or facsimiled and confirmed to it at SEMCO Energy, Inc.,
28470 13 Mile Road, Suite 300, Farmington Hills, Michigan 48334, Telephone.:
(248) 702-6282, Facsimile: (248) 702-6306, 
Attention: Mark Prendeville, Esq.

 

10.                                 Successors. 
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the controlling persons
referred to in Section 7 hereof, and no other person will have any right
or obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such
holders were parties thereto.

 

11.                                 Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.

 

12.                                 Applicable Law.  This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York without regard to principles of conflicts of laws.  The Company hereby submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.

 

[Signature Pages Follow]

 

19

 

If the foregoing is in accordance with the Purchaser’s understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Purchaser in accordance with its terms.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  SEMCO Energy, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/  
  Mark Prendeville

  
	
   

  	
   

  	
  Name:   Mark Prendeville

  
	
   

  	
   

  	
  Title:    
  V.P. and General Counsel

  
				

 

20

 

The foregoing Purchase Agreement

is hereby confirmed and accepted

as of the date first above written.

 

CREDIT SUISSE FIRST BOSTON LLC

 

 

	
  By:

  	
    /s/ 
  Joseph E. Reece

  	
   

  
	
   

  	
  Name:  Joseph E. Reece

  
	
   

  	
  Title:   
  Managing Director

  
				

 

21

 

SCHEDULE
A

 

Subsidiaries

 

SEMCO Energy Ventures, Inc.

 

SEMCO Arkansas Pipeline Company

 

SEMCO Gas Storage Company

 

SEMCO Pipeline Company

 

Southeastern Development Company

 

Southeastern Financial Services, Inc.

 

Alaska Pipeline Company

 

NORSTAR Pipeline Company, Inc.

 

Aretech Information Services, Inc.

 

Hotflame Gas, Inc.

 

Sub-Surface Resources, Inc.

 

Flint Construction Company

 

Iowa Pipeline Associates, Inc.

 

K & B Construction, Inc.

 

Long’s Underground Technologies, Inc.

 

Sub-Surface Construction Co.

 

22

 

EXHIBIT A

 

SEMCO Energy, Inc.

 

CONTROLLER’S
CERTIFICATE

 

May 14, 2003

 

The undersigned, Steve Warsinske, as Vice President and Controller of
SEMCO Energy, Inc., a Michigan corporation (the “Company”), does hereby certify to
the best of his knowledge after reasonable investigation, pursuant to Section
6(l) of the Purchase Agreement, dated May 14, 2003, by and between the Company
and Credit Suisse First Boston LLC (“CSFB”), relating to $94,641,000 in
aggregate principal amount of the Company’s 73⁄4% Senior Notes due 2013, as
follows:

 

The financial data identified by CSFB and referenced
in the attached pages of the Company’s offering circular dated May 14, 2003
(the “Offering
Circular”) (i) agrees to the dollar amounts in the Company’s audited
consolidated financial statements for the years ended December 31, 2001 and
2000 (the “AA Statements”) or (ii) to the extent such financial data
cannot be compared directly to the AA Statements, agrees to the dollar and
other amounts in the Company’s accounting records for the years ended
December 31, 2001 and 2000.

 

This certificate is delivered to assist CSFB in
conducting and documenting its investigation of the affairs of the Company in
connection with the offering of securities covered by the Offering Circular.

 

[Signature Page Follows]

 

23

 

IN WITNESS WHEREOF, I 
have hereunto signed my name this 14h day of May 2003.

 

 

	
   

  	
   

  
	
   

  	
  Name: 

  	
  Steve Warsinske

  
	
   

  	
  Title:

  	
  Vice President and Controller

  

 

24Exhibit
10.14

 

SEMCO
ENERGY, INC.

 

$150,000,000
71/8% Senior Notes due 2008

$55,359,000
73⁄4% Senior Notes due 2013

 

 

PURCHASE
AGREEMENT

 

 

May 14, 2003

 

Credit Suisse First Boston LLC

McDonald Investments Inc.

ABN AMRO Incorporated

US Bancorp Piper Jaffray Inc.

NatCity Investments, Inc.

c/o Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, NY 10010-3629

 

Ladies and Gentlemen:

 

1.                                       Introductory. 
SEMCO Energy, Inc., a Michigan corporation (the “Company”), proposes, subject to the terms
and conditions stated herein, to issue and sell to the several initial
purchasers named in Schedule A hereto (the “Purchasers”)
(i) $150,000,000 principal amount of its 71/8% Senior Notes due 2008 (the “2008
Securities”) to be issued under an indenture to be dated as of May
21, 2003 (the “2008 Indenture”),
between the Company and Fifth Third Bank, a Michigan banking corporation, as
trustee (the “2008 Trustee”), and (ii) $55,359,000 principal amount of its 73⁄4% Senior Notes due 2013 (the “2013
Securities” and, together with the 2008 Securities, the “Offered Securities” and, each referred to
as, a “Series”)
to be issued under an indenture to be dated as of May 15, 2003 (the “2013
Indenture”), between the Company and Fifth Third Bank, a
Michigan banking corporation, as trustee (the “2013 Trustee” and together with the 2008 Trustee, the “Trustees”).  The United States Securities Act of 1933 is
herein referred to as the “Securities Act.”

 

Holders (including subsequent transferees) of the Offered Securities
will have the registration rights set forth in the registration rights
agreement (the “Registration Rights Agreement”),
to be dated the Closing Date (as defined below), pursuant to which the Company
will agree to file with the Securities and Exchange Commission (the “Commission”) under the circumstances set
forth therein, (i) a registration statement under the Securities Act (the “Exchange Offer Registration Statement”)
relating to (A) the Company’s 71/8%
Senior Notes due 2008 in a like aggregate principal amount as the Company
issued under the 2008 Indenture, identical in all material respects to the 2008
Securities and registered under the Securities Act (the “2008 Exchange Securities”),
to be offered in exchange for the 2008 Securities and (B) the Company’s 73⁄4% Senior Notes due 2013 in a like
aggregate principal amount as the Company issued under the 2013 Indenture,
identical in all material respects to the 2013 Securities and registered under
the Securities Act (the “2013 Exchange Securities” and, together
with the 2008 Exchange Securities, the “Exchange Securities”), to be offered in
exchange for the 2013 Securities (such offers to exchange being referred to as
the “Exchange Offer”) and (ii) a
shelf registration statement pursuant to Rule 415 under the Securities Act (the
“Shelf Registration Statement”
and, together with the Exchange Offer Registration Statement, the “Registration Statements”).  The Offered Securities and the Exchange
Securities are referred to collectively as the “Securities.”

