-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KzIatir9o2I2QO8amD5UPU4b/EH0M+JBx8HZ5lKKOaf7vv7kfAQlmNdZQvtFe0Ph W1Icw7q1M1N2LeT/iBRAIA== 0000950124-98-003609.txt : 19980629 0000950124-98-003609.hdr.sgml : 19980629 ACCESSION NUMBER: 0000950124-98-003609 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980618 ITEM INFORMATION: FILED AS OF DATE: 19980626 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHIGAN CONSOLIDATED GAS CO /MI/ CENTRAL INDEX KEY: 0000065632 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 380478040 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07310 FILM NUMBER: 98655118 BUSINESS ADDRESS: STREET 1: 500 GRISWOLD ST CITY: DETROIT STATE: MI ZIP: 48226 BUSINESS PHONE: 3139652430 8-K 1 CURRENT REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 18, 1998 MICHIGAN CONSOLIDATED GAS COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 1-7310 38-0478040 State of Incorporation (Commission File (I.R.S. Employer Number) Identification No.) 500 GRISWOLD STREET, DETROIT, MICHIGAN 48226 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (313) 965-2430 2 Item 5. Other Events The registrant is filing herewith the following in connection with its offering of its Extendable MandatOry Par Put Remarketed Securities ("MOPPRS") due June 30, 2038 and its Resetable MAndatory Putable/remarketable Securities ("MAPS") due June 30, 2038 pursuant to the registration statement of the registrant on Form S-3 (No. 333-56333) filed with the Securities and Exchange Commission under the Securities Act of 1933. Index to Exhibits Exhibit Number Exhibit - ------- ------- 1-1 Purchase Agreement dated June 18, 1998 with respect to the MAPS. 1-2 Purchase Agreement dated June 18, 1998 with respect to the MOPPRS. 4-1 First Supplemental Indenture dated as of June 18, 1998 to the Senior Debt Securities Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A. 4-2 Thirty-fifth Supplemental Indenture dated as of June 18, 1998 to the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 between Michigan Consolidated Gas Company and Citibank, N.A. and Robert T. Kirchner, Trustees. 10-1 Reset Remarketing Agreement, dated as of June 23, 1998, by and between Michigan Consolidated Gas Company and Salomon Brothers Inc. 10-2 Reset Remarketing Agreement, dated as of June 23, 1998, by and between Michigan Consolidated Gas Company and Merrill Lynch & Co./Merrill Lynch, Pierce, Fenner & Smith Incorporated. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Michigan Consolidated Gas Company /s/ Howard L. Dow III --------------------------- Howard L. Dow III Senior Vice President and Chief Financial Officer Date: June 26, 1998 EX-1.1 2 PURCHASE AGREEMENT (MAPS) 1 EXHIBIT 1.1 MICHIGAN CONSOLIDATED GAS COMPANY (A MICHIGAN CORPORATION) DEBT SECURITIES PURCHASE AGREEMENT JUNE 18, 1998 SALOMON BROTHERS INC A. G. EDWARDS & SONS, INC. c/o Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Michigan Consolidated Gas Company (the "Company"), a Michigan corporation, confirms its agreement (this "Agreement") with Salomon Brothers Inc and each of the other Underwriters named in Schedule II hereto (collectively, the "Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Salomon Brothers Inc and A.G. Edwards & Sons, Inc. are acting as representatives (in such capacity, the "Representatives") with respect to the issue and sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the principal amount set forth in Schedule II of $75,000,000 aggregate principal amount of the Company's Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038 (the "Securities"). The Securities will be issued by the Company under its Indenture, dated as of June 1, 1998 (the "Indenture"), between the Company and Citibank, N.A., as trustee (the "Trustee"), which will be secured by the concurrent issuance and delivery to the Trustee of the Company's First Mortgage Bonds, Collateral Series A (the "COLLATERAL BONDS"), issued under and ratably secured by the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (the "ORIGINAL SECURED INDENTURE"), as supplemented and amended by thirty-five indentures supplemental thereto, including specifically the Twenty-ninth Supplemental Indenture, and the Thirty-fifth Supplemental Indenture creating the series in which the Collateral Bonds are to be issued (the "THIRTY-FIFTH 2 SUPPLEMENTAL INDENTURE") (the Original Secured Indenture and all supplemental indentures thereto being referred to collectively herein as the "Secured Indenture"), in a principal amount equal to that of and having other terms that mirror those of the Securities. The Company proposes to sell to the Underwriters Securities of the designation, with the terms and the aggregate principal amount specified in Schedule I hereto. The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement on Form S-3 (No. 333-56333) covering the registration of debt securities of the Company, including the Securities, under the Securities Act of 1933, as amended (the "1933 ACT") including the related preliminary prospectus or prospectuses, and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 ACT REGULATIONS") and the Company has have filed such post-effective amendments thereto as may be required prior to the execution of this Agreement. Such registration statement, as so amended, has been declared effective by the Commission. Such registration statement, as so amended, including the exhibits and schedules thereto, if any, and the information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "RULE 430a INFORMATION") or Rule 434(d) of the 1933 Act Regulations (the "RULE 434 INFORMATION"), is referred to herein as the "REGISTRATION STATEMENT"; and the final prospectus and the prospectus supplement relating to the offering of the Securities, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" shall be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934 ACT"), prior to the execution of this Agreement; provided, further, that if the Company files a registration statement with the Commission pursuant to Section 462(b) of the 1933 Act Regulations (the "RULE 462(b) REGISTRATION STATEMENT"), then after such filing, all references to "Registration Statement" shall be deemed to include the Rule 462(b) Registration Statement; and provided, further, that if the Company elects to rely upon Rule 434 of the 1933 Act Regulations, the term "PROSPECTUS" shall refer to the final or preliminary prospectus and the applicable term sheet (a "TERM SHEET") and all references in this Agreement to the date of such Prospectus shall mean the date of the applicable Term Sheet. A "preliminary prospectus" shall be deemed to refer to any prospectus used before the registration statement became effective and any prospectus that omitted, as applicable, the Rule 430A Information, the Rule 434 Information or other information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations, that was used after such effectiveness and prior to the execution and delivery of this Agreement. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the electronically transmitted copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus) or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is -2- 3 incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the 1934 Act which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be. SECTION 1. Representations and Warranties. (a) The Company represents and warrants to each Underwriter that: (i) No stop order suspending the effectiveness of the Registration Statement or any Rule 464(b) Registration Statement has been issued under the 1933 Act and no proceeding for that purpose has been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. (ii) The Company meets the requirements for the use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto (including the filing of the Company's most recent Annual Report on Form 10-K with the Commission) became effective and as of the date hereof, the Registration Statement, any Rule 462 Registration Statement and any amendments or supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the Trust Indenture Act of 1939, as amended (the "1939 ACT"), and the rules and regulations of the Commission under the 1939 Act (the "1939 ACT REGULATIONS") and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither the Prospectus nor any amendments or supplements thereto, at the time that the Prospectus or any such amendment or supplement was issued and at the Closing Date, included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company elects to rely upon Rule 434 of the 1933 Act Regulations, the Company will comply with the requirements of Rule 434. Notwithstanding the foregoing, the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Salomon Brothers Inc expressly for use in the Registration Statement or the Prospectus. Each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters -3- 4 for use in connection with the offering of the Securities will, at the time of such delivery, be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (iii) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act, and the rules and regulations of Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective, at the time the Prospectus was issued and on the Closing Date, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading. (iv) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (v) The financial statements of the Company included or incorporated by reference in the Registration Statement and the Prospectus, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statements of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified. Such financial state ments have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included or incorporated by reference in the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein. The ratio of earnings to fixed charges included in the Prospectus has been calculated in compliance with Item 503(d) of Regulation S-K of the Commission. The selected financial information and the summary financial data included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (vi) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as otherwise stated therein, (A) there has been no material adverse change and no development which could reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise (a "MATERIAL ADVERSE EFFECT"), whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those arising in the ordinary course of business, which are material with respect to the Company and its subsidiaries, considered as one enterprise, (C) except for regular quarterly dividends on the Company's common stock in amounts per share that are consistent with past practice or the applicable charter document or supplement thereto, respectively, there -4- 5 has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, singly or in the aggregate, have a Material Adverse Effect. (viii) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, singly or in the aggregate, have a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and all such shares are owned by the Company, directly or through its subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of the subsidiaries was issued in violation of preemptive or other similar rights arising by operation of law, under the charter or by-laws of any subsidiary or under any agreement to which the Company or any subsidiary is a party, or otherwise. (ix) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company, under any agreement to which the Company or any of its subsidiaries is a party or otherwise. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) The Securities have been duly authorized for issuance and sale pursuant to this Agreement and at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered by the Company against payment of the purchase price therefor, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms -5- 6 except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity) (the "BANKRUPTCY EXCEPTIONS"). The Securities will be in the form contemplated by, and entitled to the benefits of, the Indenture and conform in all material respects to the description thereof contained in the Prospectus and will be in substantially the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xii) The Collateral Bonds have been duly authorized for issuance and delivery to the Trustee, and at the Closing Date will have been duly executed by the Company and, when authenticated in the manner provided for in the Secured Indenture and delivered by the Company as security for the Securities, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. The Collateral Bonds will be in the form contemplated by, and entitled to the benefits of, the Secured Indenture and conform in all material respects to the description thereof contained in the Prospectus and will be substantially in the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xiii) The Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and constitutes a valid and legally binding instrument, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions; the Indenture conforms in all material respects to the description thereof contained in the Prospectus and will be in substantially the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xiv) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (xv) The Secured Indenture constitutes a legally valid and direct enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where all of the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or hereafter acquired, free from all prior liens, charges or encumbrances, except as set forth in subparagraph xxiii below, and in the case of property hereafter acquired, any thereof existing at the time of acquisition. -6- 7 (xvi) None of the Company or any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, note, lease, loan or credit agreement or any other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject, or in violation of any applicable law, rule or regulation or any judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets, which violation or default would, singly or in the aggregate, have a Material Adverse Effect. (xvii) The execution, delivery and performance by the Company of this Agreement, the Mandatory Tender Remarketing Agreement, to be dated as of the Closing Date, between the Company and Salomon Brothers Inc, as remarketing agent with respect to the Securities (the "Mandatory Tender Remarketing Agreement"), the Reset Remarketing Agreement, to be dated as of the Closing Date, between the Company and Salomon Brothers Inc as reset remarketing agent with respect to the Securities (the "Reset Remarketing Agreement" and, together with the Mandatory Tender Remarketing Agreement, the "Remarketing Agreements"); the execution, delivery and performance by the Company of the Indenture, the Securities, the Thirty-fifth Supplemental Indenture to the Original Secured Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; and the consummation of the transactions contemplated herein and therein and in the Registration Statement and the Prospectus (including the issuance and sale of the Securities and the issuance and pledge of the Collateral Bonds, and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds"); and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound (other than the lien of the Indenture), or to which any property or assets of the Company or any subsidiary thereof is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter of by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule or regulation, judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective property, assets or operations. (xviii) On the Closing Date, the Remarketing Agreements will have been validly authorized, executed and delivered by the Company and will constitute a valid and legally -7- 8 binding instrument, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. (xix) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiary's principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xx) There is no action, suit, proceeding, inquiry or investigation before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries which is required to be disclosed in the Registration Statement and the Prospectus (other than as disclosed therein), or which might reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or which might be reasonably expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated by this Agreement, or the Remarketing Agreements or the performance by the Company of its obligations hereunder and thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary thereof is a party or of which any of their respective properties or operations is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, could not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. (xxi) There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and/or filed as required. (xxii) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the performance by the Company of its obligations hereunder, in connection with (a) the offering, issuance or sale of the Securities under this Agreement, (b) the issuance and delivery to the Trustee of the Collateral Bonds, or (c) the consummation of the transactions contemplated by this Agreement, the Indenture and the Remarketing Agreements, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or foreign or state securities or blue sky laws. (xxiii) The Company has good and marketable title to the properties specifically described in and conveyed by the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permissible encumbrances, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, -8- 9 rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not materially impair the use of the property affected thereby in the operation of the business of the Company; the Company and its subsidiaries have good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except the liens of the Secured Indenture and such liens, encumbrances and defects as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as do not materially interfere with the conduct of the business of the Company and its subsidiaries. (xxiv) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory Commission, the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and to conduct the business now operated by each of them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, have a Material Adverse Effect, and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxv) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group ("MCN"), a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935 (the "1935 Act"), and such "holding company" and the Company are presently exempt from the provisions of the 1935 Act (except Section 9 thereof). (xxvi) Except as described in the Registration Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) none of the Company or any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance or code, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of -9- 10 chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "HAZARDOUS MATERIALS") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, the "ENVIRONMENTAL LAWS"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are in compliance with their requirements, or (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries. (xxvii) None of the Company or its subsidiaries is, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus, and upon the issuance and delivery to the Trustee of the Collateral Bonds, none will be, an "investment company" or an entity under the "control" of an "investment company" as such terms are defined under the Investment Company Act of 1940, as amended (the "1940 Act"). (xxviii) The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. (xxix) None of the Company and its subsidiaries or any of their respective directors, officers or controlling persons, has taken, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (xxx) No "forward looking statement" (as defined in Rule 175 under the 1933 Act) contained in the Registration Statement, any preliminary prospectus or the Prospectus was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. (b) Any certificate signed by any officer of the Company and delivered to the Underwriters or to counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as the case may be, to each Underwriter as to the matters covered thereby. SECTION 2. Sale and Delivery to the Underwriters; Closing. (a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per security set forth in Schedule I hereto, the respective principal amounts of the Securities set forth opposite the name of the such Underwriter, plus any additional principal amount of Securities -10- 11 which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) Delivery of and payment for the Securities shall be made at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019, or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 a.m. (Eastern time) on the third (fourth, if pricing of the Securities occurs after 4:30 p.m. (Eastern time) on any given day) business day after the date of execution of this Agreement (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being referred to herein as the "Closing Date"). (c) The Collateral Bonds that will secure the obligations of the Company in respect of the Securities will be issued and delivered to the Trustee of the Collateral Bonds on the Closing Date. (d) On the Closing Date the Company shall deliver the Securities to The Depository Trust Company, on behalf of the Representatives, for the account of each Underwriter against payment to the Company by wire transfer of immediately available funds to a bank account designated by the Company. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Securities which it has agreed to purchase. Salomon Brothers Inc, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Securities to be purchased by any Underwriter whose funds have not been received by the Closing Date, but such payment shall not relieve such Underwriter from its obligations hereunder. (e) Upon delivery, the Securities shall be in registered form and in such denominations as set forth on Schedule I hereto. The certificates representing the Securities shall be registered in the name of Cede & Co. and shall be made available for inspection by the Representatives in New York, New York not later than 10:00 a.m. (Eastern time) on the business day prior to the Closing Date. SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows: (a) Promptly following the execution of this Agreement, the Company will cause the Prospectus, including as a part thereof a prospectus supplement relating to the Securities and the Collateral Bonds, to be filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations and will take steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. -11- 12 (b) The Company, subject to Section 3(c), will comply with the requirements of Rule 430A or Rule 434 of the 1933 Act Regulations, as applicable, and will notify the Representatives immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment to the Registration Statement or the filing of any supplement or amendment to the Prospectus, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (c) The Company will give the Representatives notice of their intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment and any filing under Rule 462(b) of the 1933 Act Regulations), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise; will furnish the Representatives with copies of any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision a reasonable amount of time prior to such proposed filing or use, as the case may be; and will not file any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision to which the Representatives or counsel for the Underwriters shall object. (d) The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) The Company will deliver to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter may reasonably request, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be -12- 13 identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (f) The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus. If at any time when a prospectus is required by the 1933 Act or the 1934 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(c), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Underwriters, without charge, such number of copies of such amendment or supplement as the Underwriters may reasonably request. (g) The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for so long as may be required in connection with distribution of the Securities. (h) The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders and to deliver to the Representatives as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (i) The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under the caption "USE OF PROCEEDS." (j) On the Closing Date, the Company will issue and deliver the Collateral Bonds to the Trustee as security for the Securities as described in the Prospectus under the caption "DESCRIPTION OF THE NOTES--Security; Release Date." -13- 14 (k) If, at the time that the Registration Statement became (or in the case of a post-effective amendment becomes) effective, any information shall have been omitted therefrom in reliance upon Rule 430A or Rule 434 of the 1933 Act Regulations, then immediately following the execution of this Agreement, the Company will prepare, and file or transmit for filing with the Commission in accordance with such Rule 430A or Rule 434 and Rule 424(b) of the 1933 Act Regulations, copies of an amended Prospectus, or Term Sheet, or, if required by such Rule 430A, a post-effective amendment to the Registration Statement (including an amended Prospectus), containing all information so omitted. (l) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the 1933 Act Regulations by the earlier of (i) 10:00 p.m. Eastern time on the date of this Agreement and (ii) the time confirmations are sent or given, as specified by Rule 462(b)(2). (m) The Company, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (n) So long as any of the Securities are outstanding, to furnish the Representatives copies of all reports and financial statements furnished by the Company to each securities exchange on which securities issued by the Company may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the 1934 Act of the 1934 Act Regulations. (o) During a period of fifteen days from the date of the Prospectus, the Company will not, without the prior written consent of Salomon Brothers Inc, directly or indirectly, issue, pledge, sell, offer to sell, grant any option for the sale of or otherwise transfer or dispose of, any debt securities of the Company which mature more than one year after the Closing Date and which are substantially similar to the Securities, without the prior written consent of Salomon Brothers Inc, except for the offer by the Company of $75,000,000 aggregate principal amount of its Extendable MandatOry Par Put Remarketed Securities(sm) ("MOPPRS(sm)") due June 30, 2038. (p) None of the Company, its subsidiaries or any of their respective directors, officers or controlling persons, will take, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. SECTION 4. Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including, without limitation, expenses related to the following, if incurred: (i) the preparation, delivery, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto; (ii) the printing and delivery to the Underwriters of this Agreement, the -14- 15 Indenture, the Remarketing Agreements and any and such other documents as may be required in connection with the offering, purchase, sale and delivery of the Securities and the issuance and delivery of the Collateral Bonds; (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, as well as the preparation, issuance and delivery of the certificates for the Collateral Bonds to the Trustee, including any costs, taxes and expenses incident to the issuance and delivery of the Securities; (iv) the fees and disbursements of the Company's counsel, accountants and other advisors or agents; (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(g), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto; (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheet, the Prospectus and any amendments or supplements thereto, and the printing and delivery of any additional Prospectus and any amendments or supplements thereto as may be contemplated by the Remarketing Agreements; (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto; (viii) the fees and disbursements of the Trustee, including the fees and disbursements of counsel to the Trustee; (ix) any fees payable to the Commission; and (x) any fees payable in connection with the rating of the Securities by rating agencies. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company herein contained or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the 1933 Act and on the date hereof and on the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the satisfaction of counsel to the Underwriters. A prospectus containing information relating to the description of the Securities, the specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424(b) (or any required post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A), or, if the Company has elected to rely upon Rule 434 of the 1933 Act Regulations, a Term Sheet including the Rule 434 Information shall have been filed with the Commission in accordance with Rule 424(b). (b) On the Closing Date the Representatives shall have received: -15- 16 (1) The favorable opinion, dated as of the Closing Date, of Ronald E. Christian, Esq., Vice President, General Counsel and Secretary of the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus and to enter into and perform its obligations under this Agreement. (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Effect. (iv) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; and none of the outstanding shares of capital stock were issued in violation of preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company; under any agreement to which the Company, or any of its subsidiaries is a party, or otherwise. (v) The Securities are in the form contemplated by the Indenture, have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided for in the Indenture and delivered by the Company against payment of the purchase price therefor, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. Each holder of the Securities will be entitled to the benefits provided by the Indenture; the form of certificate used to evidence the Securities is in due and proper form and complies with the requirements of the Indenture; and the Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Prospectus. (vi) The Collateral Bonds are in the form contemplated by the Secured Indenture, have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided for in the Indenture, and issued and delivered by the Company to the Trustee as security for the Securities, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that -16- 17 enforcement thereof may be limited by the Bankruptcy Exceptions. The form of certificate used to evidence the Collateral Bonds is in due and proper form and complies with the requirements of the Secured Indenture; and the Collateral Bonds and the Secured Indenture conform in all material respects to the descriptions thereof contained in the Prospectus. (vii) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (viii) Except as to property acquired subsequent to the date of execution of the Thirty-fourth Supplemental Indenture, the Company has good and marketable title to the property specifically or generally described in the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permitted liens, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not, in the opinion of such counsel, materially impair the use of the property affected thereby in the operation of the business of the Company; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as are not material and do not interfere with the conduct of the business of the Company and its subsidiaries. (ix) The Secured Indenture constitutes a legally valid and enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not, in the opinion of such counsel, make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or hereafter acquired, free from all prior liens, charges or encumbrances other than the lien of the Secured Indenture, permitted liens, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, any liens existing thereof or purchase money liens placed thereon at the time of such acquisition as permitted by the grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title -17- 18 which do not, in the opinion of such counsel, materially impair the use of the property affected thereby in the operation of the business of the Company. (x) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to the execution of the Thirty-Fifth Supplemental Indenture and the issuance and delivery of the Collateral Bonds have been paid. (xi) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, individually or in the aggregate, have a Material Adverse Effect. Except as otherwise disclosed in the Registration Statement and the Prospectus, all of the issued and outstanding capital stock of each such subsidiary of the Company has been duly authorized and validly issued, is fully paid and non-assessable and all such shares are owned by the Company, directly or through its subsidiaries and, to the best of such counsel's knowledge, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any subsidiary of the Company was issued in violation of preemptive or other similar rights of any securityholder of such subsidiary. (xii) This Agreement has been duly authorized, executed and delivered by the Company. (xiii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings therefor have been initiated or threatened by the Commission. (xiv) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein, as to which such counsel need express no opinion), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations; -18- 19 the Indenture and the Statements of Eligibility on Form T-1 with respect to the Trustee filed with the Commission