 

The Company hereby agrees with the Purchasers as follows:

 

2.                                       Representations
and Warranties of the Company.  The Company
represents and warrants to, and agrees with, the Purchasers that:

 

 

(a)                                  A preliminary offering circular and
an offering circular relating to the Offered Securities and $94,641,000
principal amount of the Company’s 73⁄4%
Senior Notes due 2013 to be issued and exchanged and sold pursuant to a
Purchase Agreement (the “Other Purchase Agreement”) dated the date
hereof between the Company and Credit Suisse First Boston LLC (“CSFB”) (the “Other Securities”) to be
offered by the Company have been prepared by the Company. Such preliminary
offering circular (the “Preliminary Offering
Circular”) and offering circular (the “Offering Circular”), as supplemented as of the date of this
Purchase Agreement (this “Agreement”),
together with the information incorporated by reference therein are hereinafter
collectively referred to as the “Offering
Document.” On the date of this Agreement, the Offering Document does
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information furnished
to the Company by any Purchaser or through CSFB specifically for use therein,
it being understood and agreed that the only such information is that described
as such in Section 7(b) hereof.  The
Company’s Annual Report on Form 10-K most recently filed with the
Commission and all subsequent reports (collectively, the “Exchange Act Reports”) that have been filed
by the Company with the Commission or sent to shareholders pursuant to the
Securities Exchange Act of 1934 (the “Exchange
Act”), when they were filed with the Commission, conformed in all
material respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.

 

(b)                                 The Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Michigan, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Document.  The Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent the failure to so
qualify or be in good standing would not reasonably be expected to have a
material adverse effect on the financial condition, business, properties or
results of operations of the Company and its subsidiaries taken as a whole (“Material
Adverse Effect”).

 

(c)                                  The entities listed on Schedule B
hereto are the only subsidiaries, direct or indirect, of the Company; each
subsidiary of the Company has been duly incorporated and is an existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Document.  Each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent that the failure to
so qualify or be in good standing would not reasonably be expected to have a
Material Adverse Effect; all of the issued and outstanding capital stock of
each subsidiary of the Company has been duly authorized and validly issued and
is fully paid and nonassessable; and the capital stock of each subsidiary owned
by the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.

 

(d)                                 The 2008 Indenture has been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered by the Company and will conform to the description
thereof contained in the Offering Document; the 2008 Securities have been duly
authorized by the Company and when the 2008 Securities are executed and
authenticated in accordance with the provisions of the 2008 Indenture and
delivered and paid for pursuant to this Agreement on the Closing Date, such
2008 Securities will have been duly executed, authenticated, issued and
delivered and will conform to the description thereof contained in the Offering
Document and, assuming due authorization, execution and authentication by the
Trustee, the 2008 Indenture and such 2008 Securities will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors’ rights and to general equity principles.

 

2

 

(e)                                  The 2013 Indenture has been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered by the Company and will conform to the description
thereof contained in the Offering Document; the 2013 Securities have been duly
authorized by the Company and when the 2013 Securities are executed and
authenticated in accordance with the provisions of the 2013 Indenture and
delivered and paid for pursuant to this Agreement on the Closing Date, such
2013 Securities will have been duly executed, authenticated, issued and delivered
and will conform to the description thereof contained in the Offering Document
and, assuming due authorization, execution and authentication by the Trustee,
the 2013 Indenture and such 2013 Securities will constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

 

(f)                                    No consent, approval, authorization,
or order of, or filing with, any governmental agency or body or any court is
required for the consummation of the transactions contemplated by this
Agreement, the Indentures and the Registration Rights Agreement in connection
with the issuance and sale of the Offered Securities by the Company, except as
may be required (i) under state securities law and (ii) under federal
securities laws with respect to the Company’s obligations under the
Registration Rights Agreement.

 

(g)                                 The execution, delivery and
performance by the Company of the Indentures, this Agreement and the
Registration Rights Agreement, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof by the Company
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
respective properties, or any agreement or instrument to which the Company or
any such subsidiary is a party or by which the Company or any such subsidiary
is bound or to which any of the properties of the Company or any such
subsidiary is subject (except for such breaches, violations or defaults as
would not reasonably be expected to have a material adverse effect on the
financial condition, business, properties or results of operations of any
subsidiary of the Company), or the charter or by-laws of the Company or any
such subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this Agreement.

 

(h)                                 This Agreement has been duly
authorized, executed and delivered by the Company.

 

(i)                                     Except as disclosed in the Offering
Document or as would not be reasonably expected to have a Material Adverse
Effect, the Company and its subsidiaries have good and marketable title to all
real properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would affect the value thereof
or interfere with the use made or to be made thereof by them; and hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would interfere with the use made or to be made thereof by
them.

 

(j)                                     The Company and its subsidiaries
possess adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate be reasonably expected to have a Material Adverse Effect.

 

(k)                                  No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that would be reasonably expected to have a Material Adverse Effect.

 

3

 

(l)                                     The Company and its subsidiaries
own, possess or can acquire on reasonable terms, adequate trademarks, trade
names and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property (collectively, “intellectual property rights”) necessary to
conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of, or conflict, with asserted
rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.

 

(m)                               Except as disclosed in the Offering
Document, neither the Company nor any of its subsidiaries is in violation of
any statute, any rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “environmental laws”),
owns or operates any real property contaminated with any substance that is
subject to any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation, contamination, liability
or claim would individually or in the aggregate be reasonably expected to have
a Material Adverse Effect; and the Company is not aware of any pending
investigation that might lead to such a claim.

 

(n)                                 Except as disclosed in the Offering
Document, there are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties that if determined adversely to the Company or any of its
subsidiaries would individually or in the aggregate be reasonably expected to
have a Material Adverse Effect, or would materially and adversely affect the
ability of the Company to perform its obligations under the Indentures, this
Agreement, the Other Purchase Agreement or the Registration Rights Agreement,
or that would reasonably be expected to adversely effect the sale of the
Offered Securities; and no such actions, suits or proceedings are threatened
or, to the Company’s knowledge, contemplated.

 

(o)                                 The financial statements included in
the Offering Document present fairly the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and, except as otherwise
disclosed in the Offering Document, such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis.

 

(p)                                 Except as disclosed in the Offering
Document, since the date of the latest audited financial statements included in
the Offering Document there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
financial condition, business, properties or results of operations of the Company
and its subsidiaries taken as a whole, and, except as disclosed in or
contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.

 

(q)                                 The Company is not an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the United
States Investment Company Act of 1940 (the “Investment Company Act”); and the Company
is not and, after giving effect to the offering and sale of the Offered
Securities and the Other Securities and the application of the proceeds thereof
as described in the Offering Document, will not be an “investment company” as
defined in the Investment Company Act.

 

(r)                                    No securities of the same class
(within the meaning of Rule 144A(d)(3) under the Securities Act) as the
Offered Securities and the Other Securities are listed on any national
securities exchange

 

4

 

registered
under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.

 

(s)                                  Assuming the accuracy of the
representations and warranties of the Purchasers contained in Section 4 hereof
and its compliance with the agreements set forth therein, and, assuming the
accuracy of the representations deemed to be made in the Offering Circular by
purchasers to whom the Purchasers initially resell the Offered Securities, the
offer and sale of the Offered Securities by the Company to the Purchasers and
the initial resale of the Offered Securities by the Purchasers, in each case,
in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act pursuant to the exemption from registration
under Section 4(2) thereof and Regulation S thereunder and it is not
necessary to qualify an indenture in respect of the Offered Securities under
the United States Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

 

(t)                                    Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf (other than the
Purchasers, as to whom the Company makes no representation) (i) has,
within the six-month period prior to the date hereof, offered or sold in the
United States or to any U.S. person (as such terms are defined in
Regulation S under the Securities Act) the 2008 Securities or the 2013
Securities or any security of the same class or series as either the 2008
Securities or the 2013 Securities or (ii) has offered or will offer or
sell the Offered Securities (A) in the United States by means of any form
of general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act or (B) with respect to any such securities sold
in reliance on Rule 903 of Regulation S (“Regulation
S”) under the Securities Act, by means of any directed selling
efforts within the meaning of Rule 902(c) of Regulation S.  The Company, its affiliates and any person
acting on its or their behalf (other than the Purchasers, as to whom the
Company makes no representation) have complied and will comply with the
offering restrictions requirement of Regulation S. The Company has not entered
and will not enter into any contractual arrangement with respect to the distribution
of the Offered Securities except for this Agreement.

 

(u)                                 The Company is subject to Section 13
or 15(d) of the Exchange Act.

 

(v)                                 There is no “substantial U.S. market
interest” as defined in Rule 902(j) of Regulation S in the Company’s debt
securities.

 

(w)                               On the Closing Date, the 2008
Exchange Securities will have been duly authorized by the Company; and when the
2008 Exchange Securities are issued, executed and authenticated and delivered
in accordance with the terms of the Registration Rights Agreement and the 2008
Indenture, and assuming due authorization, execution and authentication by the
2008 Trustee, the 2008 Exchange Securities will be the valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

 

(x)                                   On the Closing Date, the 2013
Exchange Securities will have been duly authorized by the Company; and when the
2013 Exchange Securities are issued, executed and authenticated and delivered
in accordance with the terms of the Registration Rights Agreement and the 2013
Indenture, and assuming due authorization, execution and authentication by the
2013 Trustee, the 2013 Exchange Securities will be the valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.

 

(y)                                 The Registration Rights Agreement
has been duly authorized by the Company and, on the Closing Date, will have
been duly executed and delivered by the Company.  When the Registration Rights Agreement has been duly executed and
delivered by the Company, and assuming due authorization,

 

5

 

execution
and delivery by the Purchasers, the Registration Rights Agreement will be a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity
principles.  On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Circular.

 

(z)                                   Neither the Company nor any of its
subsidiaries is in violation of its respective charter or by-laws or, except as
would not reasonably be likely to result in a Material Adverse Effect, in
default in the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound.

 

(aa)                            Other than the Registration Rights
Agreement, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Securities registered pursuant to any Registration Statement.

 

(bb)                          Neither the Company nor any of its
subsidiaries nor any agent thereof acting on the behalf of them has taken, and
none of them will take, any action that might cause this Agreement or the
issuance or sale of the Offered Securities to violate Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System.  Less than 25% of the value
of the assets of the Company subject to the negative covenants of the
Indentures consist and will consist of “margin stock” within the meaning of
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System at all relevant times, and none of the proceeds of the Offered
Securities will be used, directly or indirectly, to make loans to any person
that will be secured by margin stock or will have the benefit of any
arrangement restricting the disposition or pledge of margin stock.  None of the proceeds from the issuances of
the 8.95% Remarketable or Redeemable Securities due 2008 (the “ROARS”),
the 8.00% Senior Notes due 2004, the 7.20% Senior Notes due 2007 or the 8.32%
Senior Notes due 2024 will be used for the purpose, whether immediate,
incidental or ultimate, of buying or carrying “margin stock” within the meaning
of Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System.

 

(cc)                            Except as disclosed in the Offering
Document, neither Moody’s Investors Service, Inc. nor Standard and Poor’s
Ratings Group (i) has imposed (or has informed the Company that it is
considering imposing) any condition (financial or otherwise) on the Company’s
retaining any rating assigned to the Company, any securities of the Company or
(ii) has indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned or (b)
any change in the outlook for any rating of the Company or any securities of
the Company.

 

(dd)                           Except as disclosed in the Offering
Document, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the
Company or any Purchaser for a brokerage commission, finder’s fee or other like
payment in connection with the issuance and sale of the Offered Securities to
the Purchasers, other than as may be created under this Agreement.

 

(ee)                            The amended credit agreement between
the Company, Standard Federal Bank and the other parties thereto to be entered
into on or prior to the Closing Date (the “Amended
Credit Agreement”) has been duly authorized by the Company, and on
the Closing Date, will have been duly executed and

 

6

 

delivered
by the Company.  When the Amended Credit
Agreement has been duly executed and delivered by the Company, and assuming due
authorization, execution and delivery by the other parties thereto, the Amended
Credit Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles.

 

(ff)                                The Company is not and, after giving
effect to the offering and sale of the Offered Securities and the offering,
exchange and sale of the Other Securities and the application of the proceeds
thereof as described in the Offering Document, will not be subject to
regulation as a “public-utility company,” a “holding company,” an “affiliate”
of a “holding company” or a “subsidiary company” of a “holding company” as such
terms are defined under the Public Utility Holding Company Act, as amended.

 

(gg)                          The industry-related and
customer-related data under the captions “Offering Circular Summary” and
“Business” in the Offering Document are based on or derived from sources that
the Company believes to be reliable.

 

(hh)                          The Offering Document contains all
the information specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Securities Act.

 

(ii)                                  The Company and each of its
subsidiaries carry, or are covered by, insurance in such amounts and covering
such risks as is customary for companies engaged in similar businesses in
similar industries for the conduct of their respective businesses and the value
of their respective properties.

 

(jj)                                  No relationship, direct or indirect,
required to be described under Item 404 of Regulation S-K, exists between or
among the Company on the one hand, and the directors, officers or shareholders
of the Company on the other hand, that is not described in the Offering
Document.

 

(kk)                            The Company is in compliance in all
material respects with all presently applicable provisions of ERISA; no
“reportable event” (as defined in ERISA), has occurred with respect to any
“pension plan” (as defined in ERISA), for which the Company would have any
material liability; the Company has not incurred and does not expect to incur
material liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the “Code”);
and each “pension plan” for which the Company would have any material liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, that would cause the loss of such qualification.

 

(ll)                                  Except as disclosed in the Offering
Document, the Company has filed all material federal, state and local income
and franchise tax returns required to be filed through the date hereof and has
paid all taxes due thereon, except where the same may be contested in good
faith by appropriate proceedings, and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries that has had (nor does the
Company have any knowledge of any tax deficiency that, if determined adversely
to the Company or any of its subsidiaries, would reasonably be expected to
have) a Material Adverse Effect.

 

(mm)                      Since December 31, 2002 through the
date hereof, and except as may otherwise be disclosed or contemplated in the
Offering Document, the Company has not (i) issued or granted any securities,
(ii) incurred any material liability or obligation, direct or contingent, other
than liabilities and obligations that were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course of
business or (iv) declared or paid any dividend on its capital stock.

 

7

 

(nn)                          The Company (i) makes and keeps
books and records that are accurate in all material respects and (ii) maintains
internal accounting controls that provide reasonable assurance that (A)
transactions are executed in accordance with management’s authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management’s authorization and (D)
the recorded accountability for its assets is compared with existing assets at
reasonable intervals.

 

(oo)                          Neither the Company nor any of its
subsidiaries, nor, to the Company’s knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.