as part of the Registration Statement complied as to form in all material respects with the requirements of the 1939 Act and the 1939 Act Regulations. (xv) The documents incorporated by reference in the Prospectus (other than the financial statements and supporting schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations. (xvi) The Company meets the registrant requirements for use of Form S-3 under the 1933 Act Regulations. (xvii) The Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by the Bankruptcy Exceptions. (xviii) The Secured Indenture has been duly and validly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions; the Secured Indenture has been duly qualified under the 1939 Act. (xix) The Thirty-Fifth Supplemental Indenture to the Original Secured Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by the Bankruptcy Exceptions. (xx) Each of the Remarketing Agreements has been validly authorized, executed and delivered by the Company and will constitute a valid and legally binding instrument, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. (xxi) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to the execution of the Indenture and the issuance of the Securities have been paid. (xxii) The execution, delivery and performance by the Company of this Agreement, and the Remarketing Agreements; the execution, delivery and performance by the Company of the Indenture, the Securities, the Thirty-fifth -19- 20 Supplemental Indenture to the Original Secured Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; the consummation of the transactions contemplated herein and therein and in the Registration Statement and Prospectus (including the issuance and sale of the Securities, the issuance and delivery to the Trustee of the Collateral Bonds, and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds"); and compliance by the Company with its obligations hereunder and thereunder do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to such counsel, to which the Company or its subsidiaries is a party or by which any of them may be bound, or to which any of the properties, assets or operations of the Company or its subsidiaries is subject, except for such conflicts, breaches, defaults, liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any if its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to such counsel, of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations. (xxiii) To the best of such counsel's knowledge, there is not any action, suit, proceeding, inquiry or investigation pending or threatened before or by any court or governmental agency or body, domestic or foreign, pending or threatened, against or affecting the Company or any of its subsidiaries which is required to be dis closed in the Registration Statement and the Prospectus (other than as disclosed therein), or which might reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated in this Agreement, the Indenture, the Thirty-Fifth Supplemental Indenture to the Original Secured Indenture or the Remarketing Agreements, or the performance by the Company of its obligations hereunder and thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or to which any of their respective property or assets is the subject which are not described in the Registration Statement or the Prospectus, including ordinary routine litigation incidental to the business of the Company or its subsidiaries, could not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. (xxiv) The information in the Prospectus under the captions "Summary," "The Company," "Use of Proceeds," "Description of the First Mortgage -20- 21 Bonds," and "Description of the Senior Debt Securities" and in the Registration Statement under Item 14, to the extent that they involve matters of law, summaries of legal matters, the Company's charter and by-laws or legal proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material respects. (xxv) To the best of such counsel's knowledge, there are no statutes or regulations that are required to be described in the Prospectus that are not described as required. (xxvi) To the best of such counsel's knowledge and information, neither the Company nor any of its subsidiaries is in violation of its charter or by-laws and no default by the Company or any subsidiary exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan or credit agreement, note, lease, or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them or any of their respective properties or assets are bound, except for violations and defaults that would not, singly or in the aggregate, result in a Material Adverse Effect. (xxvii) All descriptions in the Prospectus of contracts and other documents to which the Company or any of its subsidiaries is a party are accurate in all material respects. To the best of such counsel's knowledge and information, there are no franchises, contracts, indentures, mortgages, loan or credit agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or incorporated by reference as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, and the descriptions thereof or references thereto are correct in all material respects. No default exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in the Secured Indenture any other contract, indenture, mortgage, agreement, note lease or other instrument so described, referred to, filed or incorporated by reference. (xxviii) All legally required proceedings in connection with the authorization, issuance and validity of the Securities and the sale of the Securities in accordance with this Agreement (other than the filing of post-issuance reports, the non-filing of which would not render the Securities invalid), and in connection with the issuance and delivery to the Trustee of the Collateral Bonds, have been taken; and no filing with, authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than under the 1933 Act and the 1933 Act Regulations, which have been obtained, or as may be required under the securities or blue sky laws of the various states, as to which such counsel need express no opinion) is necessary or required in connection with the due authorization, execution and delivery of this Agreement, the Remarketing Agreements or the Thirty-Fifth Supplemental Indenture, or for the offering, issuance and sale of the Securities, the issuance and pledge of the Collateral Bonds, or the performance by the -21- 22 Company of its obligations in this Agreement, the Thirty-Fifth Supplemental Indenture, the Indenture, the Remarketing Agreements and the Securities. (xxix) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory Commission; the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and for the operation of the business carried on by each of them as described in the Registration Statement and the Prospectus except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all such licenses, franchises, permits, certificates, authorizations, approvals, consents and orders are in full force and effect, except when the failure of such Governmental Licenses to be in full force would not, singly or in the aggregate, have a Material Adverse Effect, and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company or its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement or the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxx) Each of the Company and its subsidiaries has good and marketable title to all material real and personal property owned by each of them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Registration Statement and the Prospectus or (b) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and any real property and buildings held under lease by the Company, or its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the conduct of the business of the Company or such subsidiaries. (xxxi) The Company is not an "investment company" or an entity under the "control" of an "investment company" as such terms are defined in the 1940 Act. (xxxii) MCN and the Company are presently exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9 thereof) which would otherwise require either of them to register thereunder. Moreover, such counsel shall confirm that nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement, including any Rule 430A Information and Rule 434 Information (if -22- 23 applicable)(except for financial statements and the notes thereto, the financial schedules and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time such Registration Statement became effective or at the date of this Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and the notes thereto, the financial schedules, and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time the Prospectus were issued, at the time of any such amended or supplemented Prospectus were issued or at the Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (2) The favorable opinion, dated as of the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect that: (i) The Registration Statement, including any Rule 462(b) Registration Statement, is effective under the 1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings therefor have been initiated or, to the best of such counsel's knowledge, threatened by the Commission. (ii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein, as to which such counsel need express no opinion), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (iii) The statements in the Prospectus under the captions and "Description of the Senior Debt Securities" and "Description of the First Mortgage Bonds," to the extent that they involve matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, have been reviewed by such counsel and are correct in all material respects. (iv) Assuming that the Remarketing Agreements being delivered at the Closing Date have been duly authorized, executed and delivered by the Company -23- 24 under Michigan law, each of them is a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. (v) The Securities, the Indenture and the Remarketing Agreements conform in all material respects to the descriptions thereof contained in the Prospectus. (vi) No authorization, approval, consent, order, registration, qualification of or with any court or federal or New York state governmental authority or agency is required for the issuance and sale of the Securities by the Company to the Underwriters, or the issuance and delivery to the Trustee by the Company of the Collateral Bonds, or the performance by the Company of its obligations under the Agreement, the Indenture, the Secured Indenture, the Thirty-Fifth Supplemental Indenture, the Remarketing Agreements, the Securities, and the Collateral Bonds except such as has been obtained and made under the federal securities laws or such as may be required under the securities or blue sky laws of the various states, as to which such counsel need express no opinion. Moreover, such counsel shall confirm that nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement, including any Rule 430A Information and Rule 434 Information (if applicable)(except for financial statements and the notes thereto, the financial schedules and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time such Registration Statement became effective or at the date of this Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and the notes thereto, the financial schedules, and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time the Prospectus were issued, at the time of any such amended or supplemented Prospectus were issued or at the Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (3) The favorable opinion, dated as of the Closing Date, of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, in form and substance satisfactory to the Representatives, with respect to such matters as the Representatives may reasonably 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. In giving such opinion, LeBoeuf, Lamb, Greene & MacRae, L.L.P. may rely as to certain matters of Michigan law upon the opinion of Ronald E. Christian, Esq., counsel for the Company, which shall be delivered in accordance with Section 5(b)(1) hereof. -24- 25 (4) The opinion, dated as of the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company, generally to the effect that, subject to the qualifications and limitations stated therein and in the Prospectus, the statements set forth in the Prospectus under the caption "Certain United States Federal Income Tax Considerations," insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters discussed therein in all material respects. (c) On the Closing Date, the Representatives shall have received a certificate of the President or a Vice President of the Company and of the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of the Closing Date, to the effect that (i) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not in the ordinary course of business, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Date, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied on or prior to the Closing Date, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (d) At the time of the execution of this Agreement, the Representatives shall have received from Deloitte & Touche LLP a letter dated such date in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect set forth below and as to such other matters as the Representatives may reasonably request, that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations; (ii) In their opinion, the consolidated financial statements and any financial statement schedules audited by them and included or incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented, comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations; (iii) On the basis of limited procedures, not constituting an audit in accordance with generally accepted auditing standards, including a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented, for the periods specified in such letter, a reading of the latest available unaudited interim consolidated financial statements of the -25- 26 Company and its subsidiaries, a reading of the minutes of the Company and its subsidiaries since the audited consolidated financial statements set forth in the Company's Annual Report on Form 10-K for the most recent year, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited condensed consolidated financial statements set forth in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented do not comply as to form in all material respects with the applicable accounting requirements of the 1934 Act and the 1934 Act Regulations as they apply to Form 10-Q or any material modifications should be made for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited consolidated financial statements set forth in the Company's Annual Report on Form 10-K for the most recent year ended incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented; (B) any other unaudited income statement data and balance sheet items included in the Prospectus, as amended or supplemented, do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived; (C) any unaudited pro forma consolidated condensed financial statements or any unaudited pro forma consolidating financial statements included or incorporated by reference in the Prospectus, as amended or supplemented, do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (D) as of a specified date not more than five days prior to the date of this Agreement, there has been any decrease or increase in the capital stock or any increase or decrease in long-term debt including capital lease obligations and current maturities (except for sinking fund and installment requirements under their long-term debt agreements, terms of the preferred securities of subsidiaries and purchases in the open market in anticipation thereof) or any increase in short-term debt, or any decrease in consolidated common shareholders' equity of the Company and its consolidated subsidiaries (other than periodic dividends declared to shareholders), in each case as compared with the corresponding amounts shown in the latest consolidated statement of financial position of the Company and its subsidiaries incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented, except in each case for increases or -26- 27 decreases which the Prospectus as amended or supplemented, including financial information incorporated by reference, discloses have occurred or may occur or which are described in such letter; and (E) for the period from the date of the latest consolidated financial statements included or incorporated by reference in the Prospectus, as amended or supplemented, to the end of the latest period for which unaudited condensed consolidated financial statements or financial information are available there were any decreases in consolidated operating revenues, operating income, net income or earnings available for Common Stock of the Company and its consolidated subsidiaries, or any increases in any items specified by the Representatives, in each case as compared with the corresponding period in the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus, as amended or supplemented, including financial information incorporated by reference, discloses have occurred or may occur or which are described in such letter; and (F) the unaudited condensed consolidated financial statements referred to in Clause (E) are not stated on a basis substantially consistent with the audited consolidated financial statements incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented. (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus, as amended or supplemented, and included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) In addition to the limited procedures, reading of minutes, inquiries and other procedures referred to in clause (iii) and (iv) above, they have carried out certain other specified procedures, not constituting an audit in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information which are derived from the general accounting and financial records of the Company and its subsidiaries, which appear in the Prospectus, as amended or supplemented, and the Registration Statement, in The Company's Annual Report on Form 10-K for the latest year ended and in the Company's Quarterly Reports on Form 10-Q since the latest Annual Report on Form 10-K and which are specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting and financial records of the Company and its subsidiaries and have found them to be in agreement; and -27- 28 (vi) If applicable and agreed to by the parties to this Agreement, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the selected financial data, pro forma financial information, prospective financial statements, consolidating financial statements and/or condensed financial statements derived from audited financial statements of the Company for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the Representatives. (e) On the Closing Date, the Representatives shall have received from Deloitte & Touche LLP a letter, dated as of the Closing Date, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Date. (f) On the Closing Date, the Securities shall be rated at least "A2" by Moody's Investors Service and "A" by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. and the Company shall have delivered to the Representatives a letter, dated the Closing Date, from such rating agencies, or other evidence satisfactory to the Representatives, confirming that the Securities have such ratings; and since the date of this Agreement, there shall not have occurred any decrease in the ratings of any of the securities of the Company or of the Securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the 1933 Act Regulations) and such organization shall not have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the securities of the Company or of the Securities. (g) On the Closing Date, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, may be terminated by the Representatives by notice to the Company at any time on or prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6 and 7 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the 1933 Act or the 1934 Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject -28- 29 under the 1933 Act, the 1934 Act or other Federal or state statutory law or regulation, at common law 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 a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; 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 any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein; provided, however, that the indemnification contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability or expense arising from the sale of the Securities by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the regulations thereunder, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus, provided that the Offerors have delivered the Prospectus to the several Underwriters in requisite quantity on a timely basis to permit such delivery or sending. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the 1933 Act or the 1934 Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth in the last paragraph of the cover page regarding delivery of the Securities, the legend in block capital letters on page 3 related to stabilization, syndicate covering transactions and penalty bids and, under the heading "Underwriting" or "Plan of Distribution", (i) the sentences related to concessions and reallowances and (ii) the paragraph related to stabilization, syndicate covering transactions and penalty bids in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus. -29- 30 (c) Promptly after receipt by an indemnified party under this Section 6 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 this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities; provided, however, that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the -30- 31 immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). SECTION 7. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of and payment for the Securities to the Underwriters. SECTION 8. Termination of Agreement. (a) The Representatives may terminate this Agreement, by notice to the Company at any time on or prior to the Closing Date, if (i) there has been, since the date of this Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change or any development which could reasonably be expected to result in a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) there has occurred any material adverse change in the financial markets in the United States or any outbreak of -31- 32 hostilities or escalation of hostilities or other calamity or crisis, or any change or development involving a prospective change in national or international political, financial or economic conditions the effect of which is such as to make it, in the judgment of the Representatives, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company or any of its affiliates has been suspended or limited by the Commission, the National Association of Securities Dealers, Inc. ("NASD") or the New York Stock Exchange, or if trading generally on either the American Stock Exchange, the New York Stock Exchange or in the over-the-counter market has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said exchanges or by such system or by order of the Commission, NASD or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal, New York or Michigan authorities. (b) If this Agreement is terminated pursuant to this Section 8, such termination shall be without liability of any party to any other party except as provided in Section 4, and provided, further, that Sections 1, 6 and 7 shall survive such termination and remain in full force and effect. SECTION 9. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Date to purchase the Securities which it or they are obligated to purchase under this Agreement (the "DEFAULTED SECURITIES"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section 9 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representatives or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 9. -32- 33 SECTION 10. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representatives at Seven World Trade Center, New York, New York 10048, attention of Legal Department (Marianne Spinelli, Esq.) with a copy to LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019-5389, attention of William S. Lamb, Esq.; notices to the Company shall be directed to it at Michigan Consolidated Gas Company, 500 Griswold Street, Detroit, Michigan 48226, attention of Ronald E. Christian, Esq., Vice President, General Counsel and Secretary. SECTION 11. Parties. This Agreement shall inure to the benefit of and be binding upon the Company, and the Underwriters and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the parties hereto and thereto and their respective successors and legal representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME UNLESS OTHERWISE INDICATED. SECTION 13. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. -33- 34 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, shall become a binding agreement among the Underwriters and the Company in accordance with its terms. Very truly yours, MICHIGAN CONSOLIDATED GAS COMPANY By: /s/ Howard L. Dow III ------------------------------- Name: Howard L. Dow III Title: Senior Vice President and Chief Financial Officer CONFIRMED AND ACCEPTED, as of the date first above written: SALOMON BROTHERS INC A.G. EDWARDS & SONS, INC. By: SALOMON BROTHERS INC By: /s/ Kimberly Blue -------------------------------- Authorized Signatory For themselves and as Representatives of the other Underwriters named in Schedule II hereto. -34- 35 SCHEDULE I REPRESENTATIVES: Salomon Brothers Inc A.G. Edwards & Sons, Inc. PURCHASE PRICE AND DESCRIPTION OF THE SECURITIES: TITLE: Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038. PRINCIPAL AMOUNT: $75,000,000. PURCHASE PRICE: 102.850% of the principal amount thereof. INDENTURE: Indenture, dated as of June 1, 1998, between Michigan Consolidated Gas Company and Citibank, N.A., as trustee. DATE OF MATURITY: June 30, 2038. INTEREST RATE: 6.20%. INTEREST PAYMENT DATES: June 30 and December 30. REDEMPTION PROVISIONS: As set forth in The Prospectus under the caption headed "Description of the Notes- Redemption." AUTHORIZED DENOMINATIONS: $1,000 and integral multiples thereof. OTHER PROVISIONS: TIME AND DATE OF DELIVERY AND PAYMENT: TIME: 9:00 A.M. (Eastern time) DATE: June 23, 1998 LOCATION: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 36 PLACE OF DELIVERY AND PAYMENT: DELIVERY: Salomon Brothers Inc c/o The Depository Trust Company 55 Water Street New York, New York 10041 PAYMENT: Wire Transfer of same day funds. -2- 37 SCHEDULE II
Principal Amount Name of Underwriter of the Securities ------------------- ----------------- Salomon Brothers Inc....................................... $37,500,000 A.G. Edwards & Sons, Inc. ................................. $37,500,000 Total...................................................... $75,000,000 ===========
EX-1.2 3 PURCHASE AGREEMENT (MOPPRS) 1 EXHIBIT 1.2 MICHIGAN CONSOLIDATED GAS COMPANY (A MICHIGAN CORPORATION) DEBT SECURITIES PURCHASE AGREEMENT JUNE 18, 1998 MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED FIRST CHICAGO CAPITAL MARKETS, INC. c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Michigan Consolidated Gas Company (the "Company"), a Michigan corporation, confirms its agreement (this "Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named in Schedule II hereto (collectively, the "Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch and First Chicago Capital Markets, Inc. are acting as representatives (in such capacity, the "Representatives") with respect to the issue and sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the principal amount set forth in Schedule II of $75,000,000 aggregate principal amount of the Company's Extendable MandatOry Par Put Remarketed Securities (sm) ("MOPPRS(sm)"), due June 30, 2038 (the "Securities"). The Securities will be issued by the Company under its Indenture, dated as of June 1, 1998 (the "Indenture"), between the Company and Citibank, N.A., as trustee (the "Trustee"), which will be secured by the concurrent issuance and delivery to the Trustee of the Company's First Mortgage Bonds, Collateral Series A (the "COLLATERAL BONDS"), issued under and ratably secured by the Indenture 2 of Mortgage and Deed of Trust dated as of March 1, 1944 (the "ORIGINAL SECURED INDENTURE"), as supplemented and amended by thirty-five indentures supplemental thereto, including specifically the Twenty-ninth Supplemental Indenture, and the Thirty-fifth Supplemental Indenture creating the series in which the Collateral Bonds are to be issued (the "THIRTY-FIFTH SUPPLEMENTAL INDENTURE") (the Original Secured Indenture and all supplemental indentures thereto being referred to collectively herein as the "Secured Indenture"), in a principal amount equal to that of and having other terms that mirror those of the Securities. The Company proposes to sell to the Underwriters Securities of the designation, with the terms and the aggregate principal amount specified in Schedule I hereto. The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement on Form S-3 (No. 333-56333) covering the registration of debt securities of the Company, including the Securities, under the Securities Act of 1933, as amended (the "1933 ACT") including the related preliminary prospectus or prospectuses, and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 ACT REGULATIONS") and the Company has filed such post-effective amendments thereto as may be required prior to the execution of this Agreement. Such registration statement, as so amended, has been declared effective by the Commission. Such registration statement, as so amended, including the exhibits and schedules thereto, if any, and the information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "RULE 430A INFORMATION") or Rule 434(d) of the 1933 Act Regulations (the "RULE 434 INFORMATION"), is referred to herein as the "REGISTRATION STATEMENT"; and the final prospectus and the prospectus supplement relating to the offering of the Securities, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" shall be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934 ACT"), prior to the execution of this Agreement; provided, further, that if the Company files a registration statement with the Commission pursuant to Section 462(b) of the 1933 Act Regulations (the "RULE 462(b) REGISTRATION STATEMENT"), then after such filing, all references to "Registration Statement" shall be deemed to include the Rule 462(b) Registration statement; and provided, further, that if the Company elects to rely upon Rule 434 of the 1933 Act Regulations, the term "PROSPECTUS" shall refer to the final or preliminary prospectus and the applicable term sheet (a "TERM SHEET") and all references in this Agreement to the date of such Prospectus shall mean the date of the applicable Term Sheet. A "preliminary prospectus" shall be deemed to refer to any prospectus used before the registration statement became effective and any prospectus that omitted, as applicable, the Rule 430A Information, the Rule 434 Information or other information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations, that was used after such effectiveness and prior to the execution and delivery of this Agreement. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the electronically transmitted copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). -2- 3 All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus) or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to mean and include the filing of any document under the 1934 Act which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be. SECTION 1. Representations and Warranties. (a) The Company represents and warrants to each Underwriter that: (i) No stop order suspending the effectiveness of the Registration Statement or any Rule 464(b) Registration Statement has been issued under the 1933 Act and no proceeding for that purpose has been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. (ii) The Company meets the requirements for the use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto (including the filing of the Company's most recent Annual Report on Form 10-K with the Commission) became effective and as of the date hereof, the Registration Statement, any Rule 462 Registration Statement and any amendments or supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the Trust Indenture Act of 1939, as amended (the "1939 ACT"), and the rules and regulations of the Commission under the 1939 Act (the "1939 ACT REGULATIONS") and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither the Prospectus nor any amendments or supplements thereto, at the time that the Prospectus or any such amendment or supplement was issued and at the Closing Date, included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If the Company elects to rely upon Rule 434 of the 1933 Act Regulations, the Company will comply with the requirements of Rule 434. Notwithstanding the foregoing, the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or the Prospectus. -3- 4 Each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with the offering of the Securities will, at the time of such delivery, be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (iii) The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act, and the rules and regulations of Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective, at the time the Prospectus was issued and on the Closing Date, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading. (iv) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (v) The financial statements of the Company included or incorporated by reference in the Registration Statement and the Prospectus, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statements of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified. Such financial state ments have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included or incorporated by reference in the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein. The ratio of earnings to fixed charges included in the Prospectus has been calculated in compliance with Item 503(d) of Regulation S-K of the Commission. The selected financial information and the summary financial data included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (vi) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as otherwise stated therein, (A) there has been no material adverse change and no development which could reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise (a "MATERIAL ADVERSE EFFECT"), whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Company or any of its -4- 5 subsidiaries, other than those arising in the ordinary course of business, which are material with respect to the Company and its subsidiaries, considered as one enterprise, (C) except for regular quarterly dividends on the Company's common stock in amounts per share that are consistent with past practice or the applicable charter document or supplement thereto, respectively, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, singly or in the aggregate, have a Material Adverse Effect. (viii) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, singly or in the aggregate, have a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and all such shares are owned by the Company, directly or through its subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of the subsidiaries was issued in violation of preemptive or other similar rights arising by operation of law, under the charter or by-laws of any subsidiary or under any agreement to which the Company or any subsidiary is a party, or otherwise. (ix) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company, under any agreement to which the Company or any of its subsidiaries is a party or otherwise. (x) This Agreement has been duly authorized, executed and delivered by the Company. -5- 6 (xi) The Securities have been duly authorized for issuance and sale pursuant to this Agreement and at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered by the Company against payment of the purchase price therefor, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity, (the "BANKRUPTCY EXCEPTIONS"). The Securities will be in the form contemplated by, and entitled to the benefits of, the Indenture and conform in all material respects to the description thereof contained in the Prospectus and will be in substantially the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xii) The Collateral Bonds have been duly authorized for issuance and delivery to the Trustee, and at the Closing Date will have been duly executed by the Company and, when authenticated in the manner provided for in the Secured Indenture and delivered by the Company as security for the Securities, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. The Collateral Bonds will be in the form contemplated by, and entitled to the benefits of, the Secured Indenture and conform in all material respects to the description thereof contained in the Prospectus and will be substantially in the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xiii) The Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and constitutes a valid and legally binding instrument, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions; the Indenture conforms in all material respects to the description thereof contained in the Prospectus and will be in substantially the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (xiv) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date, or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (xv) The Secured Indenture constitutes a legally valid and enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where all of the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or -6- 7 hereafter acquired, free from all prior liens, charges or encumbrances, except as set forth in subparagraph xxiii below, and in the case of property hereafter acquired, any thereof existing at the time of acquisition. (xvi) None of the Company or any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, note, lease, loan or credit agreement or any other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject, or in violation of any applicable law, rule or regulation or any judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets, which violation or default would, singly or in the aggregate, have a Material Adverse Effect. (xvii) The execution, delivery and performance by the Company of this Agreement, the Mandatory Tender Remarketing Agreement, to be dated as of the Closing Date, between the Company and Merrill Lynch, as Remarketing Agent with respect to the Securities (the "Mandatory Tender Remarketing Agreement"), the Reset Remarketing Agreement, to be dated as of the Closing Date, between the Company and Merrill Lynch as Reset Remarketing Agent with respect to the Securities (the "Reset Remarketing Agreement" and, together with the Mandatory Tender Remarketing Agreement, the "Remarketing Agreements"); the execution, delivery and performance by the Company of the Indenture, the Securities, the Thirty-fifth Supplemental Indenture to the Original Secured Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; and the consummation of the transactions contemplated herein and therein and in the Registration Statement and the Prospectus (including the issuance and sale of the Securities and the issuance and delivery of the Collateral Bonds, and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds"); and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound (other than the lien of the Indenture), or to which any property or assets of the Company or any subsidiary thereof is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter of by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule or regulation, judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective property, assets or operations. -7- 8 (xviii) On the Closing Date, the Remarketing Agreements will have been validly authorized, executed and delivered by the Company and will constitute a valid and legally binding instrument, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. (xix) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiary's principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xx) There is no action, suit, proceeding, inquiry or investigation before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries which is required to be disclosed in the Registration Statement and the Prospectus (other than as disclosed therein), or which might reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or which might be reasonably expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated by this Agreement, or the Remarketing Agreements or the performance by the Company of its obligations hereunder and thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary thereof is a party or of which any of their respective properties or operations is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, could not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. (xxi) There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and/or filed as required. (xxii) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the performance by the Company of its obligations hereunder, in connection with (a) the offering, issuance or sale of the Securities under this Agreement, (b) the issuance and delivery to the Trustee of the Collateral Bonds, or (c) the consummation of the transactions contemplated by this Agreement, the Indenture and the Remarketing Agreements, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or foreign or state securities or blue sky laws. (xxiii) The Company has good and marketable title to the properties specifically described in and conveyed by the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permissible encumbrances, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original -8- 9 Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not materially impair the use of the property affected thereby in the operation of the business of the Company; the Company and its subsidiaries have good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except the liens of the Secured Indenture and such liens, encumbrances and defects as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as do not materially interfere with the conduct of the business of the Company and its subsidiaries. (xxiv) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory Commission, the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and to conduct the business now operated by each of them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect except when the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, have a Material Adverse Effect and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxv) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group ("MCN"), a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935 (the "1935 Act"), and such "holding company" and the Company are presently exempt from the provisions of the 1935 Act (except Section 9 thereof). (xxvi) Except as described in the Registration Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) none of the Company or any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance or code, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without -9- 10 limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "HAZARDOUS MATERIALS") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, the "ENVIRONMENTAL LAWS"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are in compliance with their requirements, or (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries. (xxvii) None of the Company or its subsidiaries is, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Prospectus, and upon the issuance and delivery to the Trustee of the Collateral Bonds, none will be, an "investment company" or an entity under the "control" of an "investment company" as such terms are defined under the Investment Company Act of 1940, as amended (the "1940 Act"). (xxviii) The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. (xxix) None of the Company and its subsidiaries or any of their respective directors, officers or controlling persons, has taken, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (xxx) No "forward looking statement" (as defined in Rule 175 under the 1933 Act) contained in the Registration Statement, any preliminary prospectus or the Prospectus was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. (b) Any certificate signed by any officer of the Company and delivered to the Underwriters or to counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as the case may be, to each Underwriter as to the matters covered thereby. SECTION 2. Sale and Delivery to the Underwriters; Closing. (a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per -10- 11 security set forth in Schedule I hereto, the respective principal amounts of the Securities set forth opposite the name of the such Underwriter, plus any additional principal amount of Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) Delivery of and payment for the Securities shall be made at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019, or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 a.m. (Eastern time) on the third (fourth, if pricing of the Securities occurs after 4:30 p.m. (Eastern time) on any given day) business day after the date of execution of this Agreement (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being referred to herein as the "Closing Date"). (c) The Collateral Bonds that will secure the obligations of the Company in respect of the Securities will be issued and delivered to the Trustee of the Collateral Bonds on the Closing Date. (d) On the Closing Date the Company shall deliver the Securities to The Depository Trust Company, on behalf of the Representatives, for the account of each Underwriter against payment to the Company by wire transfer of immediately available funds to a bank account designated by the Company. It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Securities which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Securities to be purchased by any Underwriter whose funds have not been received by the Closing Date, but such payment shall not relieve such Underwriter from its obligations hereunder. (e) Upon delivery, the Securities shall be in registered form and in such denominations as set forth on Schedule I hereto. The certificates representing the Securities shall be registered in the name of Cede & Co. and shall be made available for inspection by the Representatives in New York, New York not later than 10:00 a.m. (Eastern time) on the business day prior to the Closing Date. SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows: (a) Promptly following the execution of this Agreement, the Company will cause the Prospectus, including as a part thereof a prospectus supplement relating to the Securities and the Collateral Bonds, to be filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations and will take steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. -11- 12 (b) The Company, subject to Section 3(c), will comply with the requirements of Rule 430A or Rule 434 of the 1933 Act Regulations, as applicable, and will notify the Representatives immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment to the Registration Statement or the filing of any supplement or amendment to the Prospectus, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (c) The Company will give the Representatives notice of their intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment and any filing under Rule 462(b) of the 1933 Act Regulations), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise; will furnish the Representatives with copies of any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision a reasonable amount of time prior to such proposed filing or use, as the case may be; and will not file any such Rule 462(b) Registration Statement, Term Sheet, amendment, supplement or revision to which the Representatives or counsel for the Underwriters shall object. (d) The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) The Company will deliver to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter may reasonably request, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be -12- 13 identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (f) The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus. If at any time when a prospectus is required by the 1933 Act or the 1934 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(c), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Underwriters, without charge, such number of copies of such amendment or supplement as the Underwriters may reasonably request. (g) The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for so long as may be required in connection with distribution of the Securities. (h) The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders and to deliver to the Representatives as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (i) The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under the caption "USE OF PROCEEDS." (j) On the Closing Date, the Company will issue and deliver the Collateral Bonds to the Trustee as security for the Securities as described in the Prospectus under the caption "DESCRIPTION OF THE NOTES--Security; Release Date." -13- 14 (k) If, at the time that the Registration Statement became (or in the case of a post-effective amendment becomes) effective, any information shall have been omitted therefrom in reliance upon Rule 430A or Rule 434 of the 1933 Act Regulations, then immediately following the execution of this Agreement, the Company will prepare, and file or transmit for filing with the Commission in accordance with such Rule 430A or Rule 434 and Rule 424(b) of the 1933 Act Regulations, copies of an amended Prospectus, or Term Sheet, or, if required by such Rule 430A, a post-effective amendment to the Registration Statement (including an amended Prospectus), containing all information so omitted. (l) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the 1933 Act Regulations by the earlier of (i) 10:00 p.m. Eastern time on the date of this Agreement and (ii) the time confirmations are sent or given, as specified by Rule 462(b)(2). (m) The Company, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (n) So long as any of the Securities are outstanding, to furnish the Representatives copies of all reports and financial statements furnished by the Company to each securities exchange on which securities issued by the Company may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the 1934 Act of the 1934 Act Regulations. (o) During a period of fifteen days from the date of the Prospectus, the Company will not, without the prior written consent of Merrill Lynch, directly or indirectly, issue, pledge, sell, offer to sell, grant any option for the sale of or otherwise transfer or dispose of, any debt securities of the Company which mature more than one year after the Closing Date and which are substantially similar to the Securities, without the prior written consent of Merrill Lynch, except for the offer by the Company of $75,000,000 aggregate principal amount of its Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038. (p) None of the Company, its subsidiaries or any of their respective directors, officers or controlling persons, will take, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. SECTION 4. Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including, without limitation, expenses related to the following, if incurred: (i) the preparation, delivery, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto; (ii) the printing and delivery to the Underwriters of this Agreement, the -14- 15 Indenture, the Remarketing Agreements and any and such other documents as may be required in connection with the offering, purchase, sale and delivery of the Securities and the issuance and delivery of the Collateral Bonds; (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, as well as the preparation, issuance and delivery of the certificates for the Collateral Bonds to the Trustee, including any costs, taxes and expenses incident to the issuance and delivery of the Securities; (iv) the fees and disbursements of the Company's counsel, accountants and other advisors or agents; (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(g), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto; (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheet, the Prospectus and any amendments or supplements thereto, and the printing and delivery of any additional Prospectus and any amendments or supplements thereto as may be contemplated by the Remarketing Agreements; (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto; (viii) the fees and disbursements of the Trustee, including the fees and disbursements of counsel to the Trustee; (ix) any fees payable to the Commission; and (x) any fees payable in connection with the rating of the Securities by rating agencies. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company herein contained or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the 1933 Act and on the date hereof and on the Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the satisfaction of counsel to the Underwriters. A prospectus containing information relating to the description of the Securities, the specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424(b) (or any required post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A), or, if the Company has elected to rely upon Rule 434 of the 1933 Act Regulations, a Term Sheet including the Rule 434 Information shall have been filed with the Commission in accordance with Rule 424(b). (b) On the Closing Date the Representatives shall have received: -15- 16 (1) The favorable opinion, dated as of the Closing Date, of Ronald E. Christian, Esq., Vice President, General Counsel and Secretary of the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan. (ii) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus and to enter into and perform its obligations under this Agreement. (iii) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Effect. (iv) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; and none of the outstanding shares of capital stock were issued in violation of preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company; under any agreement to which the Company, or any of its subsidiaries is a party, or otherwise. (v) The Securities are in the form contemplated by the Indenture, have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided for in the Indenture and delivered by the Company against payment of the purchase price therefor, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. Each holder of the Securities will be entitled to the benefits provided by the Indenture; the form of certificate used to evidence the Securities is in due and proper form and complies with the requirements of the Indenture; and the Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Prospectus. (vi) The Collateral Bonds are in the form contemplated by the Secured Indenture, have been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in the manner provided for in the Indenture, and issued and delivered by the Company to the Trustee as security for the Securities, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that -16- 17 enforcement thereof may be limited by the Bankruptcy Exceptions. The form of certificate used to evidence the Collateral Bonds is in due and proper form and complies with the requirements of the Secured Indenture; and the Collateral Bonds and the Secured Indenture conform in all material respects to the descriptions thereof contained in the Prospectus. (vii) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date, or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (viii) Except as to property acquired subsequent to the date of execution of the Thirty-fourth Supplemental Indenture, the Company has good and marketable title to the property specifically or generally described in the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permitted liens, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not, in the opinion of such counsel, materially impair the use of the property affected thereby in the operation of the business of the Company; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as are not material and do not interfere with the conduct of the business of the Company and its subsidiaries. (ix) The Secured Indenture constitutes a legally valid and enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not, in the opinion of such counsel, make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or hereafter acquired, free from all prior liens, charges or encumbrances other than the lien of the Secured Indenture, permitted liens, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, any liens existing thereof or purchase money liens placed thereon at the time of such acquisition as permitted by the grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not, in the opinion of such counsel, materially impair the use of the property affected thereby in the operation of the business of the Company. -17- 18 (x) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to the execution of the Thirty-Fifth Supplemental Indenture and the issuance and delivery of the Collateral Bonds have been paid. (xi) Each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the Prospectus, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not, individually or in the aggregate, have a Material Adverse Effect. Except as otherwise disclosed in the Registration Statement and the Prospectus, all of the issued and outstanding capital stock of each such subsidiary of the Company has been duly authorized and validly issued, is fully paid and non-assessable and all such shares are owned by the Company, directly or through its subsidiaries and, to the best of such counsel's knowledge, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any subsidiary of the Company was issued in violation of preemptive or other similar rights of any securityholder of such subsidiary. (xii) This Agreement has been duly authorized, executed and delivered by the Company. (xiii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings therefor have been initiated or threatened by the Commission. (xiv) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein, as to which such counsel need express no opinion), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations; the Indenture and the Statements of Eligibility on Form T-1 with respect to the Trustee filed with the Commission as part of the Registration Statement complied as to form in all material respects with the requirements of the 1939 Act and the 1939 Act Regulations. -18- 19 (xv) The documents incorporated by reference in the Prospectus (other than the financial statements and supporting schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the 1934 Act Regulations. (xvi) The Company meets the registrant requirements for use of Form S-3 under the 1933 Act Regulations. (xvii) The Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by the Bankruptcy Exceptions. (xviii) The Secured Indenture has been duly and validly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions; the Secured Indenture has been duly qualified under the 1939 Act. (xix) The Thirty-Fifth Supplemental Indenture to the Original Secured Indenture has been duly and validly authorized, executed and delivered by the Company and qualified under the 1939 Act and, assuming due authorization, execution and delivery thereof by the Trustee, constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by the Bankruptcy Exceptions. (xx) Each of the Remarketing Agreements has been validly authorized, executed and delivered by the Company and will constitute a valid and legally binding instrument, enforceable against the Company in accordance with its terms, except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. (xxi) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to the execution of the Indenture and the issuance of the Securities have been paid. (xxii) The execution, delivery and performance by the Company of this Agreement, and the Remarketing Agreements; the execution, delivery and performance by the Company of the Indenture, the Securities, the Thirty-fifth Supplemental Indenture to the Original Secured Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; the consummation of the transactions contemplated herein and therein and in the Registration -19- 20 Statement and Prospectus (including the issuance and sale of the Securities, the issuance and delivery to the Trustee of the Collateral Bonds, and the use of the proceeds from the sale of the Securities as described in the Prospectus under the caption "Use of Proceeds"); and compliance by the Company with its obligations hereunder and thereunder do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to such counsel, to which the Company or its subsidiaries is a party or by which any of them may be bound, or to which any of the properties, assets or operations of the Company or its subsidiaries is subject, except for such conflicts, breaches, defaults, liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any if its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to such counsel, of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations. (xxiii) To the best of such counsel's knowledge, there is not any action, suit, proceeding, inquiry or investigation pending or threatened before or by any court or governmental agency or body, domestic or foreign, pending or threatened, against or affecting the Company or any of its subsidiaries which is required to be dis closed in the Registration Statement and the Prospectus (other than as disclosed therein), or which might reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated in this Agreement, the Indenture, the Thirty-Fifth Supplemental Indenture to the Original Secured Indenture or the Remarketing Agreements, or the performance by the Company of its obligations hereunder and thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or to which any of their respective property or assets is the subject which are not described in the Registration Statement or the Prospectus, including ordinary routine litigation incidental to the business of the Company or its subsidiaries, could not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. (xxiv) The information in the Prospectus under the captions "Summary," "The Company," "Use of Proceeds," "Description of the First Mortgage Bonds," and "Description of the Senior Debt Securities" and in the Registration Statement under Item 14, to the extent that they involve matters of law, summaries of legal matters, the Company's charter and by-laws or legal proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material respects. -20- 21 (xxv) To the best of such counsel's knowledge, there are no statutes or regulations that are required to be described in the Prospectus that are not described as required. (xxvi) To the best of such counsel's knowledge and information, neither the Company nor any of its subsidiaries is in violation of its charter or by-laws and no default by the Company or any subsidiary exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan or credit agreement, note, lease, or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them or any of their respective properties or assets are bound, except for violations and defaults that would not, singly or in the aggregate, result in a Material Adverse Effect. (xxvii) All descriptions in the Prospectus of contracts and other documents to which the Company or any of its subsidiaries is a party are accurate in all material respects. To the best of such counsel's knowledge and information, there are no franchises, contracts, indentures, mortgages, loan or credit agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or incorporated by reference as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, and the descriptions thereof or references thereto are correct in all material respects. No default exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in the Secured Indenture, any other contract, indenture, mortgage, agreement, note lease or other instrument so described, referred to, filed or incorporated by reference. (xxviii) All legally required proceedings in connection with the authorization, issuance and validity of the Securities and the sale of the Securities in accordance with this Agreement (other than the filing of post-issuance reports, the non-filing of which would not render the Securities invalid), and in connection with the issuance and delivery to the Trustee of the Collateral Bonds, have been taken; and no filing with, authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than under the 1933 Act and the 1933 Act Regulations, which have been obtained, or as may be required under the securities or blue sky laws of the various states, as to which such counsel need express no opinion) is necessary or required in connection with the due authorization, execution and delivery of this Agreement, the Remarketing Agreements or the Thirty-Fifth Supplemental Indenture, or for the offering, issuance and sale of the Securities, the issuance and delivery of the Collateral Bonds, or the performance by the Company of its obligations in this Agreement, the Thirty-Fifth Supplemental Indenture, the Indenture, the Remarketing Agreements and the Securities. (xxix) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other -21- 22 operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory Commission; the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and for the operation of the business carried on by each of them as described in the Registration Statement and the Prospectus except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all such licenses, franchises, permits, certificates, authorizations, approvals, consents and orders are in full force and effect, except when the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, have a Material Adverse Effect; and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company or its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement or the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxx) Each of the Company and its subsidiaries has good and marketable title to all material real and personal property owned by each of them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Registration Statement and the Prospectus or (b) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and any real property and buildings held under lease by the Company, or its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the conduct of the business of the Company or such subsidiaries. (xxxi) The Company is not an "investment company" or an entity under the "control" of an "investment company" as such terms are defined in the 1940 Act. (xxxii) MCN and the Company are presently exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9 thereof) which would otherwise require either of them to register thereunder. Moreover, such counsel shall confirm that nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement, including any Rule 430A Information and Rule 434 Information (if applicable)(except for financial statements and the notes thereto, the financial schedules and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time such Registration Statement became effective or at the date of this Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the -22- 23 statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and the notes thereto, the financial schedules, and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time the Prospectus were issued, at the time of any such amended or supplemented Prospectus were issued or at the Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (2) The favorable opinion, dated as of the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect that: (i) The Registration Statement, including any Rule 462(b) Registration Statement, is effective under the 1933 Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings therefor have been initiated or, to the best of such counsel's knowledge, threatened by the Commission. (ii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein, as to which such counsel need express no opinion), complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (iii) The statements in the Prospectus under the captions "Description of the Senior Debt Securities" and "Description of the First Mortgage Bonds," to the extent that they involve matters of law, summaries of legal matters, documents or proceedings, or legal conclusions, have been reviewed by such counsel and are correct in all material respects. (iv) Assuming that the Remarketing Agreements being delivered at the Closing Date have been duly authorized, executed and delivered by the Company under Michigan law, each of them is a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms except to the extent that the enforcement thereof may be limited by the Bankruptcy Exceptions. -23- 24 (v) The Securities, the Indenture and the Remarketing Agreements conform in all material respects to the descriptions thereof contained in the Prospectus. (vi) No authorization, approval, consent, order, registration, qualification of or with any court or federal or New York state governmental authority or agency is required for the issuance and sale of the Securities by the Company to the Underwriters, or the issuance and delivery to the Trustee by the Company of the Collateral Bonds, or the performance by the Company of its obligations under the Agreement, the Indenture, the Secured Indenture, the Thirty-Fifth Supplemental Indenture, the Remarketing Agreements, the Securities, and the Collateral Bonds except such as has been obtained and made under the federal securities laws or such as may be required under the securities or blue sky laws of the various states, as to which such counsel need express no opinion. Moreover, such counsel shall confirm that nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement, including any Rule 430A Information and Rule 434 Information (if applicable)(except for financial statements and the notes thereto, the financial schedules and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time such Registration Statement became effective or at the date of this Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and the notes thereto, the financial schedules, and any other financial data included or incorporated by reference therein, as to which such counsel need express no opinion), at the time the Prospectus were issued, at the time of any such amended or supplemented Prospectus were issued or at the Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (3) The favorable opinion, dated as of the Closing Date, of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the Underwriters, in form and substance satisfactory to the Representatives, with respect to such matters as the Representatives may reasonably 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. In giving such opinion, LeBoeuf, Lamb, Greene & MacRae, L.L.P. may rely as to certain matters of Michigan law upon the opinion of Ronald E. Christian, Esq., counsel for the Company, which shall be delivered in accordance with Section 5(b)(1) hereof. (4) The opinion, dated as of the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company, generally to the effect that, subject to the qualifications and limitations stated therein and in the Prospectus, the statements set forth in the -24- 25 Prospectus under the caption "Certain United States Federal Income Tax Considerations," insofar as they purport to constitute summaries of matters of United States federal tax law and regulations or legal conclusions with respect thereto, constitute accurate summaries of the matters discussed therein in all material respects. (c) On the Closing Date, the Representatives shall have received a certificate of the President or a Vice President of the Company and of the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of the Closing Date, to the effect that (i) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not in the ordinary course of business, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Date, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied on or prior to the Closing Date, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (d) At the time of the execution of this Agreement, the Representatives shall have received from Deloitte & Touche LLP a letter dated such date in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters, to the effect set forth below and as to such other matters as the Representatives may reasonably request, that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations; (ii) In their opinion, the consolidated financial statements and any financial statement schedules audited by them and included or incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented, comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations; (iii) On the basis of limited procedures, not constituting an audit in accordance with generally accepted auditing standards, including a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated financial statements included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented, for the periods specified in such letter, a reading of the latest available unaudited interim consolidated financial statements of the Company and its subsidiaries, a reading of the minutes of the Company and its subsidiaries since the audited consolidated financial statements set forth in the Company's Annual Report on Form 10-K for the most recent year, inquiries of officials -25- 26 of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited condensed consolidated financial statements set forth in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented do not comply as to form in all material respects with the applicable accounting requirements of the 1934 Act and the 1934 Act Regulations as they apply to Form 10-Q or any material modifications should be made for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited consolidated financial statements set forth in the Company's Annual Report on Form 10-K for the most recent year ended incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented; (B) any other unaudited income statement data and balance sheet items included in the Prospectus, as amended or supplemented, do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived; (C) any unaudited pro forma consolidated condensed financial statements or any unaudited pro forma consolidating financial statements included or incorporated by reference in the Prospectus, as amended or supplemented, do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (D) as of a specified date not more than five days prior to the date of this Agreement, there has been any decrease or increase in the capital stock or any increase or decrease in long-term debt including capital lease obligations and current maturities (except for sinking fund and installment requirements under their long-term debt agreements, terms of the preferred securities of subsidiaries and purchases in the open market in anticipation thereof) or any increase in short-term debt, or any decrease in consolidated common shareholders' equity of the Company and its consolidated subsidiaries (other than periodic dividends declared to shareholders), in each case as compared with the corresponding amounts shown in the latest consolidated statement of financial position of the Company and its subsidiaries incorporated by reference in the Registration Statement and the Prospectus as amended or supplemented, except in each case for increases or decreases which the Prospectus as amended or supplemented, including financial information incorporated by reference, discloses have occurred or may occur or which are described in such letter; and -26- 27 (E) for the period from the date of the latest consolidated financial statements included or incorporated by reference in the Prospectus, as amended or supplemented, to the end of the latest period for which unaudited condensed consolidated financial statements or financial information are available there were any decreases in consolidated operating revenues, operating income, net income or earnings available for Common Stock of the Company and its consolidated subsidiaries, or any increases in any items specified by the Representatives, in each case as compared with the corresponding period in the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for increases or decreases which the Prospectus, as amended or supplemented, including financial information incorporated by reference, discloses have occurred or may occur or which are described in such letter; and (F) the unaudited condensed consolidated financial statements referred to in Clause (E) are not stated on a basis substantially consistent with the audited consolidated financial statements incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented. (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus, as amended or supplemented, and included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) In addition to the limited procedures, reading of minutes, inquiries and other procedures referred to in clause (iii) and (iv) above, they have carried out certain other specified procedures,not constituting an audit in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information which are derived from the general accounting and financial records of the Company and its subsidiaries, which appear in the Prospectus, as amended or supplemented, and the Registration Statement, in The Company's Annual Report on Form 10-K for the latest year ended and in the Company's Quarterly Reports on Form 10-Q since the latest Annual Report on Form 10-K and which are specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting and financial records of the Company and its subsidiaries and have found them to be in agreement; and (vi) If applicable and agreed to by the parties to this Agreement, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the selected financial data, pro forma financial information, prospective financial statements, consolidating financial statements and/or -27- 28 condensed financial statements derived from audited financial statements of the Company for the periods specified in such letter, as indicated in their reports thereon, copies of which have been furnished to the Representatives. (e) On the Closing Date, the Representatives shall have received from Deloitte & Touche LLP a letter, dated as of the Closing Date, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Date. (f) On the Closing Date, the Securities shall be rated at least "A2" by Moody's Investors Service Inc. and "A" by Standard & Poor's Ratings Group, a division of McGraw- Hill, Inc.; and the Company shall have delivered to the Representatives a letter, dated the Closing Date, from such rating agencies, in form satisfactory to the Representatives, confirming that the Securities have such ratings; and since the date of this Agreement there shall not have occurred any decrease in the ratings of any of the securities of the Company or of the Securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the 1933 Act Regulations) and no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the securities of the Company or of the Securities. (g) On the Closing Date, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, may be terminated by the Representatives by notice to the Company at any time on or prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged -28- 29 omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided, that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including, the fees, expenses and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this foregoing indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto); provided, further, that such indemnity with respect to the preliminary prospectus shall not inure to the benefit of the Underwriters (or any person controlling such Underwriters) from whom the person asserting any such loss, liability, claim, damage or expense purchased any of the Securities which are the subject thereof if such person did not receive a copy of the Prospectus (or the Prospectus as amended or supplemented) (in each case exclusive of the documents from which information is incorporated by reference) at or prior to the written confirmation of the sale of such Securities to such person in any case where the Company complied with its obligations under Sections 3(e) and 3(g) hereof and any such untrue statement or omission or alleged untrue statement or omission of a material fact contained in such preliminary prospectus (or any amendment or supplement thereto) was corrected in the Prospectus (or the Prospectus as amended or supplemented). (b) Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the -29- 30 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. -30- 31 SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) 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 Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of such Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of such Securities as set forth on such cover. The relative fault of the Company on the one hand and the Underwriters on the other hand 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 by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of -31- 32 any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the aggregate principal amount of Securities set forth opposite their respective names in Schedule II to this Agreement, and not joint. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of and payment for the Securities to the Underwriters. SECTION 9. Termination of Agreement. (a) The Representatives may terminate this Agreement, by notice to the Company at any time on or prior to the Closing Date, if (i) there has been, since the date of this Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change or any development which could reasonably be expected to result in a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) there has occurred any material adverse change in the financial markets in the United States or any outbreak of hostilities or escalation of hostilities or other calamity or crisis, or any change or development involving a prospective change in national or international political, financial or economic conditions the effect of which is such as to make it, in the judgment of the Representatives, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company or any of its affiliates has been suspended or limited by the Commission, the National Association of Securities Dealers, Inc. ("NASD") or the New York Stock Exchange, or if trading generally on either the American Stock Exchange, the New York Stock Exchange or in the over-the-counter market has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for -32- 33 securities have been required, by either of said exchanges or by such system or by order of the Commission, NASD or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal, New York or Michigan authorities. (b) If this Agreement is terminated pursuant to this Section 9, such termination shall be without liability of any party to any other party except as provided in Section 4, and provided, further, that Sections 1, 6, 7 and 8 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Date to purchase the Securities which it or they are obligated to purchase under this Agreement (the "DEFAULTED SECURITIES"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section 10 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representatives or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representative at North Tower, World Financial Center, New York, New York 10281-1202, attention of Karl Fritz Schlopy with a copy to LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019-5389, attention of William S. Lamb, Esq.; notices to the Company shall be directed to it at Michigan Consolidated Gas Company, 500 Griswold Street, Detroit, -33- 34 Michigan 48226, attention of Ronald E. Christian, Esq., Vice President, General Counsel and Secretary. SECTION 12. Parties. This Agreement shall inure to the benefit of and be binding upon the Company, and the Underwriters and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the parties hereto and thereto and their respective successors and legal representatives, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME UNLESS OTHERWISE INDICATED. SECTION 14. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. -34- 35 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, shall become a binding agreement among the Underwriters and the Company in accordance with its terms. Very truly yours, MICHIGAN CONSOLIDATED GAS COMPANY By: /s/ Howard L. Dow III --------------------------- Name: Howard L. Dow III Title: Senior Vice President and Chief Financial Officer CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED FIRST CHICAGO CAPITAL MARKETS, INC. By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ Anthony V. Leness -------------------------------------- Authorized Signatory For themselves and as Representatives of the other Underwriters named in Schedule II hereto. -35- 36 SCHEDULE I REPRESENTATIVES: Merrill Lynch, Pierce, Fenner & Smith Incorporated First Chicago Capital Markets, Inc. PURCHASE PRICE AND DESCRIPTION OF THE SECURITIES: TITLE: Extendable MandatOry Par Put Remarketed Securities (sm) ("MOPPRS(sm)") due June 30, 2038. PRINCIPAL AMOUNT: $75,000,000 PURCHASE PRICE: 101.819% of the principal amount thereof. INDENTURE: Indenture, dated as of June 1, 1998, between Michigan Consolidated Gas Company and Citibank, N.A., as trustee. DATE OF MATURITY: June 30, 2038. INTEREST RATE: 6.45% INTEREST PAYMENT DATES: June 30 and December 30. REDEMPTION PROVISIONS: As set forth in the Prospectus under the caption headed "Description of the Notes - Redemption." AUTHORIZED DENOMINATIONS: $1,000 and integral multiples thereof. OTHER PROVISIONS: TIME AND DATE OF DELIVERY AND PAYMENT: TIME: 9:00 A.M. (Eastern time) DATE: June 23, 1998 LOCATION: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 37 PLACE OF DELIVERY AND PAYMENT: DELIVERY: Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o The Depository Trust Company 55 Water Street New York, New York 10041 PAYMENT: Wire Transfer of same day funds. -2- 38 SCHEDULE II
Principal Amount Name of Underwriter of the Securities ------------------- ----------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................. $37,500,000 First Chicago Capital Markets, Inc. ....................... $37,500,000 ----------- Total...................................................... $75,000,000 ===========
EX-4.1 4 FIRST SUPPLEMENTAL INDENTURE 1 EXHIBIT 4.1 ================================================================================ FIRST SUPPLEMENTAL INDENTURE FROM MICHIGAN CONSOLIDATED GAS COMPANY TO CITIBANK, N.A. TRUSTEE -------------- Dated as of June 18, 1998 SUPPLEMENTAL TO INDENTURE Dated as of June 1, 1998 Senior Debt Securities ================================================================================ This FIRST SUPPLEMENTAL INDENTURE is made as of the 18th day of June, by and between MICHIGAN CONSOLIDATED GAS COMPANY, a corpora- 2 tion duly organized and existing under the laws of the State of Michigan (the "Company"), and CITIBANK, N.A., a national banking association incorporated and existing under and by virtue of the laws of the United States of America, as trustee (the "Trustee"). RECITALS OF THE COMPANY: WITNESSETH: that The Company has heretofore executed and delivered its Indenture (hereinafter referred to as the "Indenture"), made as of June 1, 1998; and Section 3.1 of the Indenture provides that Securities may be issued from time to time in series pursuant to a supplemental indenture specifying the terms of each issue of Securities; and The Company desires to establish a series of Securities to be designated "Extendable MandatOry Par Put Remarketed Securities(SM) due June 30, 2038" (the "Remarketed Securities") and a series of Securities to be designated "Resetable MAndatory Putable/remarketable Securities, due June 30, 2038" (the "Resetable Securities"); and Section 10.1 of the Indenture provides that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of establishing the form of Securities or establishing or reflecting any terms of any Security and adding to the covenants of the Company; and The execution and delivery of this First Supplemental Indenture (herein, this "Supplemental Indenture") has been duly authorized by a Board Resolution; NOW, THEREFORE, this Supplemental Indenture WITNESSETH, that, in order to set forth the terms and conditions upon which Remarketed Securities and the Resetable Securities are, and are to be, authenticated, issued and delivered, and in consideration of the sum of one dollar duly paid to it by the Trustee at the execution of this Supplemental Indenture, the receipt whereof is hereby acknowledged, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of such Securities as follows: 2 3 ARTICLE I RELATION TO INDENTURE; DEFINITIONS SECTION 1.1 This Supplemental Indenture constitutes an integral part of the Indenture. SECTION 1.2 For all purposes of this Supplemental Indenture: (a) Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Indenture; (b) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture; and (c) The terms "hereof," "herein," "hereby," "hereto," "hereunder," and "herewith" refer to this Supplemental Indenture. ARTICLE II THE SECURITIES There shall be hereby established two series of Securities, known as and entitled "Extendable MandatOry Par Put Remarketed Securities(SM) due June 30, 2038" and "Resetable MAndatory Putable/remarketable Securities, due June 30, 2038." The aggregate principal amount of the Remarketed Securities shall be limited to Seventy-Five Million Dollars ($75,000,000) and the aggregate principal amount of the Resetable Securities shall be limited to Seventy-Five Million Dollars ($75,000,000). Such Securities shall be initially authenticated and delivered from time to time upon delivery to the Trustee of the documents required by Section 3.1 of the Indenture, including, among other things, a Board Resolution and an Officer's Certificate specifying the following with respect to each issue of the Remarketed Securities and the Resetable Securities: (i) the form of Securities for each of the Remarketed Securities and the Resetable Securities substantially in the forms of Securities attached hereto as Appendix I and Appendix II with such changes therein as may be authorized by a Board Resolution and an Officer's Certificate as may be required to (A) conform the Remarketed Securities to the terms and conditions of the 3 4 Mandatory Tender Remarketing Agreement dated as of June 23, 1998 and the Reset Remarketing Agreement dated as of June 23, 1998, each of which is between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorpo- rated and is attached hereto and incorporated by reference herein or (B) conform the Resetable Securities to the terms and conditions of the Mandatory Tender Remarketing Agreement dated as of June 23, 1998 and the Reset Remarketing Agreement dated as of June 23, 1998, each of which is between the Company and Salomon Brothers Inc and is attached hereto and incorporated by reference herein and (ii) such other terms as shall be prescribed by the Company in a Board Resolution and an Officer's Certificate as may be required by law and which shall not be inconsistent with the terms and provisions of the Indenture or this Supplemental Indenture. ARTICLE III TRANSFER OF COLLATERAL BONDS The Company hereby issues, delivers and transfers to the Trustee (A) in connection with the issuance of the Remarketed Securities, Seventy-Five Million Dollars ($75,000,000) aggregate principal amount of a related issue of Collateral Bonds of the Company designated "First Mortgage Bonds, Collateral Series A" and (B) in connection with the issuance of the Resetable Securities, Seventy-Five Million Dollars ($75,000,000) aggregate principal amount of a related issue of Collateral Bonds of the Company designated "First Mortgage Bonds, Collateral Series B" (each, a "Related Issue," as to the respective series of Securities it secures, together, the "Collateral Bonds"), each of which has been fully registered in the name of the Trustee in such capacity, to be held in trust for the benefit of the Holders from time to time of the Related Issue of Securities and, if such transfer does not constitute a sale of the Collateral Bonds to the Trustee, the Company hereby grants a perfected security interest in the Collateral Bonds for the benefit of such Holders, in each case as security for any and all obligations of the Company under the Indenture, this Supplemental Indenture and the Related Issue of Securities, including but not limited to (1) the full and prompt payment of the interest on, principal of, and premium, if any, on such Related Issue of Securities when and as the same shall become due and payable in accordance with the terms and provisions of the Indenture and this Supplemental Indenture and such Related Issue of Securities, either at the stated maturity thereof, upon acceleration of the maturity thereof or upon redemption, and (2) the full and prompt payment of any interest on such Related Issue of Securities when and as the same shall become due and payable in accordance with the terms and provisions of the Indenture and this Supplemental Indenture and such Related 4 5 Issue of Securities. The Trustee shall enforce all of its rights under the First Mortgage Indenture as a holder of each Related Issue of Collateral Bonds transferred to it as provided in this Article III for the benefit of the Holders of the respective Related Issue of Securities and the proceeds of the enforcement of such rights shall be applied by the Trustee to satisfy the Company's obligations under the Indenture, this Supplemental Indenture, and such Related Issue of Securities. The Company shall make payments of the principal of, and premium or interest on each of the Collateral Bonds to the Trustee, which payments shall be applied by the Trustee to satisfaction of all obligations then due on the respective Related Issue of Securities. The Collateral Bonds shall not be sold or transferred by the Trustee until the earlier of the Release Date or the prior retirement of the Related Issue of Securities through redemption, repurchase or otherwise. The "Release Date" shall be the date that all First Mortgage Bonds of the Company issued and outstanding under the First Mortgage Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no Default or Event of Default has occurred and, at such time, is continuing under the Indenture. Copies of the forms of Collateral Bonds are attached hereto as Appendix III and IV, respectively, and their terms are hereby incorporated by reference herein. ARTICLE IV MISCELLANEOUS SECTION 4.1 The Trustee has accepted the amendment of the Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, and without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect of any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Company, or for or with respect to (a) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, 5 6 (b) the proper authorization hereof by the Company by corporate action or otherwise, and (c) the due execution hereof by the Company. SECTION 4.2 This Supplemental Indenture shall be construed in connection with and as a part of the Indenture. SECTION 4.3 (a) If any provision of this Supplemental Indenture conflicts with another provision of the Indenture required to be included in indentures qualified under the Trust Indenture Act of 1939, as amended (as enacted prior to the date of this Supplemental Indenture), by any of the provisions of Sections 310 to 317, inclusive, of said act, such required provision shall control. (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the Securities issued hereunder should be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby. SECTION 4.4 Whenever in this Supplemental Indenture either of the parties hereto is named or referred to, such name or reference shall be deemed to include the successors or assigns of such party, and all the covenants and agreements contained in this Supplemental Indenture by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 4.5 (a) This Supplemental Indenture may be simultaneously executed in several counterparts, and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The descriptive headings of the several Articles of this Supplemental Indenture were formulated, used and inserted in this Supplemental Indenture for 6 7 convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. 7 8 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this Supplemental Indenture to be executed by its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice President, or any other officer selected by the Board of Directors, and its corporate seal to be hereunto affixed, duly attested by its Secretary or an Assistant Secretary, and CITIBANK, N.A., as Trustee as aforesaid, has caused this Supplemental Indenture to be executed by one of its authorized signatories, as of June 23, 1998. MICHIGAN CONSOLIDATED GAS COMPANY By: /s/ Howard L. Dow III ------------------------------ Name: Howard L. Dow III Title: Senior Vice President and CFO ATTEST: /s/ Ronald E. Christian - ------------------------ Secretary CITIBANK, N.A., as Trustee By: /s/ P. DeFelice ------------------------------ Name: P. DeFelice Title: Vice President ATTEST: /s/ F. Mills - ------------------------ Authorized Officer F. Mills Senior Trust Officer 9 APPENDIX I CUSIP: 594457 BL 6 No. R-1 $75,000,000 THIS NOTE IS IN GLOBAL FORM WITHIN THE MEANING OF THE SENIOR INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company (as defined below) or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. MICHIGAN CONSOLIDATED GAS COMPANY Extendable MandatOry Par Put Remarketed Securities(sm)* ("MOPPRS(sm)") due June 30, 2038 MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under the laws of the State of Michigan (the "Company", which term includes any successor corporation under the Senior Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or registered assigns, at the office or agency of the Company in The City of New York, New York, the principal sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) on June 30, 2038 (the "Stated Maturity Date"), in the coin or currency of the United States, and to pay interest: (i) semiannually on June 30 and December 30 (x) from and including June 23, 1998 through but excluding June 30, 2008 and (y) on and after June 30, 2008 if and so long as the Extendable MOPPRS are in Mandatory Tender Mode (as defined on the reverse hereof); or (ii) on such dates as determined on the Duration/Interest Mode Determination Date (as defined on the reverse hereof) if and so long as the Extendable MOPPRS are in Reset Mode (as defined on the reverse hereof) (each, an "Interest Payment Date"), commencing December 30, 1998. Interest shall be paid on said principal sum at said office or agency, in like coin or currency, at the rate per annum specified below, from the Interest - -------- * "MandatOry Par Put Remarketed Securities(sm)" and "MOPPRS(sm)" are service marks owned by Merrill Lynch & Co., Inc. 10 Payment Date next preceding the date of this Extendable MOPPRS to which interest has been paid or duly provided for, unless the date hereof is a date to which interest has been paid or duly provided for, in which case from the date of this Extendable MOPPRS, or unless no interest has been paid or duly provided for on this Extendable MOPPRS, in which case from June 23, 1998, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear on the Security Register of the Company as provided in the Senior Indenture. Notwithstanding the foregoing, if the date hereof is after the 14th day of a month in which an Interest Payment Date occurs, and before the following Interest Payment Date, this Extendable MOPPRS shall bear interest from such Interest Payment Date; provided, that if the Company shall default in the payment of interest due on such Interest Payment Date, then this Extendable MOPPRS shall bear interest from the next preceding Interest Payment Date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for on this Extendable MOPPRS, from June 23, 1998. The interest so payable on any Interest Payment Date will, subject to certain exceptions provided in the Senior Indenture, be paid to the person in whose name this Extendable MOPPRS (or one or more Predecessor Securities) is registered at the close of business on the fifteenth calendar day next preceding such Interest Payment Date, whether or not such day is a Business Day (each a "Record Date"). The rate of interest on this Extendable MOPPRS shall be 6.45% per annum to June 30, 2008 (the "First Remarketing Date"). If, pursuant to the Mandatory Tender Remarketing Agreement, dated as of the date hereof (the "Mandatory Tender Remarketing Agreement"), between Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Mandatory Tender Remarketing Agent (the "Mandatory Tender Remarketing Agent"), and the Company, the Mandatory Tender Remarketing Agent elects to exercise its option to remarket the Extendable MOPPRS (the "Remarketing Right"), then, except as otherwise set forth on the reverse hereof, (i) this Extendable MOPPRS shall be subject to mandatory tender to the Mandatory Tender Remarketing Agent for remarketing on the First Remarketing Date, on the terms and subject to the conditions set forth on the reverse hereof, and (ii) from and after the First Remarketing Date and up to but excluding June 30, 2018 (the "Second Remarketing Date"), this Extendable MOPPRS shall bear interest from and including June 30, 2008 to but excluding June 30, 2018 (the "Second Remarketing Date") at the rate determined by the Mandatory Tender Remarketing Agent in accordance with the procedures set forth in Section 2(b) on the reverse hereof (the "Interest Rate to Second Remarketing Date"). From and after the earlier to occur of (i) the First Remarketing Date in the event that the Mandatory Tender Remarketing Agent fails to give notice of exercise of the Remarketing Right and (ii) the Second Remarketing Date, the character and duration of the interest rate on the Extendable MOPPRS shall be determined by Merrill Lynch, Pierce Fenner & Smith Incorporated, as reset remarketing agent, or such other nationally recognized broker-dealer as may be selected by the Company to act as such (the "Reset Remarketing Agent"), pursuant to that certain Reset Remarketing Agreement dated as of June 23, 1998 (the "Reset Remarketing Agreement") between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and agreed to by the Company on each applicable Duration/Interest Mode Determination Date, and the spread will be as agreed to by the Company and the Reset Remarketing Agent on the -2- 11 corresponding Spread Determination Date (as defined on the reverse hereof), subject to certain limitations set forth on the reverse of this Extendable MOPPRS. UNTIL THE RELEASE DATE (AS DEFINED ON THE REVERSE HEREOF), THIS EXTENDABLE MOPPRS SHALL BE SECURED BY FIRST MORTGAGE BONDS (THE "FIRST MORTGAGE BONDS") ISSUED AND DELIVERED BY THE COMPANY TO THE SENIOR TRUSTEE (AS DEFINED ON THE REVERSE HEREOF) UNDER THE COMPANY'S TWENTY-NINTH SUPPLEMENTAL INDENTURE DATED AS OF JULY 15, 1989, PROVIDING FOR THE RESTATEMENT OF THE INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 1, 1994 BETWEEN THE COMPANY AND CITIBANK, N.A. (THE "MORTGAGE TRUSTEE") AND ROBERT T. KIRCHNER (THE "INDIVIDUAL TRUSTEE"), AS SUPPLEMENTED BY THE THIRTY- FIFTH SUPPLEMENTAL INDENTURE (AS SO SUPPLEMENTED, THE "MORTGAGE INDENTURE"). ON THE RELEASE DATE, THE EXTENDABLE MOPPRS SHALL CEASE TO BE SECURED BY SUCH FIRST MORTGAGE BONDS AND, AT THE COMPANY'S OPTION, EITHER (i) SHALL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (ii) SHALL BE SECURED BY FIRST MORTGAGE BONDS UNDER A SECURED MORTGAGE INDENTURE OTHER THAN THE MORTGAGE INDENTURE. Reference is made to the further provisions of this Extendable MOPPRS set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Extendable MOPPRS shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Senior Trustee under the Senior Indenture referred to on the reverse hereof. -3- 12 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY By: _______________________________ Title: Attest: [SEAL] By: ______________________________ Title: CERTIFICATE OF AUTHENTICATION This is one of the Extendable MOPPRS of the series designated therein referred to in the within-mentioned Indenture. Dated: June 23, 1998 CITIBANK, N.A., as Trustee By: _______________________________ Authorized Signatory -4- 13 MICHIGAN CONSOLIDATED GAS COMPANY Extendable MandatOry Par Put Remarketed Securities(sm) ("MOPPRS(sm)") due June 30, 2038 1. Indenture. (a) This Extendable MOPPRS is one of the duly authorized issue of securities of the Company (hereinafter called the "Notes") of the series hereinafter specified, all issued or to be issued under and pursuant to an Indenture, dated as of June 1, 1998, as supplemented by the first supplemental Indenture, dated as of June 18, 1998 between the Company and the Trustee (as so supplemented, the "Senior Indenture"), duly executed and delivered by the Company to Citibank, N.A., as Trustee (herein called the "Senior Trustee," which term includes any successor trustee under the Senior Indenture), to which Senior Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Senior Trustee, the Company and the Holders of the Notes. The Notes may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions (if any) and may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as provided in the Indenture. This Note is one of the series designated as the Extendable MandatOry Par Put Remarketed Notes(sm) ("MOPPRS(sm)") due June 30, 2038 of the Company, which series is limited in aggregate principal amount to $75,000,000. (b) Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and, to the extent lawful, on overdue installments of interest at the rate per annum borne by this Note. For purposes hereof, the term "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are required or authorized to close and, in the case of Notes in Reset Mode that are in the Floating Rate Interest Mode that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted on the London interbank market. (c) Unless otherwise defined herein, all capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Indenture. 