 

3.                                       Purchase, Sale and
Delivery of Offered Securities.  On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at a purchase price of 97.5% of the principal amount thereof
plus accrued interest from May 15, 2003 to the Closing Date (as
hereinafter defined), the respective principal amounts of Securities set forth
opposite the names of the several Purchasers in Schedule A hereto.

 

The Company will deliver against payment of the purchase price the Offered
Securities to be offered and sold by the Purchasers in reliance on
Regulation S (the “Regulation S
Securities”) in the form of two or more permanent global Securities
in registered form without interest coupons (the “Regulation S Global
Securities”) that will be deposited with the Trustee as custodian for The
Depository Trust Company (“DTC”)
for the respective accounts of the DTC participants for Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear System (“Euroclear”), and Clearstream Banking,
société anonyme (“Clearstream, Luxembourg”)
and registered in the name of Cede & Co., as nominee for DTC. The Company
will deliver against payment of the purchase price the Offered Securities to be
purchased by each Purchaser hereunder and to be offered and sold by each
Purchaser in reliance on Rule 144A under the Securities Act (the “144A Securities”) in the form of two
permanent global Securities in definitive form without interest coupons (the “Restricted Global Securities”) deposited
with the Trustee as custodian for DTC and registered in the name of Cede &
Co., as nominee for DTC.  The Restricted
Global Securities shall include the legend regarding restrictions on transfer
set forth under “Transfer Restrictions” in the Offering Document. Until the
termination of the restricted period (as defined in Regulation S) with respect
to the offering of the Offered Securities, interests in the Regulation S Global
Securities may only be held by the DTC participants for Euroclear and Clearstream,
Luxembourg. Interests in any permanent global Securities will be held only in
book-entry form through Euroclear, Clearstream, Luxembourg or DTC, as the case
may be, except in the limited circumstances described in the Offering Document.

 

Payment for the Regulation S Securities and the 144A Securities shall
be made by the Purchasers in Federal (same day) funds by official check or
checks or wire transfer to an account at a bank acceptable to CSFB at
9:00  A.M. (New York time), on  May 21, 2003, or at such other time
not later than seven full business days thereafter as CSFB and the Company
determine, such time being herein referred to as the “Closing Date,” against
delivery to the Trustee as custodian for DTC of (i) the Regulation S
Global Securities representing all of the Regulation S Securities for the
respective accounts of the DTC participants for Euroclear and Clearstream,
Luxembourg and (ii) the Restricted Global Securities representing all of
the 144A Securities.  Copies of the
Regulation S Global Securities and the Restricted Global Securities will be
made available for checking at the office of  Latham & Watkins LLP 885
Third Avenue, New York, New York 10022, at least 24 hours prior to the Closing
Date.

 

4.                                       Representations by Purchasers; Resale by Purchasers.

 

8

 

(a)                                  Each Purchaser severally represents
and warrants to the Company that it is an “accredited investor” within the
meaning of Regulation D under the Securities Act.

 

(b)                                 Each Purchaser severally
acknowledges that the Offered Securities have not been registered under the
Securities Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance with
Regulation S or pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.  Each Purchaser severally represents and
agrees that it has only offered and sold, and will only offer and sell the
Offered Securities (i) as part of its distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 or Rule 144A under the
Securities Act (“Rule 144A”).
Accordingly, neither such Purchaser nor its affiliates, nor any persons acting
on its or their behalf, have engaged or will engage in any directed selling
efforts with respect to the Offered Securities, and such Purchaser, its
affiliates and all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S. Each
Purchaser severally agrees that, at or prior to confirmation of sale of the
Offered Securities, other than a sale pursuant to Rule 144A, such Purchaser will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases the Offered Securities from it during
the restricted period a confirmation or notice to substantially the following
effect:

 

“The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may
not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the date of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms used
above have the meanings given to them by Regulation S.”

 

Terms used in this subsection (b) have the meanings
given to them by Regulation S.

 

(c)                                  Each Purchaser severally agrees that
it and each of its affiliates has not entered and will not enter into any
contractual arrangement with respect to the distribution of the Offered
Securities except for any such arrangements with the other Purchasers or
affiliates of the other Purchasers or with the prior written consent of the
Company.

 

(d)                                 Each Purchaser severally agrees that
it and each of its affiliates will not offer or sell the Offered Securities in
the United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.  Each Purchaser severally
agrees, with respect to resales made in reliance on Rule 144A of any of the
Offered Securities, to deliver either with the confirmation of such resale or
otherwise prior to settlement of such resale a notice to the effect that the
resale of such Offered Securities has been made in reliance upon the exemption
from the registration requirements of the Securities Act provided by Rule 144A.

 

(e)                                  Each Purchaser severally represents
and agrees that (i) it has not offered or sold and prior to the date six
months after the date of issue of the Offered Securities will not offer or sell
any Offered Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to

 

9

 

anything
done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Offered Securities to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.

 

5.                                       Certain Agreements
of the Company.  The Company agrees with the Purchasers that:

 

(a)                                  The Company will advise CSFB
promptly of any proposal to amend or supplement the Offering Document and will
not effect such amendment or supplementation without CSFB’s consent (it being
understood that the filing of any documents with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the completion
of the resale of the Offered Securities shall be deemed to be such an amendment
or supplementation), such consent not to be unreasonably withheld. If, at any
time prior to the completion of the resale of the Offered Securities by the
Purchasers, any event occurs as a result of which the Offering Document as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary at any such time to amend or supplement the
Offering Document to comply with any applicable law, the Company promptly will
notify CSFB of such event and promptly will prepare, at its own expense, an
amendment or supplement that will correct such statement or omission or effect
such compliance. Neither CSFB’s consent to, nor the Purchasers’ delivery to
offerees or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6 hereof.

 

(b)                                 The Company will furnish to CSFB
copies of any preliminary offering circular, the Offering Document and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as CSFB reasonably requests, and the Company will
furnish to CSFB on the date hereof three copies of the Offering Document signed
by a duly authorized officer of the Company, one of which will include the
independent accountants’ reports therein manually signed by such independent
accountants.  So long as the Securities
are outstanding, at any time when the Company is not subject to Section 13
or 15(d) of the Exchange Act, the Company will promptly furnish or cause to be
furnished to CSFB (and, upon request, to each of the other Purchasers) and,
upon request of holders and prospective purchasers of the Offered Securities,
to such holders and purchasers, copies of the information required to be
delivered to holders and prospective purchasers of the Offered Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities.  The Company will pay the expenses of
printing and distributing to the Purchasers all such documents.

 

(c)                                  The Company will arrange for the
qualification of the Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in the United
States and Canada as CSFB designates and will continue such qualifications in
effect so long as required for the resale of the Offered Securities by the
Purchasers; provided that the Company will not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
such state.

 

(d)                                 So long as the Securities remain
outstanding, upon request, the Company will furnish to CSFB and to each of the
other Purchasers, as soon as practicable after the end of each fiscal year, a
copy of its annual report to shareholders for such year; and, upon request, the
Company will furnish to CSFB and to each of the other Purchasers (i) as
soon as available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Exchange Act or mailed to
shareholders, and (ii) from time to time, such other information concerning
the Company as CSFB may reasonably request.

 

10

 

(e)                                  During the period of two years after
the Closing Date, the Company will, upon request, furnish to CSFB, each of the
other Purchasers and any holder of Offered Securities a copy of the
restrictions on transfer applicable to the Offered Securities.

 

(f)                                    During the period of two years after
the Closing Date, the Company will not, and will not permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to, resell
any of the Offered Securities that have been reacquired by any of them.

 

(g)                                 During the period of two years after
the Closing Date, the Company will not be or become, an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.

 

(h)                                 The Company will pay all expenses
incidental to the performance of its obligations under this Agreement, the
Indentures and the Registration Rights Agreement, including (i) the fees and
expenses of the Trustees and their professional advisers; (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities and, as applicable, the Exchange Securities,
the preparation and printing of this Agreement, the Registration Rights
Agreement, the Offered Securities, the Indentures and the Offering Document and
any amendments and supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Offered Securities, and as
applicable, the Exchange Securities; (iii) the cost of qualifying the Offered
Securities for trading in The PortalSM Market (“PORTAL”) and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Company in connection
with the issue of the Offered Securities; (v) any expenses (including
reasonable fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities or the Exchange Securities for sale
under the laws of such jurisdictions in the United States and Canada as CSFB
designates and the printing of memoranda relating thereto; (vi) any fees
charged by investment rating agencies for the rating of the Offered Securities
or the Exchange Securities; and (vii) any expenses incurred in distributing
preliminary offering circulars and the Offering Document (including any
amendments and supplements thereto) to the Purchasers.  The Company will also pay or reimburse the
Purchasers (to the extent incurred by them) for (x) all expenses of CSFB to be
paid to CSFB by the Company pursuant to the terms of the letter agreement dated
April 26, 2003 between the Company and CSFB, (y) all reasonable travel expenses
of the Purchasers and the Company’s officers and employees and (z) any other
reasonable expenses of the Purchasers and the Company in connection with
attending or hosting meetings with prospective purchasers of the Offered
Securities from the Purchasers.

 

(i)                                     In connection with the offering,
until CSFB shall have notified the Company and the other Purchasers, which
notification shall be promptly provided upon the written request of the
Company, of the completion of the resale of the Offered Securities, neither the
Company nor any of its affiliates has or will, either alone or with one or more
other persons, bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt to
induce any person to purchase any Offered Securities; and neither it nor any of
its affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Offered
Securities.

 

(j)                                     Until the earlier of (i) the Closing
Date or (ii) July 5, 2003, the Company will not offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any United States
dollar-denominated debt securities issued or guaranteed by the Company and
having a maturity of more than one year from the date of issue, or publicly
disclose the intention to make any such offer, sale, contract, pledge or
disposition, without the prior written consent of CSFB, other than with respect
to any debt financings under the Company’s credit facilities; provided, however, the foregoing
shall not apply to the remarketing or the redemption of the Company’s ROARS in
accordance with the provisions of the remarketing agreement dated as of June
29, 2000 between the Company and Banc of America Securities LLC.  The Company will not at any time offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
any securities under circumstances where such offer, sale, contract, pledge or
disposition would cause the

 

11

 

exemption
afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation
S thereunder to cease to be applicable to the offer and sale of the Offered
Securities.

 

6.                                       Conditions of the
Obligation of the Purchasers.  The obligation of the Purchasers to purchase
and pay for the Offered Securities will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of officers of the Company made pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions precedent:

 

(a)                                  CSFB shall have received a letter,
addressed to CSFB and the Purchasers, dated the date of this Agreement and as
of the Closing Date, of PricewaterhouseCoopers LLP, in each case, in form and
substance satisfactory to the Purchasers concerning the financial information
with respect to the Company set forth in the Offering Document.

 

(b)                                 Subsequent to the execution and delivery
of this Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the financial
condition, business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise that, in the reasonable judgment of a
majority in interest of the Purchasers, including CSFB, is material and adverse
and makes it impractical or inadvisable to proceed with completion of the
offering or the sale of and payment for the Offered Securities; (ii) except as
disclosed in the Offering Document, any downgrading in the rating of any debt
securities of the Company by any “nationally recognized statistical rating
organization” (as defined for purposes of Rule 436(g) under the Securities Act),
or any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating) or any announcement that
the Company has been placed on negative outlook; (iii) any change in U.S. or
international financial, political or economic conditions or currency exchange
rates or exchange controls as would, in the reasonable judgment of a majority
in interest of the Purchasers, including CSFB, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings in
the secondary market; (iv) any material suspension or material limitation
of trading in securities generally on the New York Stock Exchange or any
setting of minimum prices for trading on such exchange, or any material
suspension of trading of any securities of the Company on any exchange or in
the over-the-counter market; (v) any banking moratorium declared by U.S.
Federal or New York authorities; (vi) any major disruption of settlements of
securities or (vii) any attack on, outbreak or escalation of hostilities or act
of terrorism involving the United States, any declaration of war by Congress or
any other national or international calamity or emergency if, in the reasonable
judgment of a majority in interest of the Purchasers, including CSFB, the
effect of any such attack, outbreak, escalation, act, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with completion of the
offering or the sale of and payment for the Offered Securities.

 

(c)                                  The Purchasers shall have received
an opinion, dated the Closing Date, of Gibson, Dunn & Crutcher LLP, special
counsel for the Company, that:

 

(i)                                     The 2008 Indenture constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.

 

(ii)                                  The 2013 Indenture constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.

 

(iii)                               The Registration Rights Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

 

12

 

(iv)                              The 2008 Securities, when executed
and authenticated in accordance with the provisions of the 2008 Indenture and
delivered to and paid for by the Purchasers in accordance with the terms
contained herein, will be legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, and will be
entitled to the benefits of the 2008 Indenture and the Registration Rights
Agreement.

 

(v)                                 The 2013 Securities, when executed
and authenticated in accordance with the provisions of the 2013 Indenture and
delivered to and paid for by the Purchasers in accordance with the terms
contained herein, will be legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and will be
entitled to the benefits of the 2013 Indenture and the Registration Rights
Agreement.

 

(vi)                              The Company is not and, after giving
effect to the offering and sale of the Offered Securities and the offering,
exchange and sale of the Other Securities and the application of the proceeds
thereof as described in the Offering Document, will not be required to be
registered as an “investment company” within the meaning of the Investment
Company Act.

 

(vii)                           The issuance or sale of the Offered
Securities, and the execution, delivery and performance by the Company of the
Indentures, this Agreement and the Registration Rights Agreement, do not and
will not violate, or require any filing with, consent, authorization or
approval of any governmental authority or regulatory body of the State of New
York or the United States of America under, any law, rule or regulation of the
State of New York or the United States of America applicable to the Company
that, in such counsel’s experience, is generally applicable to transactions in
the nature of those contemplated by the Indentures, this Agreement and the
Registration Rights Agreement, except for such filings, consents,
authorizations or approvals (i) as already have been obtained or (ii) that, if
not made or obtained, would not have a material adverse effect on the Company
and its subsidiaries taken as a whole or expose the Purchasers to any liability.