2. Terms of the Notes in Mandatory Tender Mode. On the date, if any, on which the Mandatory Tender Remarketing Agent elects to exercise the Remarketing Right in accordance with the terms hereof, the Notes shall be deemed to be in "Mandatory Tender Mode." (a) Mandatory Tender on First Remarketing Date; Purchase and Settlement. (i) Provided that the Mandatory Tender Remarketing Agent gives notice to the Company and the Senior Trustee on a Business Day not later than eleven Business Days prior to the First Remarketing Date of its intention to exercise the Remarketing Right to purchase the Notes for remarketing (the "Mandatory Tender Notification Date"), each Note shall be automatically tendered, or deemed tendered, to the Mandatory Tender Remarketing Agent for purchase on the Mandatory Tender Remarketing Date in accordance with Section 2(a)(ii) below, except as set forth in Sections 6 and -5- 14 7 below. The purchase price of such tendered Notes shall be equal to 100% of the principal amount thereof. Upon such tender, the Mandatory Tender Remarketing Agent shall have the option, in its sole discretion, to elect to remarket the Notes in accordance with the Mandatory Tender Remarketing Agreement for its own account at varying prices to be determined by the Mandatory Tender Remarketing Agent at the time of each sale. If the Mandatory Tender Remarketing Agent makes such election, the obligation of the Mandatory Tender Remarketing Agent to purchase the Notes on the Mandatory Tender Remarketing Date shall be subject to the conditions set forth in the Mandatory Tender Remarketing Agreement. No Holder or actual purchaser of the Notes ("Beneficial Owner") shall have any rights or claims under the Mandatory Tender Remarketing Agreement or against the Company or the Mandatory Tender Remarketing Agent as a result of the Mandatory Tender Remarketing Agent not purchasing such Notes. (i) Following the Mandatory Tender Notification Date and assuming that the Notes are remarketed by the Mandatory Remarketing Agent pursuant to the exercise of the Remarketing Right, the tender and purchase of the Notes provided for in Section 2(a)(i) above shall be effected as follows, subject to Sections 6 and 7 below: (x) All of the tendered Notes shall be automatically delivered to the account of the Trustee, by book-entry through DTC or any successor thereto pending payment of the purchase price therefor, on the Remarketing Date. (y) The Mandatory Tender Remarketing Agent shall make or cause the Trustee to make payment to DTC by book entry through DTC in accordance with the procedures of DTC, by 1:00 p.m., New York City time, on the Mandatory Tender Remarketing Date against delivery through DTC of such Beneficial Owner's tendered Notes, of the purchase price for tendered Notes that have been purchased for remarketing by the Mandatory Tender Remarketing Agent. The Company shall make or cause the Trustee to make payment of interest to DTC on the Mandatory Tender Remarketing Date by book entry through DTC by 2:30 p.m., New York City time, on the Mandatory Tender Remarketing Date. (ii) In anticipation of the purchase of the Notes by the Mandatory Tender Remarketing Agent for remarketing or the repurchase of the Notes by the Company on the Remarketing Date, the Trustee shall notify the Holder hereof, not less than 30 days nor more than 60 days prior to the Remarketing Date, that all Notes will be delivered on the Mandatory Tender Remarketing Date through the facilities of DTC against payment of the purchase price therefor by the Mandatory Tender Remarketing Agent or the Company, as the case may be. (b) Determination of Interest Rate to Second Remarketing Date; Notification Thereof. Subject to the Remarketing Dealer's election to exercise the Remarketing Right as provided in Section 2(a)(i), by 3:30 p.m., New York City time, on the third Business Day immediately preceding the Remarketing Date (the "Mandatory Tender Determination Date"), the Mandatory Tender Remarketing Agent shall determine the Interest Rate to Second Remarketing Date to the nearest one hundred-thousandth (0.00001) of one percent per annum. The Interest Rate to -6- 15 Second Remarketing Date shall be equal to the sum of 5.50% (the "Base Rate") and the Applicable Spread (as defined below), which will be based on the Dollar Price (as defined below) of the Notes. The "Applicable Spread" for the Notes in Mandatory Tender Mode shall be the lowest bid indication, expressed as a spread (in the form of a percentage or in basis points) above the Base Rate, obtained by the Mandatory Tender Remarketing Agent on the Mandatory Tender Determination Date from the bids quoted by five Reference Corporate Dealers (as defined below) for the full aggregate principal amount of the Notes at the Dollar Price, but assuming (i) an issue date that is the Mandatory Tender Remarketing Date, with settlement on such date without accrued interest, (ii) a maturity date that is the Second Remarketing Date of the Notes and (iii) a stated annual interest rate, payable semiannually on each Interest Payment Date (as defined below), equal to the Base Rate plus the spread bid by the applicable Reference Corporate Dealer Second Remarketing Date. If fewer than five Reference Corporate Dealers bid as described above, then the Applicable Spread shall be the lowest of such bid indications obtained as described above. The Interest Rate to Second Remarketing Date announced by the Mandatory Tender Remarketing Agent, absent manifest error, shall be binding and conclusive upon the Beneficial Owners and Holders of the Notes, the Company and the Senior Trustee. "Dollar Price" means, with respect to the Notes in Mandatory Tender Mode, the present value determined by the Mandatory Tender Remarketing Agent, as of the First Remarketing Date, of the Remaining Scheduled Payments (as defined below) discounted to the First Remarketing Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below). "Reference Corporate Dealers" means leading dealers of publicly traded debt securities of the Company in The City of New York (which may include the Mandatory Tender Remarketing Agent or one of its affiliates) selected by the Mandatory Tender Remarketing Agent after consultation with the Company. "Remaining Scheduled Payments" means, with respect to the Notes, the remaining scheduled payments of the principal thereof and interest thereon, calculated at the Applicable Base Rate only, that would be due after the First Remarketing Date to and including the Second Remarketing Date as determined by the Mandatory Tender Remarketing Agent. "Treasury Rate" means, with respect to the First Remarketing Date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated (on a day count basis) yield to maturity of the Comparable Treasury Issues (as defined below), assuming a price for the Comparable Treasury Issues (expressed as a percentage of its principal amount), equal to the Comparable Treasury Price (as defined below) for such Remarketing Date. "Comparable Treasury Issues" means the United States Treasury Security or Securities selected by the Mandatory Tender Remarketing Agent as having an actual or interpolated maturity or maturities comparable to the Second Remarketing Date. -7- 16 "Comparable Treasury Price" means, with respect to the First Remarketing Date, (a) the offer prices for the Comparable Treasury Issues (expressed in each case as a percentage of its principal amount) on the Mandatory Tender Determination Date, as set forth on "Telerate Page 500" (or such other page as may replace Telerate Page 500) or (b) if such page (or any successor page) is not displayed or does not contain such offer prices on such Mandatory Tender Determination Date, (i) the average of the Reference Treasury Dealer Quotations for the First Remarketing Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the Mandatory Tender Remarketing Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. "Telerate Page 500" means the display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such other page as may replace Telerate Page 500 on such service) or such other service displaying the offer prices specified in (a) above as may replace Dow Jones Markets Limited. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and the First Remarketing Date, the offer prices for the Comparable Treasury Issues (expressed in each case as a percentage of its principal amount) quoted to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the First Determination Date. "Reference Treasury Dealer" means each of Credit Suisse First Boston Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or their respective affiliates which are primary U.S. Government Notes dealers) and their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. Government Notes dealer in The City of New York (a "Primary Treasury Dealer"), the Remarketing Dealer shall substitute therefor another Primary Treasury Dealer. Provided the Remarketing Right has been exercised, the Mandatory Tender Remarketing Agent shall notify the Company, the Senior Trustee and DTC by telephone, confirmed in writing, by 4:00 p.m., New York City time, on the Mandatory Tender Determination Date, of the Interest Rate to Second Remarketing Date. In such event, all of the tendered Notes of a series will be automatically delivered to the account of the Senior Trustee, by book-entry through DTC pending payment of the purchase price therefor, on the First Remarketing Date, and the Mandatory Tender Remarketing Agent shall make or cause the Senior Trustee to make payment to the DTC Participant of each tendering Beneficial Owner of the Notes, by book-entry through DTC by the close of business on the First Remarketing Date against delivery through DTC of such Beneficial Owner's tendered Notes of 100% of the principal amount of such tendered Notes. The transactions described above shall be executed on the First Remarketing Date through DTC in accordance with the procedures of DTC, and the accounts of the respective DTC Participants shall be debited and credited and the Notes delivered by book entry as necessary to effect the purchases and sales thereof. Transactions involving the sale and purchase of the Notes remarketed by the Mandatory Tender Remarketing Agent on and after the First Remarketing Date shall settle in immediately available funds through DTC's Same-Day Funds Settlement System. The tender and settlement procedures described above, including -8- 17 provisions for payment by purchasers of the Notes in the remarketing or for payment to selling Beneficial Owners of tendered Notes, may be modified to the extent required by DTC or to the extent required to facilitate the tender and remarketing of such series of Notes in certificated form, if the book-entry system is no longer available for the Notes at the time of the remarketing. In addition, the Mandatory Tender Remarketing Agent may, in accordance with the terms of the Senior Indenture, modify the tender and settlement procedures set forth above in order to facilitate the tender and settlement process. 3. Terms of the Notes in Reset Mode. If (i) the Mandatory Tender Remarketing Agent does not provide notification to the Company of its intention to exercise the Remarketing Right on the eleventh Business Day prior to the First Remarketing Date (which date may also be referred to herein as the "Mandatory Tender Remarketing Date"), on the tenth Business Day prior to the Mandatory Tender Remarketing Date or (ii) the Second Remarketing Date, in the event the Remarketing Right is exercised, the Notes will be deemed to be in "Reset Mode." (a) Tender at Option of Beneficial Owners in Reset Mode. If the Company and the Reset Remarketing Agent agree on the Spread on the Spread Determination Date (as defined below) with respect to any Subsequent Spread Period, the Company and the Reset Remarketing Agent will enter into a Reset Remarketing Agreement Supplement (a "Reset Remarketing Agreement Supplement") under which the Reset Remarketing Agent will agree, subject to Section 6 and 7 below and other applicable terms and conditions set forth in such Reset Remarketing Agreement Supplement, to purchase from tendering Holders on the Reset Tender Date all Notes with respect to which the Reset Remarketing Agent receives a Reset Tender Notice as described below at 100% of the principal amount thereof (the "Purchase Price"). Except as otherwise provided in the next succeeding paragraph, each Beneficial Owner of a Note may, at such owner's option, upon giving notice as provided below (a "Reset Tender Notice"), tender such Note for purchase by the Reset Remarketing Agent on the Reset Tender Date with respect to a Spread Period at the Purchase Price. The Purchase Price shall be paid by the Reset Marketing Agent in accordance with the standard procedures of DTC, and accounts of the respective DTC Participants shall be debited and credited and the Notes delivered by book-entry as necessary to effect any purchases and sales thereof. The Reset Tender Notice must be received by the Reset Remarketing Agent during the period commencing at 3:00 p.m., New York City time, on the Spread Determination Date and ending at 12:00 noon, New York City time, on the second Business Day following such Spread Determination Date for such Subsequent Spread Period (the "Notice Date"). Except as otherwise provided below, a Reset Tender Notice shall be irrevocable. If a Reset Tender Notice is not received for any reason by the Reset Remarketing Agent with respect to any Note by 12:00 noon, New York City time, on the Notice Date, the Beneficial Owner of such Note shall be deemed to have elected not to tender such Note for purchase by the Reset Remarketing Agent. (b) Determination of Duration and Interest Rate Mode. Upon each Duration/Interest Mode Determination Date (as defined below), the mode and other terms for the next Subsequent Spread Period shall be determined as described below. -9- 18 (i) Floating Rate Interest Mode. If the Notes in Reset Mode are in Floating Rate Mode, then the following shall apply: During the Floating Rate Interest Mode, interest on the Notes for each Subsequent Spread Period shall be payable either monthly, quarterly or semiannually, as specified by the Company on each Duration/Interest Mode Determination Date. With respect to Notes in the Floating Rate Interest Mode, interest shall be payable, in arrears, in the case of Notes which pay: (a) monthly, on the thirtieth day of each month; (b) quarterly, on the thirtieth day of each March, June, September and December; and (c) semiannually, on the thirtieth day of each June and December. During any Subsequent Spread Period during which the Reset Mode Notes are in the Floating Rate Interest Mode, the interest rate on the Notes shall be reset either monthly, quarterly or semiannually, and the Notes shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a 360-day year) equal to LIBOR (as defined below) for the applicable Interest Period (as defined below), plus the applicable Spread. Interest on the Notes shall accrue from and including each Interest Payment Date to but excluding the next succeeding Interest Payment Date or maturity date, as the case may be. Each interest period during any Subsequent Spread Period (each, an "Interest Period") shall be from and including the most recent Interest Payment Date on which interest has been paid to but excluding the next Interest Payment Date. The first day of an Interest Period is referred to herein as an "Interest Reset Date". If any Interest Payment Date (other than at maturity), redemption date, Interest Reset Date, Duration/Interest Mode Determination Date, Spread Determination Date (as defined below), Commencement Date or Reset Tender Date would otherwise be a day that is not a Business Day, such Interest Payment Date, redemption date, Interest Reset Date, Duration/Interest Mode Determination Date, Spread Determination Date, Commencement Date or Reset Tender Date, as the case may be, shall be postponed to the next succeeding day that is a Business Day; provided, however, that if such next succeeding Business Day is in the next calendar month, such date shall occur on the immediately preceding Business Day. LIBOR applicable for an Interest Period shall be determined by the Rate Agent (as defined below) as of the second London Business Day (as defined below) preceding each Interest Reset Date (a "LIBOR Determination Date") in accordance with the following provisions: (x) LIBOR shall be determined on the basis of the offered rate for deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date, which appears on Telerate Page 3750 (as defined below) as of approximately 11:00 a.m., London time, on such LIBOR Determination Date. "Telerate Page 3750" means the display designated on page "3750" on Dow Jones Markets Limited or any successor thereto (or such other page as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. Dollar deposits). If no such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR Determination Date shall -10- 19 be determined in accordance with the provisions of paragraph (y) below. The term "London Business Day" means any day on which dealings in deposits in U.S. Dollars are transacted in the London interbank market. (y) With respect to a LIBOR Determination Date on which no rate appears on Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date, the Rate Agent shall request the principal London offices of each of four major reference banks in the London interbank market selected by the Rate Agent (after consultation with the Company) to provide the Rate Agent with a quotation of the rate at which deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business day immediately following such LIBOR Determination Date, are offered by it to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR for such LIBOR Determination Date shall be the arithmetic mean of such quotations as calculated by the Rate Agent. If fewer than two quotations are provided, LIBOR for such LIBOR Determination Date shall be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., New York City time, on such LIBOR Determination Date by three major banks in The City of New York selected by the Rate Agent (after consultation with the Company) for loans in U.S. Dollars to leading European banks, of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the Rate Agent are not quoting as mentioned in this sentence, LIBOR for such LIBOR Determination Date shall be LIBOR determined with respect to the immediately preceding LIBOR Determination Date. The Index Maturity applicable to Notes in the Floating Rate Interest Mode shall be, in the case of Notes paying (x) monthly, one month; (y) quarterly, three months; and (z) semiannually, six months. The term "Rate Agent" means the entity selected by the Company as its agent to determine (i) LIBOR and the interest rate on the Notes for any Interest Period and/or (ii) the yield to maturity on the applicable United States Treasury security that is used in connection with the determination of the applicable Fixed Rate, and the ensuing applicable Fixed Rate pursuant to the Reset Remarketing Agreement. (ii) Fixed Rate Interest Mode. If the Notes are to be reset to the Fixed Rate Interest Mode, as agreed to by the Company and the Reset Remarketing Agent on a Duration/Interest Mode Determination, then the applicable Fixed Rate for the corresponding Subsequent Spread Period shall be determined by 1:00 p.m. on the third Business Day preceding the Commencement Date for such Subsequent Spread Period -11- 20 (the "Fixed Rate Determination Date"), in accordance with the following provisions: the Fixed Rate shall be a per annum rate and shall be determined by auditing the applicable Spread (as agreed to by the Company and the Reset Remarketing Agent on the preceding Spread Determination Date) to the yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the applicable United States Treasury security, selected by the Rate Agent or its agent after consultation with the Reset Remarketing Agent, as having a maturity comparable to the duration selected for the following Subsequent Spread Period, which would be used in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the duration selected for the following Subsequent Spread Period. Interest in the Fixed Rate Interest Mode shall be computed on the basis of a 360-day year of twelve 30-day months. Such interest shall be payable semiannually in arrears on the Interest Payment Dates occurring on each June 30 and December 30 at the applicable Fixed Rate, as determined by the Company and the Reset Remarketing Agent on the Fixed Rate Determination Date, beginning on the Commencement Date and for the duration of the relevant Subsequent Spread Period. Interest on the Notes shall accrue from and including each Interest Payment Date to but excluding the next succeeding Interest Payment Date or maturity date, as the case may be. If any Interest Payment Date or any redemption date in the Fixed Rate Interest Mode falls on a day that is not a Business Day (in either case, other than any Interest Payment Date or redemption date that falls on a Commencement Date, in which case each such date including the Commencement Date shall be postponed to the next day that is a Business Day), the related payment of principal and interest shall be made on the next succeeding Business Day as if it were made on the date such payment was due, and no interest shall accrue on the amounts so payable for the period from and after such dates; provided, however, that if such next succeeding Business Day is in the next calendar year, such Interest Payment Date shall occur on the immediately preceding Business Day. (c) Additional Terms of the Notes in Reset Mode. The Spread that shall be applicable during each Subsequent Spread Period for Notes in Reset Mode shall be the percentage (a) recommended by the Reset Remarketing Agent so as to result in a rate that, in the opinion of the Reset Remarketing Agent, will enable tendered Notes to be remarketed by the Reset Remarketing Agent at 100% of the principal amount thereof, and (b) agreed to by the Company. The interest rate mode during such Subsequent Spread Period shall be either the Floating Rate Interest Mode or the Fixed Rate Interest Mode, as determined by the Company and the Reset Remarketing Agent. Unless notice of redemption of the Notes as a whole has been given, the duration, redemption dates, redemption type, redemption prices (if applicable), Commencement Date, Interest Payment Dates and interest rate mode (and any other relevant terms) for each Subsequent Spread Period shall be established by 3:00 p.m., New York City time, on the tenth Business Day prior to the Commencement Date of each Subsequent Spread Period (each a "Duration/Interest -12- 21 Mode Determination Date"). In addition, the Spread for each Subsequent Spread Period shall be established by 1:00 p.m., New York City time, on the fifth Business Day prior to the Commencement Date of such Subsequent Spread Period (each, a "Spread Determination Date"). Thirty calender days prior to the First Remarketing Date, the Company shall request that DTC provide preliminary notification to its Participants that, on the date that is ten Business Days prior to the First Remarketing Date either (i) the Remarketing Right will have been exercised and the Notes will be subject to mandatory tender on the First Remarketing Date or (ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination Date will occur on such date. If the Mandatory Tender Remarketing Agent does not provide notification of its intention to exercise the Remarketing Right on the Mandatory Tender Notification Date, on or before the date that is ten Business Days prior to the First Remarketing Date, the Company shall request that DTC notify its Participants of the occurrence of a Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Note wishes to tender such Note. With respect to all Subsequent Spread Periods established after the First Remarketing Date, the Company shall request not later than five nor more than ten calendar days prior to any Duration/Interest Mode Determination Date, that DTC notify its Participants of such Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Notes wishes to tender such Note. In the event that DTC or its nominee is no longer the Holder of record of the Notes, the Company shall notify the Holders of such information within such period of time. In the event that the Company and the Reset Remarketing Agent do not agree on the Spread for any Subsequent Spread Period, then the Company shall be required unconditionally to repurchase and retire all of the Notes on the Reset Tender Date at a price equal to 100% of the principal amount thereof, together with accrued interest to the Reset Tender Date. In the event that the Reset Remarketing Agent fails to purchase any Notes tendered on the Reset Tender Date, then the Company shall be required unconditionally to repurchase and retire any Notes tendered and not purchased by the Reset Remarketing Agent. All percentages resulting from any calculation of any interest rate for the Notes shall be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one millionths of a percentage point rounded upward, and all dollar amounts shall be rounded to the hearest cent, with one-half cent being rounded upward. 4. Security; Release Date. Prior to the Release Date (as hereinafter defined), the Notes shall be secured by First Mortgage Bonds designated as Collateral Bonds, Series A (the "Collateral Bonds"), delivered by the Company to the Senior Trustee for the benefit of the Holders of the Notes. Prior to the Release Date, the Company shall make payments of the principal of, and premium, if any, and or interest on, the Collateral Bonds to the Senior Trustee, which payments shall be applied by the Senior Trustee to satisfaction of all obligations then due on the Notes. Reference is made to the Mortgage Indenture and the Senior Indenture for a description of the rights of the Senior Trustee as holder of the Collateral Bonds, the property mortgaged and pledged under the Mortgage Indenture and the rights of the Company and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee and the -13- 22 terms and conditions upon which the Collateral Bonds are secured and the circumstances under which additional First Mortgage Bonds may be issued. FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN COLLATERAL BONDS) ISSUED UNDER THE MORTGAGE INDENTURE HAVE BEEN RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE AT, BEFORE OR AFTER THE MATURITY THEREOF (THE "RELEASE DATE"), THE COLLATERAL BONDS SHALL CEASE TO SECURE THE NOTES IN ANY MANNER PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND AT SUCH TIME IS CONTINUING UNDER THE SENIOR INDENTURE. IN CERTAIN CIRCUMSTANCES PRIOR TO THE RELEASE DATE AS PROVIDED IN THE SENIOR INDENTURE, THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF COLLATERAL BONDS HELD BY THE TRUSTEE, BUT IN NO EVENT PRIOR TO THE RELEASE DATE TO AN AMOUNT LESS THAN THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE SERIES OF NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH COLLATERAL BONDS. 