 

(viii)                        Assuming the accuracy of the
representations and warranties of the Company and the Purchasers and compliance
by them and their agreements contained herein, no registration of the Offered
Securities under the Securities Act, and no qualification of the Indentures
under the Trust Indenture Act, is required for the offer and sale and delivery
of the Offered Securities to the Purchasers on the date hereof or the resales
by the Purchasers in the manner contemplated by this Agreement and the Offering
Document, it being understood that such counsel expresses no opinion as to any
subsequent resale of the Offered Securities.

 

(ix)                                The statements contained in the
Offering Document under the caption “Description of Other Indebtedness,”
insofar as such statements constitute a general summary of provisions of
documents referred to therein, are accurate in all material respects and fairly
summarize the matters referred to therein.

 

(x)                                   The statements under the caption
“Important Federal Income Tax Consideration,” insofar as such statements
constitute matters of United States law, are accurate in all material respects,
subject to the qualifications and limitations set forth therein.

 

(xi)                                As issued and delivered pursuant to
this Agreement, the Offered Securities are not of the same class (within the
meaning of Rule 144A under the Securities Act) as any securities of the Company
or any of its subsidiaries that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.

 

13

 

(xii)                             The issuance and sale to and the
resale by the Purchasers of the Offered Securities and the issuance, exchange
and sale to and the resale by CSFB of the Other Securities in accordance with
the provisions of this Agreement and the Other Purchase Agreement and the
application of the proceeds thereof by the Company as described in the Offering
Document do not and will not result in a violation of Regulations U or X of the
Board of Governors of the Federal Reserve System.

 

(xiii)                          The Indentures, the Offered
Securities, the Purchase Agreement and the Registration Rights Agreement
conform in all material respects with the descriptions thereof contained in the
Offering Document.

 

In addition, Gibson, Dunn & Crutcher LLP shall
have participated in conferences with officers and other representatives of the
Company, representatives of the independent auditors for the Company and
representatives of the Purchasers at which the contents of the Offering
Document and related matters were discussed. 
Because the purpose of such counsel’s professional engagement was not to
establish or confirm factual matters and because the scope of such counsel’s
examination of the affairs of the Company did not permit it to verify the
accuracy, completeness or fairness of the statements set forth in the Offering
Document, Gibson, Dunn & Crutcher LLP is not passing upon the accuracy,
completeness or fairness of the statements contained in the Offering
Document.  On the basis of the
foregoing, and except for the financial statements and schedules and the notes
thereto, statistical information that is purported to have been provided on the
authority of an expert or public official and other information of an
accounting or financial nature included therein as to which such counsel
expresses no such belief, no facts came to the attention of Gibson, Dunn &
Crutcher LLP that led such counsel to believe that the Offering Document, as of
its date and as of the Closing Date, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

(d)                                 The Purchasers shall have received
an opinion, dated the Closing Date, of Dickinson Wright, counsel for the
Company, that:

 

(i)                                     The Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Michigan, with corporate power and authority to own its properties
and conduct its business as described in the Offering Document; and based on
the certificates of state officials, the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business
requires such qualification.

 

(ii)                                  The 2008 Indenture has been duly
authorized, executed and delivered by the Company.

 

(iii)                               The 2013 Indenture has been duly
authorized, executed and delivered by the Company.

 

(iv)                              The Purchase Agreement and the
Registration Rights Agreement have each been duly authorized, executed and
delivered by the Company.

 

(v)                                 The 2008 Securities have been duly authorized,
executed, issued and delivered by the Company.

 

(vi)                              The 2013 Securities have been duly
authorized, executed, issued and delivered by the Company.

 

14

 

(vii)                           The 2008 Exchange Securities have
been duly authorized by the Company.

 

(viii)                        The 2013 Exchange Securities have
been duly authorized by the Company

 

(ix)                                There are no pending actions, suits
or proceedings against or affecting the Company, any of its subsidiaries or any
of their respective properties that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect, or would materially and adversely affect the ability of the
Company to perform its obligations under the Indenture, the Purchase Agreement,
the Other Purchase Agreement or the Registration Rights Agreement, or that are
otherwise material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to such counsel’s
knowledge, contemplated.

 

(x)                                   There are no contracts, agreements
or understandings between the Company and any person (other than the
Registration Rights Agreement) granting such person the right to require the
Company to file a registration statement under the Securities Act with respect
to any securities of the Company owned by such person or to require the Company
to include such securities with the Offered Securities and the Other Securities
registered pursuant to the Registration Rights Agreement or in any securities
being registered pursuant to any other registration statement filed by the
Company under the Securities Act.

 

(xi)                                The execution, delivery and
performance of the Indentures, the Purchase Agreement and the Registration
Rights Agreement and the issuance and sale of the Offered Securities and
compliance with the terms and provisions thereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any statute, any rule, regulation or order of any governmental agency or body
or any court having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, or any material agreement or instrument to
which the Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject, or the charter or by-laws of the Company or
any such subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by the Purchase
Agreement.

 

(e)                                  The Purchasers shall have received
from Latham & Watkins LLP, counsel for the Purchasers, such opinion or
opinions, dated the Closing Date, with respect to the validity of the Offered
Securities, the exemption from registration for the offer and sale of the
Offered Securities by the Company to the Purchasers and the resales by the
Purchasers as contemplated hereby and other related matters as CSFB may
require, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.

 

(f)                                    The Purchasers shall have received
an opinion, dated the Closing Date, of Loomis, Ewert, Parsley, Davis &
Gotting, A Professional Corporation, special Michigan regulatory counsel for
the Company, that:

 

(i)                                     The statements contained in the
Offering Document under the captions “Business — Regulatory Matters — Michigan”
and “Business — Regulatory Matters — Environmental Matters,” insofar as they
describe the laws, rules, regulations and documents referred therein, are
accurate in all material respects.

 

(g)                                 The Purchasers shall have received
an opinion, dated the Closing Date, of Ashburn & Mason, special Alaska
regulatory counsel for the Company, that:

 

15

 

(i)                                     The statements contained in the
Offering Document under the caption “Business—Regulatory Matters—Alaska,”
insofar as they describe the laws, rules, regulations and documents referred
therein, are accurate in all material respects.

 

(h)                                 The Purchasers shall have received
an opinion, dated the Closing Date, of LeBoeuf, Lamb, Greene & MacRae, LLP,
special federal regulatory counsel for the Company, that:

 

(i)                                     The Company is not, and after giving
effect to, and solely as a result of, the offering and sale of the Offered
Securities and the Other Securities and the application of the proceeds thereof
as described in the Offering Document, will not, be required to register as a “holding
company” under the Public Utility Holding Company Act of 1935 (“PUHCA”)
and is not and will not be subject to regulation as a “holding company” or an
“affiliate” or a “subsidiary company” of a “holding company” required to
register under PUCHA, as such terms are defined under PUHCA.

 

(ii)                                  The statements contained in the
Offering Document under the caption “Business-Regulatory Matters,” insofar as
they describe the absence of regulation by the Federal Energy Regulatory
Commission, are accurate in all material respects.

 

(iii)                               The statements contained in the
Offering Document under the caption “Business-Regulatory Matters-Safety
Regulations,” insofar as they describe the laws, rules and regulations
described therein, are accurate in all material respects.