5. Maintenance of Book-Entry System. (a) The tender and settlement procedures set forth in Section 2 above, including provisions for payment by purchasers of Notes in the remarketing or for payment to selling Beneficial Owners of tendered Notes, shall be subject to modification, notwithstanding any provision to the contrary set forth in Article 9 of the Senior Indenture, to the extent required by DTC or, if the book-entry system is no longer available for the Notes at the time of the remarketing, to the extent required to facilitate the tendering and remarketing of Notes in certificated form. In addition, either of the Remarketing Agents may, notwithstanding any provision to the contrary set forth in Article 9 of the Senior Indenture, modify the settlement procedures set forth herein in order to facilitate the settlement process. (b) The Company hereby agrees with the Senior Trustee and the holders of Notes that at all times, notwithstanding any provision to the contrary set forth in the Senior Indenture, (i) it shall use its best efforts to maintain the Notes in book-entry form with DTC or any successor thereto and to appoint a successor thereto to the extent necessary to maintain the Notes in book-entry form and (ii) it shall waive any discretionary right that it otherwise may have under the Senior Indenture to cause the Notes to be issued in certificated form. 6. Repurchase. If the Notes are in Mandatory Tender Mode, in the event that (i) the Mandatory Remarketing Agent for any reason does not notify the Company of the Interest Rate to Second Remarketing Date by 4:00 p.m., New York City time, on the Mandatory Tender Determination Date, or (ii) prior to the First Remarketing Date, the Mandatory Tender Remarketing Agent has resigned and no successor has been appointed on or before the Mandatory Tender Determination Date, or (iii) since the Mandatory Tender Notification Date, the Mandatory Tender Remarketing Agent terminates the Mandatory Tender Remarketing Agreement because of the occurrence of a material adverse change in the condition of the Company and its subsidiaries, considered as one enterprise, or because an Event of Default, or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Notes has occurred and is continuing, or any other event -14- 23 constituting a termination event under the Mandatory Tender Remarketing Agreement has occurred, or (iv) the Mandatory Tender Remarketing Agent for any reason does not purchase all tendered Notes on the First Remarketing Date, the Company shall repurchase such Notes on the First Remarketing Date at a price equal to 100% of the principal amount of such Notes plus all accrued and unpaid interest, if any, to the First Remarketing Date. If the Notes are in Reset Mode, in the event that (i) the Company and the Reset Remarketing Agent fail for any reason to agree on a Spread for a Subsequent Spread Period, or (ii) prior to any Commencement Date, the Reset Remarketing Agent has resigned and no successor thereto has been appointed on or before the Duration/Interest Mode Determination Date, or (iii) since the Spread Determination Date, the Reset Remarketing Agent terminates the Reset Remarketing Agreement because of the occurrence of a material adverse change in the condition of the Company and its subsidiaries, considered as one enterprise, or because an Event of Default, or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Notes has occurred and is continuing, or any other event constituting a termination event under the Reset Remarketing Agreement has occurred, or (iv) the Reset Remarketing Agent for any reason does not purchase any Notes tendered on the Reset Tender Date, the Company shall repurchase any such Notes tendered but not purchased by the Reset Remarketing Agent on the First Remarketing Date at a price equal to 100% of the principal amount of such Notes plus all accrued and unpaid interest, if any, to the applicable Reset Tender Date. 7. Redemption. (a) Notwithstanding any election by the Mandatory Tender Remarketing Agent to remarket the Notes on the Mandatory Tender Remarketing Date, the tendering of the Notes for purchase by the Mandatory Tender Remarketing Agent on such date as set forth in Section 2(b)(ii) above shall be subject to the right of the Company to redeem the Notes from the Mandatory Tender Remarketing Agent as provided in Section 7(b) below. (b) The Company, in its sole and absolute discretion, shall have the right, upon notice to the Mandatory Tender Remarketing Agent and the Senior Trustee not later than the close of business on the Business Day immediately preceding the Mandatory Tender Determination Date, to irrevocably elect to redeem the Notes, in whole but not in part, from the Mandatory Tender Remarketing Agent on the Mandatory Tender Remarketing Date at the Optional Redemption Price. The "Optional Redemption Price" shall be the greater of (i) 100% of the principal amount of the Notes and (ii) the sum of the present values of the Remaining Scheduled Payments thereon, as determined by the Mandatory Tender Remarketing Agent, discounted to the Mandatory Tender Remarketing Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate, plus in either case accrued and unpaid interest from the Mandatory Tender Remarketing Date on the principal amount being redeemed to the date of redemption. If the Company elects to redeem the Notes, it shall pay the redemption price therefor in same-day funds by wire transfer to an account designated by the Mandatory Tender Remarketing Agent on the Mandatory Tender Remarketing Date. (c) If the Notes are in Reset Mode, on each Commencement Date and on those Interest Payment Dates specified as redemption dates by the Company on the Duration/Interest Mode -15- 24 Determination Date in connection with any Subsequent Spread Period, the Notes may be redeemed, at the option of the Company, in whole or in part, upon notice thereof given at any time during the 30-calendar-day period ending on the tenth Business Day prior to the redemption date (provided that notice of any partial redemption must be given at least 15 calendar days prior to the redemption date), in accordance with the redemption type selected on the Duration/Interest Mode Determination date. In the event that less than all of the outstanding Notes are to be so redeemed, the Notes to be redeemed shall be selected by such method as the Senior Trustee shall deem fair and appropriate. The redemption type to be chosen by the Company and the Reset Remarketing Agent on the Duration/Interest Mode Determination Date may be one of the following as defined herein: (i) Par Redemption; (ii) Premium Redemption; or (iii) Make-Whole Redemption. "Par Redemption" means redemption at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon, if any, to the redemption date. "Premium Redemption" means redemption at a redemption price or prices greater than 100% of the principal amount thereof, plus accrued interest thereon, if any, to the redemption date, as determined on the Duration/Interest Mode Determination date. "Make-Whole Redemption" means redemption at a redemption price equal to the Make-Whole Amount (as defined below), if any, with respect to such Notes. Unless otherwise specified by the Company on any Duration/Interest Mode Determination Date, the redemption type will be a Par Redemption. "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Note, any amount equal to the greater of (i) 100% of the principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the redemption date to the end of the applicable Subsequent Spread Period, computed by discounting such payments, in each case, to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Rate plus the Reinvestment Spread, plus accrued interest on the principal amount thereof to the date of redemption. "Reinvestment Spread" means, with respect to the Notes, a number, expressed as a number of basis points or as a percentage, selected by the Company and agreed to by the Reset Remarketing Agent on the Duration/Interest Mode Determination Date. 8. Effect of Event of Default. In case an Event of Default with respect to the Notes shall occur and be continuing, the unpaid principal of the Notes may be declared due and payable, in the manner, with the effect and subject to the conditions provided in the Senior Indenture. 9. Amendments and Waivers. The Senior Indenture may be modified by the Company and the Senior Trustee without consent of any Holder with respect to certain matters as described in the Indenture. In addition, the Senior Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes of each series to be affected under the Senior Indenture at any time by the Company and the Senior Trustee with the consent of the Holders of a majority in principal amount of the Notes at the time Outstanding of each series to be affected. -16- 25 The Senior Indenture also contains provisions permitting the Holders of a majority in principal amount of the Notes of each series at the time Outstanding, on behalf of the Holders of all Notes of such series, to waive compliance by the Company with certain provisions of the Senior Indenture and certain past defaults under the Senior Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall bind such Holder and all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 10. Obligation of Company. No reference herein to the Senior Indenture and no provision of this Note or of the Senior Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest on this Note at the time, place, and rate and in the coin or currency herein prescribed. 11. Denominations, Transfer and Exchange. (a) The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Senior Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. (b) As provided in the Senior Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series, and of like tenor, of authorized denominations and for the same maturity and aggregate principal amount, shall be issued to the designated transferee or transferees. (c) No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Senior Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Senior Trustee nor any such agent shall be affected by notice to the contrary. 12. No Liability of Certain Persons. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under this Note or the Senior Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder, by accepting a Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 13. Governing Law. The Senior Indenture and this Note shall for all purposes be governed by, and construed in accordance with, the internal laws of the State of New York. -17- 26 ---------------------------------------------------------------------------- THE FOLLOWING ABBREVIATIONS SHALL BE CONSTRUED AS THOUGH THE WORDS SET FORTH BELOW OPPOSITE EACH ABBREVIATION WERE WRITTEN OUT IN FULL WHERE SUCH ABBREVIATION APPEARS: TEN COM--as tenants in common (Name) CUST (Name) UNIF--(Name) as Custodian TEN ENT--as tenants by the entirety GIFT MIN ACT (state) for (Name) Under the (State) JT TEN--as joint tenants with Uniform Gifts to right of survivorship Minors Act and not as tenants in common
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST. ---------------------------------------------------------------------------- To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint --------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: Your Signature: --------------- --------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------ (Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Transfer Agent, which requirements will include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act.) Social Security Number or Taxpayer Identification Number: ------------------------------------------- -18- 27 APPENDIX II CUSIP: 594457 BK 8 No. R-1 $75,000,000 THIS NOTE IS IN GLOBAL FORM WITHIN THE MEANING OF THE SENIOR INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY. Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company (as defined below) or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. MICHIGAN CONSOLIDATED GAS COMPANY Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)")* due June 30, 2038 MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under the laws of the State of Michigan (the "Company", which term includes any successor corporation under the Senior Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or registered assigns, at the office or agency of the Company in The City of New York, New York, the principal sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) on June 30, 2038 (the "Stated Maturity Date"), in the coin or currency of the United States, and to pay interest: (i) semiannually on June 30 and December 30 (x) from and including June 23, 1998 through but excluding June 30, 2003 and (y) on and after June 30, 2003 if and so long as the Resetable MAPS are in Mandatory Tender Mode (as defined on the reverse hereof); or (ii) on such dates as determined on the Duration/Interest Mode Determination Date (as defined on the reverse hereof) if and so long as the Resetable MAPS are in Reset Mode (as defined on the reverse hereof) (each, an "Interest Payment Date"), commencing December 30, 1998. Interest shall be paid on said principal sum at said office or agency, in like coin or currency, at the rate per annum specified below, from - ----------- *"MAPS(sm)" is a service mark of Salomon Brothers Inc -1- 28 the Interest Payment Date next preceding the date of this Resetable MAPS to which interest has been paid or duly provided for, unless the date hereof is a date to which interest has been paid or duly provided for, in which case from the date of this Resetable MAPS, or unless no interest has been paid or duly provided for on this Resetable MAPS, in which case from June 23, 1998, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear on the Security Register of the Company as provided in the Senior Indenture. Notwithstanding the foregoing, if the date hereof is after the 14th day of a month in which an Interest Payment Date occurs, and before the following Interest Payment Date, this Resetable MAPS shall bear interest from such Interest Payment Date; provided, that if the Company shall default in the payment of interest due on such Interest Payment Date, then this Resetable MAPS shall bear interest from the next preceding Interest Payment Date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for on this Resetable MAPS, from June 23, 1998. The interest so payable on any Interest Payment Date will, subject to certain exceptions provided in the Senior Indenture, be paid to the person in whose name this Resetable MAPS (or one or more Predecessor Securities) is registered at the close of business on the fifteenth calendar day next preceding such Interest Payment Date, whether or not such day is a Business Day (each a "Record Date"). The rate of interest on this Resetable MAPS shall be 6.20% per annum to June 30, 2003 (the "First Remarketing Date"). If, pursuant to the Mandatory Tender Remarketing Agreement, dated as of the date hereof (the "Mandatory Tender Remarketing Agreement"), between Salomon Brothers Inc, as Mandatory Tender Remarketing Agent (the "Mandatory Tender Remarketing Agent"), and the Company, the Mandatory Tender Remarketing Agent elects to exercise its option to remarket the Resetable MAPS (the "Remarketing Right"), then, except as otherwise set forth on the reverse hereof, (i) this Resetable MAPS shall be subject to mandatory tender to the Mandatory Tender Remarketing Agent for remarketing on the First Remarketing Date, on the terms and subject to the conditions set forth on the reverse hereof, and (ii) from and after the First Remarketing Date and up to but excluding June 30, 2013 (the "Second Remarketing Date"), this Resetable MAPS shall bear interest from and including June 30, 2003 to but excluding June 30, 2013 (the "Second Remarketing Date") at the rate determined by the Mandatory Tender Remarketing Agent in accordance with the procedures set forth in Section 2(b) on the reverse hereof (the "Interest Rate to Second Remarketing Date"). From and after the earlier to occur of (i) the First Remarketing Date in the event that the Mandatory Tender Remarketing Agent fails to give notice of exercise of the Remarketing Right and (ii) the Second Remarketing Date, the character and duration of the interest rate on the Resetable MAPS shall be determined by Salomon Brothers Inc, as reset remarketing agent, or such other nationally recognized broker-dealer as may be selected by the Company to act as such (the "Reset Remarketing Agent"), pursuant to that certain Reset Remarketing Agreement dated as of June 23, 1998 (the "Reset Remarketing Agreement") between the Company and Salomon Brothers Inc, and agreed to by the Company on each applicable Duration/Interest Mode Determination Date, and the spread will be as agreed to by the Company and the Reset -2- 29 Remarketing Agent on the corresponding Spread Determination Date (as defined on the reverse hereof), subject to certain limitations set forth on the reverse of this Resetable MAPS. UNTIL THE RELEASE DATE (AS DEFINED ON THE REVERSE HEREOF), THIS RESETABLE MAPS SHALL BE SECURED BY FIRST MORTGAGE BONDS (THE "FIRST MORTGAGE BONDS") ISSUED AND DELIVERED BY THE COMPANY TO THE SENIOR TRUSTEE (AS DEFINED ON THE REVERSE HEREOF) UNDER THE COMPANY'S TWENTY-NINTH SUPPLEMENTAL INDENTURE DATED AS OF JULY 15, 1989, PROVIDING FOR THE RESTATEMENT OF THE INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 1, 1994 BETWEEN THE COMPANY AND CITIBANK, N.A. (THE "MORTGAGE TRUSTEE") AND ROBERT T. KIRCHNER (THE "INDIVIDUAL TRUSTEE"), AS SUPPLEMENTED BY THE THIRTY-FIFTH SUPPLEMENTAL INDENTURE (AS SO SUPPLEMENTED, THE "MORTGAGE INDENTURE"). ON THE RELEASE DATE, THE RESETABLE MAPS SHALL CEASE TO BE SECURED BY SUCH FIRST MORTGAGE BONDS AND, AT THE COMPANY'S OPTION, EITHER (i) SHALL BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (ii) SHALL BE SECURED BY FIRST MORTGAGE BONDS UNDER A SECURED MORTGAGE INDENTURE OTHER THAN THE MORTGAGE INDENTURE. Reference is made to the further provisions of this Resetable MAPS set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Resetable MAPS shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Senior Trustee under the Senior Indenture referred to on the reverse hereof. -3- 30 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY By: _________________________________ Title: Attest: [SEAL] By: ______________________________ Title: CERTIFICATE OF AUTHENTICATION This is one of the Resetable MAPS of the series designated therein referred to in the within-mentioned Indenture. Dated: June 23, 1998 CITIBANK, N.A., as Trustee By: ____________________________ Authorized Signatory -4- 31 MICHIGAN CONSOLIDATED GAS COMPANY Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038 1. Indenture. (a) This Resetable MAPS is one of the duly authorized issue of securities of the Company (hereinafter called the "Notes") of the series hereinafter specified, all issued or to be issued under and pursuant to an Indenture, dated as of June 1, 1998, as supplemented by the first supplemental Indenture, dated as of June 18, 1998 between the Company and the Trustee (as so supplemented, the "Senior Indenture"), duly executed and delivered by the Company to Citibank, N.A., as Trustee (herein called the "Senior Trustee," which term includes any successor trustee under the Senior Indenture), to which Senior Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Senior Trustee, the Company and the Holders of the Notes. The Notes may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions (if any) and may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as provided in the Indenture. This Note is one of the series designated as the Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038 of the Company, which series is limited in aggregate principal amount to $75,000,000. (b) Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and, to the extent lawful, on overdue installments of interest at the rate per annum borne by this Note. For purposes hereof, the term "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are required or authorized to close and, in the case of Notes in Reset Mode that are in the Floating Rate Interest Mode that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted on the London interbank market. (c) Unless otherwise defined herein, all capitalized terms used herein without definition shall have the meanings assigned to them in the Senior Indenture. 2. Terms of the Notes in Mandatory Tender Mode. On the date, if any, on which the Mandatory Tender Remarketing Agent elects to exercise the Remarketing Right in accordance with the terms hereof, the Notes shall be deemed to be in "Mandatory Tender Mode." (a) Mandatory Tender on First Remarketing Date; Purchase and Settlement. (i) Provided that the Mandatory Tender Remarketing Agent gives notice to the Company and the Senior Trustee on a Business Day not later than eleven Business Days prior to the First Remarketing Date of its intention to exercise the Remarketing Right to purchase the Notes for remarketing (the "Mandatory Tender Notification Date"), each Note shall be automatically tendered, or deemed tendered, to the Mandatory Tender Remarketing Agent for purchase on -5- 32 the Mandatory Tender Remarketing Date in accordance with Section 2(a)(ii) below, except as set forth in Sections 6 and 7 below. The purchase price of such tendered Notes shall be equal to 100% of the principal amount thereof. Upon such tender, the Mandatory Tender Remarketing Agent shall have the option, in its sole discretion, to elect to remarket the Notes in accordance with the Mandatory Tender Remarketing Agreement for its own account at varying prices to be determined by the Mandatory Tender Remarketing Agent at the time of each sale. If the Mandatory Tender Remarketing Agent makes such election, the obligation of the Mandatory Tender Remarketing Agent to purchase the Notes on the Mandatory Tender Remarketing Date shall be subject to the conditions set forth in the Mandatory Tender Remarketing Agreement. No Holder or actual purchaser of the Notes ("Beneficial Owner") shall have any rights or claims under the Mandatory Tender Remarketing Agreement or against the Company or the Mandatory Tender Remarketing Agent as a result of the Mandatory Tender Remarketing Agent not purchasing such Notes. (i) Following the Mandatory Tender Notification Date and assuming that the Notes are remarketed by the Mandatory Remarketing Agent pursuant to the exercise of the Remarketing Right, the tender and purchase of the Notes provided for in Section 2(a)(i) above shall be effected as follows, subject to Sections 6 and 7 below: (x) All of the tendered Notes shall be automatically delivered to the account of the Trustee, by book-entry through DTC or any successor thereto pending payment of the purchase price therefor, on the Remarketing Date. (y) The Mandatory Tender Remarketing Agent shall make or cause the Trustee to make payment to DTC by book entry through DTC in accordance with the procedures of DTC, by 1:00 p.m., New York City time, on the Mandatory Tender Remarketing Date against delivery through DTC of such Beneficial Owner's tendered Notes, of the purchase price for tendered Notes that have been purchased for remarketing by the Mandatory Tender Remarketing Agent. The Company shall make or cause the Trustee to make payment of interest to DTC on the Mandatory Tender Remarketing Date by book entry through DTC by 2:30 p.m., New York City time, on the Mandatory Tender Remarketing Date. (ii) In anticipation of the purchase of the Notes by the Mandatory Tender Remarketing Agent for remarketing or the repurchase of the Notes by the Company on the Remarketing Date, the Trustee shall notify the Holder hereof, not less than 30 days nor more than 60 days prior to the Remarketing Date, that all Notes will be delivered on the Mandatory Tender Remarketing Date through the facilities of DTC against payment of the purchase price therefor by the Mandatory Tender Remarketing Agent or the Company, as the case may be. (b) Determination of Interest Rate to Second Remarketing Date; Notification Thereof. Subject to the Remarketing Dealer's election to exercise the Remarketing Right as provided in Section 2(a)(i), by 3:30 p.m., New York City time, on the third Business Day immediately -6- 33 preceding the Remarketing Date (the "Mandatory Tender Determination Date"), the Mandatory Tender Remarketing Agent shall determine the Interest Rate to Second Remarketing Date to the nearest one hundred-thousandth (0.00001) of one percent per annum. The Interest Rate to Second Remarketing Date shall be equal to the sum of 5.50% (the "Base Rate") and the Applicable Spread (as defined below), which will be based on the Dollar Price (as defined below) of the Notes. The "Applicable Spread" for the Notes in Mandatory Tender Mode shall be the lowest bid indication, expressed as a spread (in the form of a percentage or in basis points) above the Base Rate, obtained by the Mandatory Tender Remarketing Agent on the Mandatory Tender Determination Date from the bids quoted by five Reference Corporate Dealers (as defined below) for the full aggregate principal amount of the Notes at the Dollar Price, but assuming (i) an issue date that is the Mandatory Tender Remarketing Date, with settlement on such date without accrued interest, (ii) a maturity date that is the Second Remarketing Date of the Notes and (iii) a stated annual interest rate, payable semiannually on each Interest Payment Date (as defined below), equal to the Base Rate plus the spread bid by the applicable Reference Corporate Dealer Second Remarketing Date. If fewer than five Reference Corporate Dealers bid as described above, then the Applicable Spread shall be the lowest of such bid indications obtained as described above. The Interest Rate to Second Remarketing Date announced by the Mandatory Tender Remarketing Agent, absent manifest error, shall be binding and conclusive upon the Beneficial Owners and Holders of the Notes, the Company and the Senior Trustee. "Dollar Price" means, with respect to the Notes in Mandatory Tender Mode, the present value determined by the Mandatory Tender Remarketing Agent, as of the First Remarketing Date, of the Remaining Scheduled Payments (as defined below) discounted to the First Remarketing Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below). "Reference Corporate Dealers" means leading dealers of publicly traded debt securities of the Company in The City of New York (which may include the Mandatory Tender Remarketing Agent or one of its affiliates) selected by the Mandatory Tender Remarketing Agent after consultation with the Company. "Remaining Scheduled Payments" means, with respect to the Notes, the remaining scheduled payments of the principal thereof and interest thereon, calculated at the Applicable Base Rate only, that would be due after the First Remarketing Date to and including the Second Remarketing Date as determined by the Mandatory Tender Remarketing Agent. "Treasury Rate" means, with respect to the First Remarketing Date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated (on a day count basis) yield to maturity of the Comparable Treasury Issues (as defined below), assuming a price for the Comparable Treasury Issues (expressed as a percentage of its principal amount), equal to the Comparable Treasury Price (as defined below) for such Remarketing Date. -7- 34 "Comparable Treasury Issues" means the United States Treasury Security or Securities selected by the Mandatory Tender Remarketing Agent as having an actual or interpolated maturity or maturities comparable to the Second Remarketing Date. "Comparable Treasury Price" means, with respect to the First Remarketing Date, (a) the offer prices for the Comparable Treasury Issues (expressed in each case as a percentage of its principal amount) on the Mandatory Tender Determination Date, as set forth on "Telerate Page 500" (or such other page as may replace Telerate Page 500) or (b) if such page (or any successor page) is not displayed or does not contain such offer prices on such Mandatory Tender Determination Date, (i) the average of the Reference Treasury Dealer Quotations for the First Remarketing Date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the Mandatory Tender Remarketing Agent obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. "Telerate Page 500" means the display designated as "Telerate Page 500" on Dow Jones Markets Limited (or such other page as may replace Telerate Page 500 on such service) or such other service displaying the offer prices specified in (a) above as may replace Dow Jones Markets Limited. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and the First Remarketing Date, the offer prices for the Comparable Treasury Issues (expressed in each case as a percentage of its principal amount) quoted to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m., New York City time, on the First Determination Date. "Reference Treasury Dealer" means each of Credit Suisse First Boston Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or their respective affiliates which are primary U.S. Government Notes dealers) and their respective successors; provided, however, that if any of the foregoing or their affiliates shall cease to be a primary U.S. Government Notes dealer in The City of New York (a "Primary Treasury Dealer"), the Remarketing Dealer shall substitute therefor another Primary Treasury Dealer. Provided the Remarketing Right has been exercised, the Mandatory Tender Remarketing Agent shall notify the Company, the Senior Trustee and DTC by telephone, confirmed in writing, by 4:00 p.m., New York City time, on the Mandatory Tender Determination Date, of the Interest Rate to Second Remarketing Date. In such event, all of the tendered Notes of a series will be automatically delivered to the account of the Senior Trustee, by book-entry through DTC pending payment of the purchase price therefor, on the First Remarketing Date, and the Mandatory Tender Remarketing Agent shall make or cause the Senior Trustee to make payment to the DTC Participant of each tendering Beneficial Owner of the Notes, by book-entry through DTC by the close of business on the First Remarketing Date against delivery through DTC of such Beneficial Owner's tendered Notes of 100% of the principal amount of such tendered Notes. The transactions described above shall be executed on the First Remarketing Date through DTC in accordance with the procedures of DTC, and -8- 35 the accounts of the respective DTC Participants shall be debited and credited and the Notes delivered by book entry as necessary to effect the purchases and sales thereof. Transactions involving the sale and purchase of the Notes remarketed by the Mandatory Tender Remarketing Agent on and after the First Remarketing Date shall settle in immediately available funds through DTC's Same-Day Funds Settlement System. The tender and settlement procedures described above, including provisions for payment by purchasers of the Notes in the remarketing or for payment to selling Beneficial Owners of tendered Notes, may be modified to the extent required by DTC or to the extent required to facilitate the tender and remarketing of such series of Notes in certificated form, if the book-entry system is no longer available for the Notes at the time of the remarketing. In addition, the Mandatory Tender Remarketing Agent may, in accordance with the terms of the Senior Indenture, modify the tender and settlement procedures set forth above in order to facilitate the tender and settlement process. 3. Terms of the Notes in Reset Mode. If (i) the Mandatory Tender Remarketing Agent does not provide notification to the Company of its intention to exercise the Remarketing Right on the eleventh Business Day prior to the First Remarketing Date (which date may also be referred to herein as the "Mandatory Tender Remarketing Date"), on the tenth Business Day prior to the Mandatory Tender Remarketing Date or (ii) the Second Remarketing Date, in the event the Remarketing Right is exercised, the Notes will be deemed to be in "Reset Mode." (a) Tender at Option of Beneficial Owners in Reset Mode. If the Company and the Reset Remarketing Agent agree on the Spread on the Spread Determination Date (as defined below) with respect to any Subsequent Spread Period, the Company and the Reset Remarketing Agent will enter into a Reset Remarketing Agreement Supplement (a "Reset Remarketing Agreement Supplement") under which the Reset Remarketing Agent will agree, subject to Section 6 and 7 below and other applicable terms and conditions set forth in such Reset Remarketing Agreement Supplement, to purchase from tendering Holders on the Reset Tender Date all Notes with respect to which the Reset Remarketing Agent receives a Reset Tender Notice as described below at 100% of the principal amount thereof (the "Purchase Price"). Except as otherwise provided in the next succeeding paragraph, each Beneficial Owner of a Note may, at such owner's option, upon giving notice as provided below (a "Reset Tender Notice"), tender such Note for purchase by the Reset Remarketing Agent on the Reset Tender Date with respect to a Spread Period at the Purchase Price. The Purchase Price shall be paid by the Reset Marketing Agent in accordance with the standard procedures of DTC, and accounts of the respective DTC Participants shall be debited and credited and the Notes delivered by book-entry as necessary to effect any purchases and sales thereof. The Reset Tender Notice must be received by the Reset Remarketing Agent during the period commencing at 3:00 p.m., New York City time, on the Spread Determination Date and ending at 12:00 noon, New York City time, on the second Business Day following such Spread Determination Date for such Subsequent Spread Period (the "Notice Date"). Except as otherwise provided below, a Reset Tender Notice shall be irrevocable. If a Reset Tender Notice is not received for any reason by the Reset Remarketing Agent with respect to any Note -9- 36 by 12:00 noon, New York City time, on the Notice Date, the Beneficial Owner of such Note shall be deemed to have elected not to tender such Note for purchase by the Reset Remarketing Agent. (b) Determination of Duration and Interest Rate Mode. Upon each Duration/Interest Mode Determination Date (as defined below), the mode and other terms for the next Subsequent Spread Period shall be determined as described below. (i) Floating Rate Interest Mode. If the Notes in Reset Mode are in Floating Rate Mode, then the following shall apply: During the Floating Rate Interest Mode, interest on the Notes for each Subsequent Spread Period shall be payable either monthly, quarterly or semiannually, as specified by the Company on each Duration/Interest Mode Determination Date. With respect to Notes in the Floating Rate Interest Mode, interest shall be payable, in arrears, in the case of Notes which pay: (a) monthly, on the thirtieth day of each month; (b) quarterly, on the thirtieth day of each March, June, September and December; and (c) semiannually, on the thirtieth day of each June and December. During any Subsequent Spread Period during which the Reset Mode Notes are in the Floating Rate Interest Mode, the interest rate on the Notes shall be reset either monthly, quarterly or semiannually, and the Notes shall bear interest at a per annum rate (computed on the basis of the actual number of days elapsed over a 360-day year) equal to LIBOR (as defined below) for the applicable Interest Period (as defined below), plus the applicable Spread. Interest on the Notes shall accrue from and including each Interest Payment Date to but excluding the next succeeding Interest Payment Date or maturity date, as the case may be. Each interest period during any Subsequent Spread Period (each, an "Interest Period") shall be from and including the most recent Interest Payment Date on which interest has been paid to but excluding the next Interest Payment Date. The first day of an Interest Period is referred to herein as an "Interest Reset Date". If any Interest Payment Date (other than at maturity), redemption date, Interest Reset Date, Duration/Interest Mode Determination Date, Spread Determination Date (as defined below), Commencement Date or Reset Tender Date would otherwise be a day that is not a Business Day, such Interest Payment Date, redemption date, Interest Reset Date, Duration/Interest Mode Determination Date, Spread Determination Date, Commencement Date or Reset Tender Date, as the case may be, shall be postponed to the next succeeding day that is a Business Day; provided, however, that if such next succeeding Business Day is in the next calendar month, such date shall occur on the immediately preceding Business Day. LIBOR applicable for an Interest Period shall be