 

(i)                                     The Purchasers shall have received a
certificate, dated the Closing Date, of the President or any Vice President and
a principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable investigation, shall
state that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date, and that, subsequent to the dates of the most recent
financial statements in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective material
adverse change, in the financial condition, business, properties or results of
operations of the Company and its subsidiaries taken as a whole except as set
forth in or contemplated by the Offering Document or as described in such
certificate.

 

(j)                                     The
Purchasers shall have received an opinion, dated the Closing Date, of
Mark Prendeville, general counsel of the Company, that:

 

(i)                                     The statements contained in the
Company’s proxy statement, dated March 10, 2003, under the caption
“Compensation of Executive Officers and Directors—Employment and Related
Agreements” and incorporated by reference in the Offering Document, insofar as
they describe the documents referred therein, are accurate in all material
respects.

 

(ii)                                  The statements contained in the
Offering Document under the caption “Business—Gas Distribution Business—Gas
Supply Agreements,” insofar as they describe the documents referred therein,
are accurate in all material respects.

 

(iii)                               The statements contained in the
Offering Document under the caption “Business—Legal Proceedings,” insofar as
they describe the complaint of Triad Energy Resources Corp., et. al. v.
NiSource Inc., et. al (filed March 18, 2003) (U.S. Dist. Ct., DC), are accurate
in all material respects.

 

16

 

(k)                                  The Purchasers shall have received
the Registration Rights Agreement duly executed and delivered by the Company.

 

(l)                                     The Purchasers shall have received a
certificate, substantially in the form of Exhibit A hereto, dated the date of
this Agreement, of the Vice President and Controller of the Company in which
such officer, to the best of his knowledge after reasonable investigation,
states that the financial data referenced in such certificate (i) agrees to the
dollar amounts in the Company’s audited consolidated financial statements for
the years ended December 31, 2001 and 2000 (the “AA Statements”) or (ii) to the
extent such financial data cannot be compared directly to the AA Statements,
agrees to the dollar and other amounts in the Company’s accounting records for
the years ended December 31, 2001 and 2000.

 

(m)                               The Company shall have consummated
the Amended Credit Agreement prior to, or simultaneously with, the Closing Date
on terms no less favorable to the Company than as described in the Offering
Document, and the Purchasers shall have received counterparts, conformed as
executed, of the Amended Credit Agreement and such other documentation as they
reasonably deem necessary to evidence the consummation thereof.

 

(n)                                 At or prior to the closing date of
the Other Securities, the Company shall have received requisite consents to the
modification of the financial maintenance covenants relating to the Company’s
8.0% senior notes due 2004, 7.20% senior notes due 2007 and 8.32% senior notes
due 2024 (collectively, the “Private
Notes”) so as to permit the incurrence of the Offered Securities and the
Other Securities, and the amendments of the indentures relating to the Private
Notes and effecting such modifications shall have become operative, and the
Purchasers shall have received reasonably satisfactory evidence thereof.  On the Closing Date, the Company shall have
repurchased all outstanding Private Notes or, with respect to such Private
Notes not repurchased, given to each holder thereof notice of redemption of
such Private Notes in accordance with the terms of the indentures relating to
the Private Notes, and the Purchasers shall have received reasonably
satisfactory evidence thereof.

 

The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFB may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder.

 

7.                                       Indemnification
and Contribution.  (a)                                The Company will indemnify and hold
harmless each Purchaser, its partners, directors and officers and each person,
if any, who controls such Purchaser within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser may become subject, under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular or the Exchange Act Reports, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, including any losses,
claims, damages or liabilities arising out of or based upon the Company’s
failure to perform its obligations under Section 5(a) of this Agreement, and
will reimburse each Purchaser for any legal or other expenses reasonably
incurred by such Purchaser in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Purchaser through CSFB
specifically for use therein, it being understood and agreed that the only such
information consists of the information described as such in
subsection (b) below; provided further, however, with respect to any such
untrue statement or alleged untrue statement in or omission or alleged omission
from the Preliminary Offering Circular, the indemnity agreement contained in
this paragraph (a) shall not inure to the benefit of any Purchaser or any
affiliate, partner, director, officer or controlling

 

17

 

person thereof to the extent that (i) a copy of the Offering
Circular as then amended or supplemented was not sent or given to a person to
whom the Purchaser sold the Offered Securities at or prior to the written
confirmation of the sale of such Offered Securities to such person and (ii)
such loss, claim, damage or liability of or with respect to such Purchaser or
any affiliate, partner, director, officer or controlling person thereof arises
out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from such Preliminary Offering Circular that was
corrected in the Offering Circular as then amended or supplemented, unless such
failure to deliver the Offering Circular as then amended or supplemented was a
result of non-compliance by the Company with the provisions of Section 5(a),
and so long as the Offering Circular and any amendment or supplement thereto
was provided by the Company to the Purchasers in the requisite quantity and on
a timely basis to permit delivery on or prior to the written confirmation of
the sale of such Offered Securities.

 

(b)                                 Each Purchaser will severally and not
jointly indemnify and hold harmless the Company, its directors and officers and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, against any losses, claims, damages or liabilities to
which the Company may become subject, under the Securities Act or the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Offering
Document, or any amendment or supplement thereto, or any related preliminary
offering circular, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through CSFB specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchaser consists
of the following information in the Offering Document furnished on behalf of
each Purchaser: under the caption “Plan of Distribution” in the fourth
paragraph, the third sentence of the tenth paragraph, the twelfth paragraph,
the thirteenth paragraph and the first sentence of the fifteenth paragraph;
provided, however, that the Purchasers shall not be liable for any losses,
claims, damages or liabilities arising out of or based upon the Company’s
failure to perform its obligations under Section 5(a) of this Agreement.

 

(c)                                  Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under subsection (a) or (b) above, notify the indemnifying
party of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability that it may have to any
indemnified party otherwise than under subsection (a) or (b) above. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes (i) an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to or an admission of
fault, culpability or failure to act by or on behalf of any indemnified party.

 

(d)                                 If the indemnification provided for in
this Section is unavailable or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in subsection (a) or
(b) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one

 

18

 

hand and the Purchasers on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Purchasers on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total discounts and commissions received by the
Purchasers from the Company under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Purchasers and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim that is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Purchaser shall be required to contribute any amount in
excess of the amount by which the total discounts, fees and commissions
received by such Purchaser exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  The Purchasers’ obligations in this
subsection (d) to contribute are several in proportion to their respective
obligations and not joint.

 

(e)                                  The obligations of the Company under this
Section shall be in addition to any liability that the Company may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Purchaser within the meaning of the Securities Act or the
Exchange Act; and the obligations of the Purchasers under this Section shall be
in addition to any liability that the respective Purchasers may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act.

 

8.                                       Default of
Purchasers.  If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
principal amount of such Series of Offered Securities that such defaulting
Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of
the total principal amount of the applicable Series of Offered Securities, CSFB
may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Purchasers, but if no
such arrangements are made by the Closing Date, the non-defaulting Purchasers
shall be obligated severally, in proportion to their respective commitments
hereunder with respect to such Series of Offered Securities, to purchase such
Series of the Offered Securities that such defaulting Purchasers agreed but
failed to purchase. If any Purchaser or Purchasers so default and the aggregate
principal amount of such Series of Offered Securities with respect to which
such default or defaults occur exceeds 10% of the total principal amount of
such Series of Offered Securities and arrangements satisfactory to CSFB and the
Company for the purchase of such Series of Offered Securities by other persons
are not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Purchaser or the Company,
except as provided in Section 9 hereof. As used in this Agreement, the
term “Purchaser” includes any person substituted for a Purchaser under this
Section. Nothing herein will relieve a defaulting Purchaser from liability for
its default.

 

9.                                       Survival of
Certain Representations and Obligations.  The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers and of the Purchasers set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made
by or on behalf of any Purchaser, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. 
If this Agreement is terminated pursuant to Section 8 hereof or if
for any reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Company shall remain responsible for the expenses to be paid
or reimbursed by it pursuant to Section 5 hereof and the respective
obligations of the Company and the Purchasers pursuant to Section 7 hereof
shall remain in effect.  If the purchase
of the Offered Securities by the Purchasers is not

 

19

 

consummated for any reason other than solely because of the
termination of this Agreement pursuant to Section 8 hereof or the
occurrence of any event specified in clause (iv), (v), (vi) or (vii) of
Section 6(b) hereof, the Company will reimburse the Purchasers for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.

 

10.                                 Notices. 
All communications hereunder will be in writing and, if sent to the
Purchasers will be mailed, delivered or facsimiled and confirmed to the
Purchasers c/o Credit Suisse First Boston LLC, Eleven Madison Avenue,
New York, New York 10010-3629, Facsimile: (212) 325-8278, Attention:
Investment Banking Department — Transactions Advisory Group, or, if sent to the
Company, will be mailed, delivered or facsimiled and confirmed to it at SEMCO
Energy, Inc., 28470 13 Mile Road, Suite 300, Farmington Hills, Michigan 48334,
Telephone.: (248) 702-6282, Facsimile: (248) 702-6306,  Attention: Mark Prendeville, Esq.; provided, however, that any notice to
a Purchaser pursuant to Section 7 hereof will be mailed, delivered or
facsimiled and confirmed to such Purchaser.

 

11.                                 Successors. 
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the controlling persons
referred to in Section 7 hereof, and no other person will have any right
or obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.

 

12.                                 Representation of Purchasers. 
You will act for the Purchasers in connection with this purchase, and
any action under this Agreement taken by you will be binding upon all the
Purchasers.

 

13.                                 Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.

 

14.                                 Applicable Law.  This Agreement
shall be governed by, and construed in accordance with, the laws of the State
of New York without regard to principles of conflicts of laws.  The Company hereby submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.

 

[Signature Pages Follow]

 

20

 

If the foregoing is in accordance with the Purchasers’ understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Purchasers in accordance with its terms.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  SEMCO Energy, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ 
  Mark Prendeville

  
	
   

  	
   

  	
  Name:   Mark Prendeville

  
	
   

  	
   

  	
  Title:    
  V.P. and General Counsel

  
				

 

21

 

The foregoing Purchase Agreement

is hereby confirmed and accepted

as of the date first above written.

 

CREDIT SUISSE FIRST BOSTON LLC

MCDONALD INVESTMENTS INC.

ABN AMRO INCORPORATED

US BANCORP PIPER JAFFRAY INC.

NATCITY INVESTMENTS, INC.

 

 

	
  By: 

  	
  CREDIT SUISSE FIRST
  BOSTON LLC

  
	
   

  
	
  By:

  	
  /s/  Joseph E. Reece

  	
   

  
	
   

  	
  Name:  Joseph E. Reece

  
	
   

  	
  Title:   
  Managing Directors

  
					

 

22

 

SCHEDULE A

 

 

	
  Purchaser

  	
   

  	
  Principal Amount of

  2008 Securities

  	
   

  	
  Principal Amount of

  2013 Securitie

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Suisse
  First Boston LLC

  	
   

  	
  $

  	
  105,000,000

  	
   

  	
  $

  	
  10,359,000

  	
   

  
	
  McDonald
  Investments Inc.

  	
   

  	
  18,000,000

  	
   

  	
  18,000,000

  	
   

  
	
  ABN AMRO
  Incorporated

  	
   

  	
  15,000,000

  	
   

  	
  15,000,000

  	
   

  
	
  US Bancorp Piper
  Jaffray Inc.

  	
   

  	
  9,000,000

  	
   

  	
  9,000,000

  	
   

  
	
  NatCity
  Investments, Inc.

  	
   

  	
  3,000,000

  	
   

  	
  3,000,000

  	
   

  
	
  Total

  	
   

  	
  $

  	
  150,000,000

  	
   

  	
  $

  	
  55,359,000

  	
   

  

 

23

 

SCHEDULE B

 

Subsidiaries

 

SEMCO Energy Ventures, Inc.

 

SEMCO Arkansas Pipeline Company

 

SEMCO Gas Storage Company

 

SEMCO Pipeline Company

 

Southeastern Development Company

 

Southeastern Financial Services, Inc.

 

Alaska Pipeline Company

 

NORSTAR Pipeline Company, Inc.

 

Aretech Information Services, Inc.

 

Hotflame Gas, Inc.

 

Sub-Surface Resources, Inc.

 

Flint Construction Company

 

Iowa Pipeline Associates, Inc.

 

K & B Construction, Inc.

 

Long’s Underground Technologies, Inc.

 

Sub-Surface Construction Co.

 

24

 

EXHIBIT A

 

SEMCO
ENERGY, INC.

 

 

CONTROLLER’S
CERTIFICATE

 

May 14, 2003

 

The undersigned, Steve Warsinske, as Vice President and Controller of
SEMCO Energy, Inc., a Michigan corporation (the “Company”), does hereby certify to
the best of his knowledge after reasonable investigation, pursuant to Section
6(l) of the Purchase Agreement, dated May 14, 2003, by and among the Company
and the Purchasers listed in Schedule A thereto (collectively, the “Purchasers”),
relating to (x) $55,359,000 in aggregate principal amount of the Company’s 73⁄4%
Senior Notes due 2013 and (y) $150,000,000 in aggregate principal amount of the
Company’s 71/8% Senior Notes due 2008,
as follows:

 

The financial data identified by the Purchasers and
referenced in the attached pages of the Company’s offering circular dated May
14, 2003 (the “Offering Circular”) (i) agrees to the dollar amounts in the
Company’s audited consolidated financial statements for the years ended
December 31, 2001 and 2000 (the “AA Statements”) or (ii) to the extent such
financial data cannot be compared directly to the AA Statements, agrees to the
dollar and other amounts in the Company’s accounting records for the years
ended December 31, 2001 and 2000.

 

This certificate is delivered to assist the Purchasers
in conducting and documenting their investigation of the affairs of the Company
in connection with the offering of securities covered by the Offering Circular.

 

[Signature Page Follows]

 

25

 

IN WITNESS WHEREOF, I 
have hereunto signed my name this 14h day of May 2003.

 

	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   Steve
  Warsinske

  
	
   

  	
  Title:

  	
  Vice President and Controller

  
				

 

26

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