determined by the Rate Agent (as defined below) as of the second London Business Day (as defined below) preceding each Interest Reset Date (a "LIBOR Determination Date") in accordance with the following provisions: (x) LIBOR shall be determined on the basis of the offered rate for deposits -10- 37 in U.S. Dollars of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date, which appears on Telerate Page 3750 (as defined below) as of approximately 11:00 a.m., London time, on such LIBOR Determination Date. "Telerate Page 3750" means the display designated on page "3750" on Dow Jones Markets Limited or any successor thereto (or such other page as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. Dollar deposits). If no such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR Determination Date shall be determined in accordance with the provisions of paragraph (y) below. The term "London Business Day" means any day on which dealings in deposits in U.S. Dollars are transacted in the London interbank market. (y) With respect to a LIBOR Determination Date on which no rate appears on Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date, the Rate Agent shall request the principal London offices of each of four major reference banks in the London interbank market selected by the Rate Agent (after consultation with the Company) to provide the Rate Agent with a quotation of the rate at which deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business day immediately following such LIBOR Determination Date, are offered by it to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR for such LIBOR Determination Date shall be the arithmetic mean of such quotations as calculated by the Rate Agent. If fewer than two quotations are provided, LIBOR for such LIBOR Determination Date shall be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., New York City time, on such LIBOR Determination Date by three major banks in The City of New York selected by the Rate Agent (after consultation with the Company) for loans in U.S. Dollars to leading European banks, of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the Rate Agent are not quoting as mentioned in this sentence, LIBOR for such LIBOR Determination Date shall be LIBOR determined with respect to the immediately preceding LIBOR Determination Date. The Index Maturity applicable to Notes in the Floating Rate Interest Mode shall be, in the case of Notes paying (x) monthly, one month; (y) quarterly, three months; and (z) semiannually, six months. The term "Rate Agent" means the entity selected by the Company as its agent to -11- 38 determine (i) LIBOR and the interest rate on the Notes for any Interest Period and/or (ii) the yield to maturity on the applicable United States Treasury security that is used in connection with the determination of the applicable Fixed Rate, and the ensuing applicable Fixed Rate pursuant to the Reset Remarketing Agreement. (ii) Fixed Rate Interest Mode. If the Notes are to be reset to the Fixed Rate Interest Mode, as agreed to by the Company and the Reset Remarketing Agent on a Duration/Interest Mode Determination, then the applicable Fixed Rate for the corresponding Subsequent Spread Period shall be determined by 1:00 p.m. on the third Business Day preceding the Commencement Date for such Subsequent Spread Period (the "Fixed Rate Determination Date"), in accordance with the following provisions: the Fixed Rate shall be a per annum rate and shall be determined by auditing the applicable Spread (as agreed to by the Company and the Reset Remarketing Agent on the preceding Spread Determination Date) to the yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the applicable United States Treasury security, selected by the Rate Agent or its agent after consultation with the Reset Remarketing Agent, as having a maturity comparable to the duration selected for the following Subsequent Spread Period, which would be used in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the duration selected for the following Subsequent Spread Period. Interest in the Fixed Rate Interest Mode shall be computed on the basis of a 360-day year of twelve 30-day months. Such interest shall be payable semiannually in arrears on the Interest Payment Dates occurring on each June 30 and December 30 at the applicable Fixed Rate, as determined by the Company and the Reset Remarketing Agent on the Fixed Rate Determination Date, beginning on the Commencement Date and for the duration of the relevant Subsequent Spread Period. Interest on the Notes shall accrue from and including each Interest Payment Date to but excluding the next succeeding Interest Payment Date or maturity date, as the case may be. If any Interest Payment Date or any redemption date in the Fixed Rate Interest Mode falls on a day that is not a Business Day (in either case, other than any Interest Payment Date or redemption date that falls on a Commencement Date, in which case each such date including the Commencement Date shall be postponed to the next day that is a Business Day), the related payment of principal and interest shall be made on the next succeeding Business Day as if it were made on the date such payment was due, and no interest shall accrue on the amounts so payable for the period from and after such dates; provided, however, that if such next succeeding Business Day is in the next calendar year, such Interest Payment Date shall occur on the immediately preceding Business Day. (c) Additional Terms of the Notes in Reset Mode. The Spread that shall be applicable during each Subsequent Spread Period for Notes in Reset Mode shall be the percentage (a) recommended by the Reset Remarketing Agent so as to result in a rate that, in -12- 39 the opinion of the Reset Remarketing Agent, will enable tendered Notes to be remarketed by the Reset Remarketing Agent at 100% of the principal amount thereof, and (b) agreed to by the Company. The interest rate mode during such Subsequent Spread Period shall be either the Floating Rate Interest Mode or the Fixed Rate Interest Mode, as determined by the Company and the Reset Remarketing Agent. Unless notice of redemption of the Notes as a whole has been given, the duration, redemption dates, redemption type, redemption prices (if applicable), Commencement Date, Interest Payment Dates and interest rate mode (and any other relevant terms) for each Subsequent Spread Period shall be established by 3:00 p.m., New York City time, on the tenth Business Day prior to the Commencement Date of each Subsequent Spread Period (each a "Duration/Interest Mode Determination Date"). In addition, the Spread for each Subsequent Spread Period shall be established by 1:00 p.m., New York City time, on the fifth Business Day prior to the Commencement Date of such Subsequent Spread Period (each, a "Spread Determination Date"). Thirty calender days prior to the First Remarketing Date, the Company shall request that DTC provide preliminary notification to its Participants that, on the date that is ten Business Days prior to the First Remarketing Date either (i) the Remarketing Right will have been exercised and the Notes will be subject to Mandatory tender on the First Remarketing Date or (ii) the Notes will be in Reset Mode and a Duration/Interest Mode Determination Date will occur on such date. If the Mandatory Tender Remarketing Agent does not provide notification of its intention to exercise the Remarketing Right on the Mandatory Tender Notification Date, on or before the date that is ten Business Days prior to the First Remarketing Date, the Company shall request that DTC notify its Participants of the occurrence of a Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Note wishes to tender such Note. With respect to all Subsequent Spread Periods established after the First Remarketing Date, the Company shall request not later than five nor more than ten calendar days prior to any Duration/Interest Mode Determination Date, that DTC notify its Participants of such Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Notes wishes to tender such Note. In the event that DTC or its nominee is no longer the Holder of record of the Notes, the Company shall notify the Holders of such information within such period of time. In the event that the Company and the Reset Remarketing Agent do not agree on the Spread for any Subsequent Spread Period, then the Company shall be required unconditionally to repurchase and retire all of the Notes on the Reset Tender Date at a price equal to 100% of the principal amount thereof, together with accrued interest to the Reset Tender Date. In the event that the Reset Remarketing Agent fails to purchase any Notes tendered on the Reset Tender Date, then the Company shall be required unconditionally to repurchase and retire any Notes tendered and not purchased by the Reset Remarketing Agent. All percentages resulting from any calculation of any interest rate for the Notes shall be rounded, if necessary, to the nearest one hundred thousandth of a percentage point, with five one millionths of a percentage point rounded upward, and all dollar amounts shall be rounded -13- 40 to the nearest cent, with one-half cent being rounded upward. 4. Security; Release Date. Prior to the Release Date (as hereinafter defined), the Notes shall be secured by First Mortgage Bonds designated as Collateral Bonds, Series B (the "Collateral Bonds"), delivered by the Company to the Senior Trustee for the benefit of the Holders of the Notes. Prior to the Release Date, the Company shall make payments of the principal of, and premium, if any, and or interest on, the Collateral Bonds to the Senior Trustee, which payments shall be applied by the Senior Trustee to satisfaction of all obligations then due on the Notes. Reference is made to the Mortgage Indenture and the Senior Indenture for a description of the rights of the Senior Trustee as holder of the Collateral Bonds, the property mortgaged and pledged under the Mortgage Indenture and the rights of the Company and of the Mortgage Trustee in respect thereof, the duties and immunities of the Mortgage Trustee and the terms and conditions upon which the Collateral Bonds are secured and the circumstances under which additional First Mortgage Bonds may be issued. FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN COLLATERAL BONDS) ISSUED UNDER THE MORTGAGE INDENTURE HAVE BEEN RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE AT, BEFORE OR AFTER THE MATURITY THEREOF (THE "RELEASE DATE"), THE COLLATERAL BONDS SHALL CEASE TO SECURE THE NOTES IN ANY MANNER PROVIDED THAT NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND AT SUCH TIME IS CONTINUING UNDER THE SENIOR INDENTURE. IN CERTAIN CIRCUMSTANCES PRIOR TO THE RELEASE DATE AS PROVIDED IN THE SENIOR INDENTURE, THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF COLLATERAL BONDS HELD BY THE TRUSTEE, BUT IN NO EVENT PRIOR TO THE RELEASE DATE TO AN AMOUNT LESS THAN THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE SERIES OF NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH COLLATERAL BONDS. 5. Maintenance of Book-Entry System. (a) The tender and settlement procedures set forth in Section 2 above, including provisions for payment by purchasers of Notes in the remarketing or for payment to selling Beneficial Owners of tendered Notes, shall be subject to modification, notwithstanding any provision to the contrary set forth in Article 9 of the Senior Indenture, to the extent required by DTC or, if the book-entry system is no longer available for the Notes at the time of the remarketing, to the extent required to facilitate the tendering and remarketing of Notes in certificated form. In addition, either of the Remarketing Agents may, notwithstanding any provision to the contrary set forth in Article 9 of the Senior Indenture, modify the settlement procedures set forth herein in order to facilitate the settlement process. (b) The Company hereby agrees with the Senior Trustee and the holders of Notes that at all times, notwithstanding any provision to the contrary set forth in the Senior Indenture, (i) it shall use its best efforts to maintain the Notes in book-entry form with DTC or any successor thereto and to appoint a successor thereto to the extent necessary to maintain the Notes in book-entry form and (ii) it shall waive any discretionary right that it otherwise may have under -14- 41 the Senior Indenture to cause the Notes to be issued in certificated form. 6. Repurchase. If the Notes are in Mandatory Tender Mode, in the event that (i) the Mandatory Remarketing Agent for any reason does not notify the Company of the Interest Rate to Second Remarketing Date by 4:00 p.m., New York City time, on the Mandatory Tender Determination Date, or (ii) prior to the First Remarketing Date, the Mandatory Tender Remarketing Agent has resigned and no successor has been appointed on or before the Mandatory Tender Determination Date, or (iii) since the Mandatory Tender Notification Date, the Mandatory Tender Remarketing Agent terminates the Mandatory Tender Remarketing Agreement because of the occurrence of a material adverse change in the condition of the Company and its subsidiaries, considered as one enterprise, or because an Event of Default, or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Notes has occurred and is continuing, or any other event constituting a termination event under the Mandatory Tender Remarketing Agreement has occurred, or (iv) the Mandatory Tender Remarketing Agent for any reason does not purchase all tendered Notes on the First Remarketing Date, the Company shall repurchase such Notes on the First Remarketing Date at a price equal to 100% of the principal amount of such Notes plus all accrued and unpaid interest, if any, to the First Remarketing Date. If the Notes are in Reset Mode, in the event that (i) the Company and the Reset Remarketing Agent fail for any reason to agree on a Spread for a Subsequent Spread Period, or (ii) prior to any Commencement Date, the Reset Remarketing Agent has resigned and no successor thereto has been appointed on or before the Duration/Interest Mode Determination Date, or (iii) since the Spread Determination Date, the Reset Remarketing Agent terminates the Reset Remarketing Agreement because of the occurrence of a material adverse change in the condition of the Company and its subsidiaries, considered as one enterprise, or because an Event of Default, or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Notes has occurred and is continuing, or any other event constituting a termination event under the Reset Remarketing Agreement has occurred, or (iv) the Reset Remarketing Agent for any reason does not purchase any Notes tendered on the Reset Tender Date, the Company shall repurchase any such Notes tendered but not purchased by the Reset Remarketing Agent on the First Remarketing Date at a price equal to 100% of the principal amount of such Notes plus all accrued and unpaid interest, if any, to the applicable Reset Tender Date. 7. Redemption. (a) Notwithstanding any election by the Mandatory Tender Remarketing Agent to remarket the Notes on the Mandatory Tender Remarketing Date, the tendering of the Notes for purchase by the Mandatory Tender Remarketing Agent on such date as set forth in Section 2(b)(ii) above shall be subject to the right of the Company to redeem the Notes from the Mandatory Tender Remarketing Agent as provided in Section 7(b) below. (b) The Company, in its sole and absolute discretion, shall have the right, upon notice to the Mandatory Tender Remarketing Agent and the Senior Trustee not later than the close of business on the Business Day immediately preceding the Mandatory Tender Determination -15- 42 Date, to irrevocably elect to redeem the Notes, in whole but not in part, from the Mandatory Tender Remarketing Agent on the Mandatory Tender Remarketing Date at the Optional Redemption Price. The "Optional Redemption Price" shall be the greater of (i) 100% of the principal amount of the Notes and (ii) the sum of the present values of the Remaining Scheduled Payments thereon, as determined by the Mandatory Tender Remarketing Agent, discounted to the Mandatory Tender Remarketing Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate, plus in either case accrued and unpaid interest from the Mandatory Tender Remarketing Date on the principal amount being redeemed to the date of redemption. If the Company elects to redeem the Notes, it shall pay the redemption price therefor in same-day funds by wire transfer to an account designated by the Mandatory Tender Remarketing Agent on the Mandatory Tender Remarketing Date. (c) If the Notes are in Reset Mode, on each Commencement Date and on those Interest Payment Dates specified as redemption dates by the Company on the Duration/Interest Mode Determination Date in connection with any Subsequent Spread Period, the Notes may be redeemed, at the option of the Company, in whole or in part, upon notice thereof given at any time during the 30-calendar-day period ending on the tenth Business Day prior to the redemption date (provided that notice of any partial redemption must be given at least 15 calendar days prior to the redemption date), in accordance with the redemption type selected on the Duration/Interest Mode Determination date. In the event that less than all of the outstanding Notes are to be so redeemed, the Notes to be redeemed shall be selected by such method as the Senior Trustee shall deem fair and appropriate. The redemption type to be chosen by the Company and the Reset Remarketing Agent on the Duration/Interest Mode Determination Date may be one of the following as defined herein: (i) Par Redemption; (ii) Premium Redemption; or (iii) Make-Whole Redemption. "Par Redemption" means redemption at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon, if any, to the redemption date. "Premium Redemption" means redemption at a redemption price or prices greater than 100% of the principal amount thereof, plus accrued interest thereon, if any, to the redemption date, as determined on the Duration/Interest Mode Determination date. "Make-Whole Redemption" means redemption at a redemption price equal to the Make-Whole Amount (as defined below), if any, with respect to such Notes. Unless otherwise specified by the Company on any Duration/Interest Mode Determination Date, the redemption type will be a Par Redemption. "Make-Whole Amount" means, in connection with any optional redemption or accelerated payment of any Note, any amount equal to the greater of (i) 100% of the principal amount and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon from the redemption date to the end of the applicable Subsequent Spread Period, computed by discounting such payments, in each case, to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Rate plus the Reinvestment Spread, plus accrued interest on the principal amount thereof to the date of redemption. -16- 43 "Reinvestment Spread" means, with respect to the Notes, a number, expressed as a number of basis points or as a percentage, selected by the Company and agreed to by the Reset Remarketing Agent on the Duration/Interest Mode Determination Date. 8. Effect of Event of Default. In case an Event of Default with respect to the Notes shall occur and be continuing, the unpaid principal of the Notes may be declared due and payable, in the manner, with the effect and subject to the conditions provided in the Senior Indenture. 9. Amendments and Waivers. The Senior Indenture may be modified by the Company and the Senior Trustee without consent of any Holder with respect to certain matters as described in the Indenture. In addition, the Senior Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes of each series to be affected under the Senior Indenture at any time by the Company and the Senior Trustee with the consent of the Holders of a majority in principal amount of the Notes at the time Outstanding of each series to be affected. The Senior Indenture also contains provisions permitting the Holders of a majority in principal amount of the Notes of each series at the time Outstanding, on behalf of the Holders of all Notes of such series, to waive compliance by the Company with certain provisions of the Senior Indenture and certain past defaults under the Senior Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall bind such Holder and all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. 10. Obligation of Company. No reference herein to the Senior Indenture and no provision of this Note or of the Senior Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium, if any, and interest on this Note at the time, place, and rate and in the coin or currency herein prescribed. 11. Denominations, Transfer and Exchange. (a) The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Senior Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. (b) As provided in the Senior Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in -17- 44 writing, and thereupon one or more new Notes of this series, and of like tenor, of authorized denominations and for the same maturity and aggregate principal amount, shall be issued to the designated transferee or transferees. (c) No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Senior Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Senior Trustee nor any such agent shall be affected by notice to the contrary. 12. No Liability of Certain Persons. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under this Note or the Senior Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder, by accepting a Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 13. Governing Law. The Senior Indenture and this Note shall for all purposes be governed by, and construed in accordance with, the internal laws of the State of New York. -18- 45 ___________________________________________________________________ THE FOLLOWING ABBREVIATIONS SHALL BE CONSTRUED AS THOUGH THE WORDS SET FORTH BELOW OPPOSITE EACH ABBREVIATION WERE WRITTEN OUT IN FULL WHERE SUCH ABBREVIATION APPEARS: TEN COM--as tenants in common (Name) CUST (Name) UNIF--(Name) as Custodian TEN ENT--as tenants by the entirety GIFT MIN ACT (state) for (Name) Under the (State) JT TEN--as joint tenants with Uniform Gifts to right of survivorship Minors Act and not as tenants in common ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST. ___________________________________________________________________ To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's social security or tax I.D. number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: _______________ Your Signature:_____________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ___________________________________________________ (Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Transfer Agent, which requirements will include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act.) Social Security Number or Taxpayer Identification Number:__________________________________ -19- 46 APPENDIX III No. R-1 Principal Amount $75,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES A being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 23, 1998 MATURITY DATE: June 30, 2038 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES A (HEREINAFTER, "COLLATERAL BONDS"), REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED AND DELIVERED BY THE COMPANY TO CITIBANK, N.A., AS TRUSTEE (IN SUCH CAPACITY, THE "SENIOR TRUSTEE") UNDER AN INDENTURE, DATED AS OF JUNE 1, 1998, BETWEEN THE COMPANY AND THE SENIOR TRUSTEE, AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE THERETO DATED AS OF JUNE 18, 1998 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF EXTENDABLE MANDATORY PAR PUT REMARKETED SECURITIES DUE JUNE 30, 2038 (THE "RELATED NOTES") ISSUED PURSUANT TO THE SENIOR INDENTURE. THE COLLATERAL BONDS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED (EXCEPT TO A SUCCESSOR TRUSTEE) UNTIL THE EARLIER OF THE RELEASE DATE (AS DEFINED BELOW) OR THE PRIOR RETIREMENT OF THE RELATED NOTES THROUGH REDEMPTION, REPURCHASE OR OTHERWISE. THE INTEREST RATE ON THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THAT OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES, A FORM OF WHICH IS ANNEXED HERETO AS APPENDIX I. THE INTEREST PAYMENT DATES IN RESPECT OF THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THOSE OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES. THE COMPANY SHALL MAKE PAYMENTS OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE COLLATERAL BONDS, TO THE SENIOR TRUSTEE, WHICH PAYMENTS SHALL BE APPLIED BY THE SENIOR TRUSTEE TO THE SATISFACTION OF OBLIGATIONS ON THE RELATED NOTES. THE MATURITY DATE SPECIFIED ABOVE IS ALSO THE MATURITY DATE OF THE RELATED NOTES. MICHIGAN CONSOLIDATED GAS COMPANY (hereinafter called the "Company"), a corporation of the State of Michigan, for value received, hereby promises to pay to CITIBANK, N.A., as trustee for the benefit of the holders of the Related Notes, or registered assigns (in such capacity, the "Senior Trustee"), the sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) -1- 47 on the Maturity Date specified above, at the corporate trust office of the Mortgage Trustee hereinafter named in the Borough of Manhattan, The City of New York, New York, or at the principal office of any successor in trust, in lawful money of the United States of America, and to pay interest thereon at the Interest Rate(s) from time to time specified in or determined pursuant to the Related Notes, in like lawful money payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York on such interest payment date(s) and on the Maturity Date (each an "Interest Payment Date") as provided in the Related Notes, from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid, commencing on the Interest Payment Date next succeeding the Original Issue Date, until the Company's obligation with respect to the payment of such principal sum shall be discharged as provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds represented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to such Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding such date. If the Company shall default in the payment of interest due on any Interest Payment Date, then interest shall be payable from the next preceding Interest Payment Date to which interest has been paid, or, if no such interest has been paid on the Collateral Bonds represented by this certificate, from the Original Issue Date. So long as there is no existing default in the payment of interest, the person in whose name the Collateral Bonds represented by this certificate were registered at the close of business on the relevant Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date, except that if the Company shall default in the payment of interest due on such Interest Payment Date, such defaulted interest shall be paid to the person in whose name the Collateral Bonds represented by this Certificate are registered on the Record Date for the Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Collateral Bonds. The term "Record Date" as used herein with respect to any Interest Payment Date shall mean the last Business Day which is more than ten calendar days prior to such Interest Payment Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the city of New York are required or authorized to close and, in the case of Related Notes in the Floating Rate Mode (as defined in the form of Related Note), a day that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. The bonds represented by this certificate, of the series hereinafter specified, are bonds of the Company (herein called the "bonds") known as its "First Mortgage Bonds," issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust dated as of March 1, 1944, duly executed by the Company to City Bank Farmers Trust Company (now known as Citibank, N.A., successor trustee, as "Mortgage Trustee") and Ralph E. Morton (Robert T. Kirchner, successor individual trustee and, together with Citibank, N.A., the "Secured Trustees") as restated in Part II of the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, which became effective on April 1, 1994, to which indenture and all indentures supplemental thereto executed on and after July 15, 1989 reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the bonds are, and are to be, issued and secured, and the rights of the holders of the bonds and of the Secured Trustees in respect of such security (which indenture and all indentures supplemental thereto, including the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, are hereinafter collectively called the "Secured Indenture"). As provided in the Secured Indenture, the bonds may be for various principal sums and are issuable in series, which may mature at different times, may bear interest at different rates and may otherwise vary as therein provided. The bonds represented by this certificate are part of a Series designated "Collateral Bonds," herein called Collateral Bonds, created by the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, as provided for in the Secured Indenture. -2- 48 With the consent of the Company and to the extent permitted by and as provided in the Secured Indenture and the Senior Indenture, the rights and obligations of the Company and/or the rights of the holders of the Collateral Bonds of the Thirty-second Series and/or the terms and provisions of the Secured Indenture may be modified or altered by such affirmative vote or votes of the holders of the Related Notes then outstanding as are specified in the Senior Indenture. The Collateral Bonds shall be redeemed if and to the extent Related Notes are redeemed, as provided in the Senior Indenture with respect to the Related Notes and in the Related Notes. In case an event of default as defined in the Secured Indenture or the Senior Indenture shall occur, the principal of the Collateral Bonds may become or be declared due and payable in the manner, with the effect, and subject to the conditions provided in the Secured Indenture and the Senior Indenture. The Senior Trustee has agreed pursuant to the Senior Indenture to hold the Collateral Bonds as collateral for the benefit of the holders of the Related Notes under all circumstances and not to transfer (except to a successor trustee) such Collateral Bonds until the earlier of the Release Date or the prior retirement of the Related Notes through redemption, repurchase or otherwise. "Release Date" means the date on which all First Mortgage Bonds of the Company issued and outstanding under the Secured Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no default or event of default has occurred and is continuing under the Senior Indenture. On the Release Date, the Senior Trustee shall deliver to the Company for cancellation all Collateral Bonds, and the Company shall cause the Senior Trustee to provide notice to all holders of Related Notes of the occurrence of the Release Date. As a result, on the Release Date, the Collateral Bonds shall cease to secure the Related Notes. Following the Release Date, the Company shall cause the Secured Indenture to be closed, and the Company shall not issue any additional Collateral Bonds to be issued thereunder. From and after the Release Date, the Company's obligations in respect of the Collateral Bonds shall be satisfied and discharged. No recourse shall be had for the payment of the principal of, or the interest on, the Collateral Bonds, or for any claim based hereon or otherwise in respect of the Collateral Bonds or the Secured Indenture, Senior Indenture or any indenture supplemental to either thereof, or against any incorporator, stockholder, director or officer, past, present or future, of the Company, as such, or any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, directors or officers being waived and released by the owner hereof and every owner of any Related Note by the acceptance of the Collateral Bonds or such Related Note, as the case may be, and as part of the consideration for the issue thereof, and being likewise waived and released pursuant to the Secured Indenture and the Senior Indenture. The Collateral Bonds shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually executed by the Mortgage Trustee or its successor in trust under the Secured Indenture. IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this certificate to be executed under its name with the signature of its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice-President, or any other officer selected by the Board of Directors, under its corporate seal, which may be a facsimile, attested with the signature of its Secretary or one of its Assistant Secretaries. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY -3- 49 By President and Chief Executive Officer Attest: Secretary The bonds represented by this certificate constitute Collateral Bonds of the series designated and described in the within-mentioned Secured Indenture. CITIBANK, N.A., as Mortgage Trustee By Authorized Officer ---------------------------------------------------------------- -4- 50 APPENDIX IV No. R-1 Principal Amount $75,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES B being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 23, 1998 MATURITY DATE: June 30, 2038 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES A (HEREINAFTER, "COLLATERAL BONDS"), REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED AND DELIVERED BY THE COMPANY TO CITIBANK, N.A., AS TRUSTEE (IN SUCH CAPACITY, THE "SENIOR TRUSTEE") UNDER AN INDENTURE, DATED AS OF JUNE 1, 1998, BETWEEN THE COMPANY AND THE SENIOR TRUSTEE, AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE THERETO DATED AS OF JUNE 18, 1998 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF RESETABLE MANDATORY PUTABLE/REMARKETABLE SECURITIES DUE JUNE 30, 2038 (THE "RELATED NOTES") ISSUED PURSUANT TO THE SENIOR INDENTURE. THE COLLATERAL BONDS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED (EXCEPT TO A SUCCESSOR TRUSTEE) UNTIL THE EARLIER OF THE RELEASE DATE (AS DEFINED BELOW) OR THE PRIOR RETIREMENT OF THE RELATED NOTES THROUGH REDEMPTION, REPURCHASE OR OTHERWISE. THE INTEREST RATE ON THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THAT OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES, A FORM OF WHICH IS ANNEXED HERETO AS APPENDIX I. THE INTEREST PAYMENT DATES IN RESPECT OF THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THOSE OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES. THE COMPANY SHALL MAKE PAYMENTS OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE COLLATERAL BONDS, TO THE SENIOR TRUSTEE, WHICH PAYMENTS SHALL BE APPLIED BY THE SENIOR TRUSTEE TO THE SATISFACTION OF OBLIGATIONS ON THE RELATED NOTES. THE MATURITY DATE SPECIFIED ABOVE IS ALSO THE MATURITY DATE OF THE RELATED NOTES. MICHIGAN CONSOLIDATED GAS COMPANY (hereinafter called the "Company"), a corporation of the State of Michigan, for value received, hereby promises to pay to CITIBANK, N.A., as trustee for the benefit of the holders of the Related Notes, or registered assigns (in such capacity, the "Senior Trustee"), the sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) -1- 51 on the Maturity Date specified above, at the corporate trust office of the Mortgage Trustee hereinafter named in the Borough of Manhattan, The City of New York, New York, or at the principal office of any successor in trust, in lawful money of the United States of America, and to pay interest thereon at the Interest Rate(s) from time to time specified in or determined pursuant to the Related Notes, in like lawful money payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York on such interest payment date(s) and on the Maturity Date (each an "Interest Payment Date") as provided in the Related Notes, from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid, commencing on the Interest Payment Date next succeeding the Original Issue Date, until the Company's obligation with respect to the payment of such principal sum shall be discharged as provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds represented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to such Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding such date. If the Company shall default in the payment of interest due on any Interest Payment Date, then interest shall be payable from the next preceding Interest Payment Date to which interest has been paid, or, if no such interest has been paid on the Collateral Bonds represented by this certificate, from the Original Issue Date. So long as there is no existing default in the payment of interest, the person in whose name the Collateral Bonds represented by this certificate were registered at the close of business on the relevant Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date, except that if the Company shall default in the payment of interest due on such Interest Payment Date, such defaulted interest shall be paid to the person in whose name the Collateral Bonds represented by this Certificate are registered on the Record Date for the Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Collateral Bonds. The term "Record Date" as used herein with respect to any Interest Payment Date shall mean the last Business Day which is more than ten calendar days prior to such Interest Payment Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the city of New York are required or authorized to close and, in the case of Related Notes in the Floating Rate Mode (as defined in the form of Related Note), a day that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. The bonds represented by this certificate, of the series hereinafter specified, are bonds of the Company (herein called the "bonds") known as its "First Mortgage Bonds," issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust dated as of March 1, 1944, duly executed by the Company to City Bank Farmers Trust Company (now known as Citibank, N.A., successor trustee, as "Mortgage Trustee") and Ralph E. Morton (Robert T. Kirchner, successor individual trustee and, together with Citibank, N.A., the "Secured Trustees") as restated in Part II of the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, which became effective on April 1, 1994, to which indenture and all indentures supplemental thereto executed on and after July 15, 1989 reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the bonds are, and are to be, issued and secured, and the rights of the holders of the bonds and of the Secured Trustees in respect of such security (which indenture and all indentures supplemental thereto, including the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, are hereinafter collectively called the "Secured Indenture"). As provided in the Secured Indenture, the bonds may be for various principal sums and are issuable in series, which may mature at different times, may bear interest at different rates and may otherwise vary as therein provided. The bonds represented by this certificate are part of a Series designated "Collateral Bonds," herein called Collateral Bonds, created by the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, as provided for in the Secured Indenture. -2- 52 With the consent of the Company and to the extent permitted by and as provided in the Secured Indenture and the Senior Indenture, the rights and obligations of the Company and/or the rights of the holders of the Collateral Bonds of the Thirty-second Series and/or the terms and provisions of the Secured Indenture may be modified or altered by such affirmative vote or votes of the holders of the Related Notes then outstanding as are specified in the Senior Indenture. The Collateral Bonds shall be redeemed if and to the extent Related Notes are redeemed, as provided in the Senior Indenture with respect to the Related Notes and in the Related Notes. In case an event of default as defined in the Secured Indenture or the Senior Indenture shall occur, the principal of the Collateral Bonds may become or be declared due and payable in the manner, with the effect, and subject to the conditions provided in the Secured Indenture and the Senior Indenture. The Senior Trustee has agreed pursuant to the Senior Indenture to hold the Collateral Bonds as collateral for the benefit of the holders of the Related Notes under all circumstances and not to transfer (except to a successor trustee) such Collateral Bonds until the earlier of the Release Date or the prior retirement of the Related Notes through redemption, repurchase or otherwise. "Release Date" means the date on which all First Mortgage Bonds of the Company issued and outstanding under the Secured Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no default or event of default has occurred and is continuing under the Senior Indenture. On the Release Date, the Senior Trustee shall deliver to the Company for cancellation all Collateral Bonds, and the Company shall cause the Senior Trustee to provide notice to all holders of Related Notes of the occurrence of the Release Date. As a result, on the Release Date, the Collateral Bonds shall cease to secure the Related Notes. Following the Release Date, the Company shall cause the Secured Indenture to be closed, and the Company shall not issue any additional Collateral Bonds to be issued thereunder. From and after the Release Date, the Company's obligations in respect of the Collateral Bonds shall be satisfied and discharged. No recourse shall be had for the payment of the principal of, or the interest on, the Collateral Bonds, or for any claim based hereon or otherwise in respect of the Collateral Bonds or the Secured Indenture, Senior Indenture or any indenture supplemental to either thereof, or against any incorporator, stockholder, director or officer, past, present or future, of the Company, as such, or any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, directors or officers being waived and released by the owner hereof and every owner of any Related Note by the acceptance of the Collateral Bonds or such Related Note, as the case may be, and as part of the consideration for the issue thereof, and being likewise waived and released pursuant to the Secured Indenture and the Senior Indenture. The Collateral Bonds shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually executed by the Mortgage Trustee or its successor in trust under the Secured Indenture. IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this certificate to be executed under its name with the signature of its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice-President, or any other officer selected by the Board of Directors, under its corporate seal, which may be a facsimile, attested with the signature of its Secretary or one of its Assistant Secretaries. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY -3- 53 By President and Chief Executive Officer Attest: Secretary The bonds represented by this certificate constitute Collateral Bonds of the series designated and described in the within-mentioned Secured Indenture. CITIBANK, N.A., as Mortgage Trustee By Authorized Officer ---------------------------------------------------------------- -4- EX-4.2 5 35TH SUPPLEMENTAL INDENTURE 1 EXHIBIT 4.2 ================================================================================ THIRTY-FIFTH SUPPLEMENTAL INDENTURE TO INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 1, 1944 --------------- AS RESTATED IN PART II OF THE TWENTY-NINTH SUPPLEMENTAL INDENTURE DATED AS OF JULY 15, 1989 WHICH BECAME EFFECTIVE ON APRIL 1, 1994 --------------- MICHIGAN CONSOLIDATED GAS COMPANY TO CITIBANK, N.A. AND ROBERT T. KIRCHNER TRUSTEES DATED AS OF JUNE 18, 1998 --------------- CREATING AN ISSUE OF FIRST MORTGAGE BONDS, DESIGNATED AS COLLATERAL BONDS ================================================================================ 2 MICHIGAN CONSOLIDATED GAS COMPANY THIRTY-FIFTH SUPPLEMENTAL INDENTURE DATED AS OF JUNE 18, 1998 SUPPLEMENTAL TO INDENTURE OF MORTGAGE AND DEED OF TRUST DATED AS OF MARCH 1, 1944 --------------- TABLE OF CONTENTS* --------------- PAGE ---- ARTICLE I CREATION OF AN ISSUE OF FIRST MORTGAGE BONDS, DESIGNATED AND DISTINGUISHED AS "COLLATERAL BONDS".................................. 3 SECTION 1....................................................... 3 SECTION 2....................................................... 4 SECTION 3....................................................... 5 SECTION 4....................................................... 5 SECTION 5....................................................... 5 ARTICLE II ISSUE OF COLLATERAL BONDS .............................................. 5 ARTICLE III THE TRUSTEES............................................................ 6 ARTICLE IV MISCELLANEOUS PROVISIONS................................................ 6 * NOTE: The Table of Contents is not part of the original Indenture as executed. 3 THIS THIRTY-FIFTH SUPPLEMENTAL INDENTURE, dated as of the 18th day of June, 1998, between MICHIGAN CONSOLIDATED GAS COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Michigan (hereinafter called the "Company"), having its principal place of business at 500 Griswold Street, Detroit, Michigan, party of the first part, and CITIBANK, N.A. (formerly First National City Bank), a national banking association incorporated and existing under and by virtue of the laws of the United States of America, having an office at 111 Wall Street in the Borough of Manhattan, The City of New York, New York, successor to CITY BANK FARMERS TRUST COMPANY (hereinafter with its predecessors as trustee called the "Mortgage Trustee"), and ROBERT T. KIRCHNER, having an office at 120 Wall Street, 13th Floor, New York, New York, successor to RALPH E. MORTON as individual trustee (hereinafter with his predecessors as individual trustee called the "Individual Trustee"), as Trustees under the Indenture hereinafter mentioned, parties of the second part (the Mortgage Trustee and Individual Trustee being hereinafter together referred to as the "Trustees"): WHEREAS, the Company has heretofore executed and delivered to the Trustees an Indenture of Mortgage and Deed of Trust (hereinafter called the "Original Indenture"), dated as of March 1, 1944; WHEREAS, the Twenty-ninth Supplemental Indenture, which became effective April 1, 1994 provided for the modification and restatement of the Original Indenture, as previously amended (the "Indenture"), and secures the Company's First Mortgage Bonds, unlimited in aggregate principal amount except as therein otherwise provided: Thirtieth Supplemental Indenture, dated as of September 1, 1991; Thirty-first Supplemental Indenture, dated as of December 15, 1991; Thirty-second Supplemental Indenture, dated as of January 5, 1993; Thirty-third Supplemental Indenture, dated as of May 1, 1995; Thirty-fourth Supplemental Indenture, dated as of November 1, 1996; and 4 WHEREAS, at the date hereof there were outstanding First Mortgage Bonds of the Company issued under the Indenture, of 6 series (all outstanding bonds of 25 other series having been previously retired) in the principal amounts set forth below:
Amount Amount Outstanding Designation of Series Initially Issued As of 6/18/98 ----------------------- ---------------- ------------- First Mortgage Bonds (Secured Medium-Term Notes, Series A) 9-1/8% Series due 2004......................................... $ 55,000,000 $ 18,000,000 First Mortgage Bonds 9-1/2% Series due 2021......................................... 40,000,000 40,000,000 First Mortgage Bonds (Secured Term Notes, Series A) 8% Series due 2002............................................. 70,000,000 17,314,000 7-1/2% Series due 2020......................................... 10,000,000 9,922,000 6-3/4% Series due 2023......................................... 20,000,000 16,967,000 First Mortgage Bonds (Secured Term Notes, Series B) 5-3/4% Series due 2001......................................... 60,000,000 60,000,000 8-1/4% Series due 2014......................................... 80,000,000 80,000,000 7-1/2% Series due 2020......................................... 20,000,000 19,719,000 7% Series due 2025............................................. 40,000,000 40,000,000 First Mortgage Bonds (Secured Term Notes, Series B) 6.51% Series due 1999.......................................... 30,000,000 30,000,000 6.72% Series due 2003.......................................... 4,150,000 4,150,000 6.80% Series due 2003.......................................... 15,850,000 15,850,000 7.15% Series due 2006.......................................... 40,000,000 40,000,000 7.06% Series due 2012.......................................... 40,000,000 40,000,000 First Mortgage Bonds (Secured Medium-Term Notes, Series C) 7.21% Series due 2007.......................................... 30,000,000 30,000,000 7.60% Series due 2017.......................................... 15,000,000 14,990,000
and WHEREAS, the Company desires in and by this Thirty-fifth Supplemental Indenture to create a Thirty-second series of bonds and certain subseries thereunder to be issued under the Indenture, to designate or otherwise distinguish such series, to specify the particulars necessary to describe and define the same, and to specify such other provisions and agreements in respect thereof as are in the Indenture provided or permitted; and WHEREAS, all the conditions and requirements necessary to make this Thirty-fifth Supplemental Indenture, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Thirty-fifth Supplemental Indenture in the form and with the terms hereof have been in all respects duly authorized; 2 5 NOW, THEREFORE, it is agreed by and between the Company and the Trustees as follows: ARTICLE I CREATION OF AN ISSUE OF FIRST MORTGAGE BONDS, DESIGNATED AND DISTINGUISHED AS "COLLATERAL BONDS" SECTION 1. There is hereby created a series of bonds to be issued under and secured by the Indenture, to be known as "First Mortgage Bonds," designated and distinguished as "Collateral Bonds" of the Company (herein collectively sometimes called the "Collateral Bonds"). The Collateral Bonds may be issued without limitation as to aggregate principal amount except as provided in the Indenture and in this Thirty-fifth Supplemental Indenture. The Collateral Bonds shall be registered bonds without coupons and shall be dated as of the date of the authentication thereof by the Trustee. Separate series of Collateral Bonds are being issued by the Company contemporaneously with the issuance of separate series of senior debt securities of the Company including, initially, those designated "Extendable Mandatory Par Put Remarketed Securities ("MOPPRS(sm)") due June 30, 2038" and "Resetable Mandatory Putable/remarketable Securities ("MAPS(sm)"), due June 30, 2038" and are being issued and delivered to Citibank, N.A., as trustee (in such capacity, together with any successor trustee(s), the "Senior Trustee") under the Indenture dated as of June 1, 1998, governing such senior debt securities (the "Senior Indenture"), in such capacity, as collateral for the benefit of the holders of such securities. The series of such senior debt securities collateralized by any Collateral Bonds shall be referred to as the "Related Notes" with respect to such Collateral Bonds. The Collateral Bonds shall bear interest at such rate or rates and be payable on such date or dates, shall mature and be subject to mandatory or optional redemption on such date or dates and shall have such other terms and provisions not inconsistent with the Indenture as are set forth in the forms of Collateral Bonds attached as Appendix I and II hereto (herein sometimes called the "Bond Forms") or otherwise as the Board of Directors may determine in accordance with a resolution filed with the Mortgage Trustee and referring to this Thirty-fifth Supplemental Indenture (herein called an "Authorizing Resolution"). Resolutions of the Board of Directors of the Company establishing the terms of the Related Notes with respect to any Collateral Bonds shall constitute Authorizing Resolutions for purposes of establishing the terms of such Collateral Bonds. An Authorizing Resolution may alter, correct or change the form of any of the Bond Forms prior to the issue and authentication of any Collateral Bond provided that the substantive terms contained in any of any of the Bond Forms is not changed in any manner adverse to the holder of any Collateral Bonds. So long as there is no existing default in the payment of interest on the Collateral Bonds, all Collateral Bonds authenticated by the Trustee after the Record Date specified for any interest payment date, and prior to such interest payment date (unless the issue date hereinafter specified is after such Record Date) shall be dated the date of authentication, but shall bear interest from such interest payment date, and the person in whose name any Collateral Bond is registered at the close of business on any Record Date with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding any transfer or exchange of such Collateral Bond subsequent to the Record Date and on or prior to such interest payment date, except if and to the extent the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such Collateral Bond is registered on the Record Date for the interest payment date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Collateral Bonds; and provided that interest payable on a maturity date shall be payable to the person to whom the principal thereof is payable. If the issue date of any Collateral Bond is after such Record Date, such Bond shall bear interest from the issue date but payment of interest shall commence on the second interest payment date next succeeding the issue date. Any notice which is mailed as herein provided shall be conclusively presumed to have been properly and sufficiently given on the date of such mailing, whether or not the holder receives notice. 3 6 The terms "Record Date"and "Business Day" as used herein are defined in the Bond Forms. The term "issue date" as used herein with respect to Collateral Bonds of a designated interest rate and maturity shall mean the date of first authentication of Collateral Bonds of such designated interest rate and maturity. As used in this Section 1, the term "default in the payment of interest" means failure to pay interest on the applicable interest payment date disregarding any period of grace permitted by Section 9.01 of the Indenture. The Company shall make payments of the principal of, and premium or interest on, the Collateral Bonds to the Senior Trustee, which payments shall be applied by the Senior Trustee to satisfaction of obligations on the Related Notes in respect of such Collateral Bonds. SECTION 2. Each series of Collateral Bonds shall be redeemed if and to the extent the Related Notes with respect to such Collateral Bonds are redeemed, as provided in the Senior Indenture and in such Related Notes. The redemption price in respect of any Collateral Bonds (including principal, premium, if any, and interest thereon) shall be the redemption price applicable to the Related Notes with respect to such Collateral Bonds. Any notice required to be furnished to the holders of the Collateral Bonds or the Trustees relating to the redemption of such Collateral Bonds shall be considered furnished by the delivery of appropriate notice to the holders of the Related Notes or the Senior Trustee, as the case may be, as provided in the Senior Indenture and the Related Notes with respect to such Collateral Bonds. Any redemption payment made by the Company on the Related Notes (whether for principal, premium, if any, or interest) shall be applied by the Senior Trustee as payment of the redemption price in respect of the correspondingly redeemed Collateral Bonds. In the event the Related Notes with respect to a series of Collateral Bonds are redeemed in part, an equivalent aggregate principal amount of the corresponding series of Collateral Bonds shall be so redeemed, the Senior Trustee, as holder of the Collateral Bonds as collateral for such Related Notes, shall deliver to the Mortgage Trustee for cancellation an equivalent principal amount of Collateral Bonds of the series corresponding to the Related Notes so redeemed, and the Company shall execute and the Mortgage Trustee shall authenticate and deliver, without charge, to the Senior Trustee, as holder thereof, one or more new Collateral Bonds of authorized denominations for the unredeemed balance of any Collateral Bonds surrendered for redemption in connection with the redemption of the Related Notes. SECTION 3. The Collateral Bonds shall be registered bonds without coupons. The Mortgage Trustee shall be the registrar and paying agent for the Collateral Bonds, which duties it hereby accepts. Collateral Bonds may be issued in the denomination of $1,000 or any integral multiple thereof. SECTION 4. Collateral Bonds shall be exchangeable, at the option of the registered owners thereof and upon surrender thereof at the corporate trust office of the Trustee in the Borough of Manhattan, The City of New York, New York, for registered bonds of the same aggregate principal amount and other terms, but of different authorized denomination or denominations, such exchanges to be made without service charge (except for any stamp tax or other governmental charge). Every bond so surrendered shall be accompanied by a proper transfer power duly executed by the registered owner or by duly authorized attorney transferring such bond to the Company, and the signature to such transfer power shall be guaranteed to the satisfaction of the Trustee. All bonds so surrendered shall be forthwith canceled and delivered to or upon the order of the Company. All bonds executed, authenticated and delivered in exchange for bonds so surrendered shall be valid obligations of the Company, evidencing the same debt as the bonds surrendered, and shall be secured by the same lien and be entitled to the same benefits and protection as the bonds in exchange for which they are executed, authenticated and delivered. The Company shall not be required to make any such exchange or any registration of transfer (1) during a period of fifteen days next preceding any interest payment date, but only if there is an existing default in the payment of interest on the Collateral Bonds on which such payment is due or (2) after the bond so presented for 4 7 exchange or registration of transfer, or any portion thereof, has been called for redemption and notice thereof given to the registered owner. SECTION 5. Pending the preparation of definitive Collateral Bonds the Company may from time to time execute, and upon its written order, the Trustee shall authenticate and deliver, in lieu of such definitive bonds and subject to the same provisions, limitations and conditions, one or more temporary bonds, in registered form, of any denomination specified in the written order of the Company for the authentication and delivery thereof, and with such omissions, insertions and variations as may be determined by the Board of Directors of the Company. Such temporary bonds shall be substantially of the tenor of the bonds to be issued as herein before recited, but such temporary bonds may, in lieu of the statement of the specific redemption prices required to be set forth in Collateral Bonds in definitive form. If any such temporary Collateral Bonds shall at any time be so authenticated and delivered in lieu of definitive bonds, the Company shall upon request at its own expense prepare, execute and deliver to the Trustee and thereupon, upon the presentation and surrender of temporary bonds, the Trustee shall authenticate and deliver in exchange therefor, without charge to the holder, definitive bonds of the same series and other terms, if any, and for the same principal sum in the aggregate as the temporary bonds surrendered. All temporary bonds so surrendered shall be forthwith canceled by the Trustee and delivered to or upon the order of the Company. Until exchanged for definitive bonds the temporary bonds shall in all respects be entitled to the lien and security of the Indenture and all supplemental indentures. ARTICLE II ISSUE OF COLLATERAL BONDS Collateral Bonds, of the Thirty-second Series, in the aggregate principal amount of $400,000,000 including, without limitation, Collateral Bonds designated Collateral Bonds, Series A, in the aggregate principal amount of $75,000,000 and Collateral Bonds, Series B, in the aggregate principal amount of $75,000,000, may be executed, authenticated and delivered from time to time as permitted by the provisions of the Indenture. ARTICLE III THE TRUSTEES The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Thirty-fifth Supplemental Indenture or the due execution hereof by the Company, or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustees by reason of this Thirty-fifth Supplemental Indenture other than as set forth in the Indenture and this Thirty-fifth Supplemental Indenture is executed and accepted on behalf of the Trustees, subject to all the terms and conditions set forth in the Indenture, as fully to all intents as if the same were herein set forth at length. ARTICLE IV MISCELLANEOUS PROVISIONS Except insofar as herein otherwise expressly provided, all the provisions, terms and conditions of the Indenture shall be deemed to be incorporated in, and made a part of, this Thirty-fifth Supplemental Indenture and the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, by the Thirtieth Supplemental Indenture dated 5 8 as of September 1, 1991, by the Thirty-first Supplemental Indenture dated as of December 15, 1991, by the Thirty-second Supplemental Indenture dated as of January 5, 1993, by the Thirty-third Supplemental Indenture dated as of May 1, 1995, by the Thirty-fourth Supplemental Indenture dated as of November 1, 1996, and by this Thirty-fifth Supplemental Indenture is in all respects ratified and confirmed; and the Indenture and said Supplemental Indentures shall be read, taken and construed as one and the same instrument. Nothing in this Thirty-fifth Supplemental Indenture is intended, or shall be construed, to give to any person or corporation, other than the parties hereto and the holders of Collateral Bonds issued and to be issued under and secured by the Indenture, any legal or equitable right, remedy or claim under or in respect of this Thirty-fifth Supplemental Indenture, or under any covenant, condition or provision herein contained, all the covenants, conditions and provisions of this Thirty-fifth Supplemental Indenture being intended to be, and being, for the sole and exclusive benefit of the parties hereto and of the holders of bonds issued and to be issued under the Indenture and secured thereby. All covenants, promises and agreements in this Thirty-fifth Supplemental Indenture contained by or on behalf of the Company shall bind its successors and assigns whether so expressed or not. This Thirty-fifth Supplemental Indenture may be executed in any number of counterparts, and each of such counterparts when so executed shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument. 6 9 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this Thirty-fifth Supplemental Indenture to be executed by its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice President, or any other officer selected by the Board of Directors, and its corporate seal to be hereunto affixed, duly attested by its Secretary or an Assistant Secretary, and Citibank, N.A., as Mortgage Trustee as aforesaid, has caused the same to be executed by one of its authorized signatories and its corporate seal to be hereunto affixed, duly attested by another one of its authorized signatories, and Robert T. Kirchner, as Individual Trustee as aforesaid, has hereunto affixed his signature, on the respective dates of their acknowledgments hereinafter set forth, as of the date and year first above written. MICHIGAN CONSOLIDATED GAS COMPANY By /s/ Howard L. Dow III Attest: /s/ Ronald E. Christian ---------------------------------- ------------------------- Name: Howard L. Dow III Name: Ronald E. Christian Tile: Senior Vice President and CFO Title: Vice President, General Counsel and Secretary 500 Griswold Street 500 Griswold Street Detroit, Michigan Detroit, Michigan Signed, sealed, acknowledged and delivered by MICHIGAN CONSOLIDATED GAS COMPANY in the presence of: /s/ Robert A. DeGryse --------------------------------- /s/ Michael J. Way --------------------------------- Citibank, N.A., as Mortgage Trustee, By /s/ Lawrence Mills Attest: /s/ Peter M. Pavlyshin ------------------------------ ----------------------- Lawrence Mills Peter M. Pavlyshin Senior Trust Officer Trust Officer 111 Wall Street New York, New York /s/ Robert T. Kirchner ------------------------------ Robert T. Kirchner as Individual Trustee 111 Wall Street, 5th Floor New York, New York Signed, sealed, acknowledged and delivered by CITIBANK, N.A. and ROBERT T. KIRCHNER, in the presence of: /s/ Rosemary Melendez --------------------------------- Rosemary Melendez /s/ Doris Ware --------------------------------- Doris Ware 10 State of Michigan } } ss. County of Wayne } The foregoing instrument was acknowledged before me this 18th day of June, 1998, by Howard L. Dow III, of MICHIGAN CONSOLIDATED GAS COMPANY, a Michigan corporation, on behalf of the corporation. /s/ Janice Ann Beal Notary Public, Wayne County, Michigan My Commission Expires: February 2,001 State of New York } } ss. County of New York } The foregoing instrument was acknowledged before me this 22nd day of June, 1998, by F. Mills, Senior Trust Officer of Citibank, N.A., a national banking association, on behalf of the association, as Trustee, and Robert T. Kirchner, as Individual Trustee as in said instrument described. /s/ Jeffrey Berger Notary Public, State of New York No. 01BE5015814 Qualified in Kings County Commission Expires: July 26, 1999 11 APPENDIX I No. R-1 Principal Amount $75,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES A being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 23, 1998 MATURITY DATE: June 30, 2038 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES A (HEREINAFTER, "COLLATERAL BONDS"), REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED AND DELIVERED BY THE COMPANY TO CITIBANK, N.A., AS TRUSTEE (IN SUCH CAPACITY, THE "SENIOR TRUSTEE") UNDER AN INDENTURE, DATED AS OF JUNE 1, 1998, BETWEEN THE COMPANY AND THE SENIOR TRUSTEE, AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE THERETO DATED AS OF JUNE 18, 1998 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF EXTENDABLE MANDATORY PAR PUT REMARKETED SECURITIES DUE JUNE 30, 2038 (THE "RELATED NOTES") ISSUED PURSUANT TO THE SENIOR INDENTURE. THE COLLATERAL BONDS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED (EXCEPT TO A SUCCESSOR TRUSTEE) UNTIL THE EARLIER OF THE RELEASE DATE (AS DEFINED BELOW) OR THE PRIOR RETIREMENT OF THE RELATED NOTES THROUGH REDEMPTION, REPURCHASE OR OTHERWISE. THE INTEREST RATE ON THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THAT OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES, A FORM OF WHICH IS ANNEXED HERETO AS APPENDIX I. THE INTEREST PAYMENT DATES IN RESPECT OF THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THOSE OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES. THE COMPANY SHALL MAKE PAYMENTS OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE COLLATERAL BONDS, TO THE SENIOR TRUSTEE, WHICH PAYMENTS SHALL BE APPLIED BY THE SENIOR TRUSTEE TO THE SATISFACTION OF OBLIGATIONS ON THE RELATED NOTES. THE MATURITY DATE SPECIFIED ABOVE IS ALSO THE MATURITY DATE OF THE RELATED NOTES. MICHIGAN CONSOLIDATED GAS COMPANY (hereinafter called the "Company"), a corporation of the State of Michigan, for value received, hereby promises to pay to CITIBANK, N.A., as trustee for the benefit of the holders of the Related Notes, or registered assigns (in such capacity, the "Senior Trustee"), the sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) -1- 12 on the Maturity Date specified above, at the corporate trust office of the Mortgage Trustee hereinafter named in the Borough of Manhattan, The City of New York, New York, or at the principal office of any successor in trust, in lawful money of the United States of America, and to pay interest thereon at the Interest Rate(s) from time to time specified in or determined pursuant to the Related Notes, in like lawful money payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York on such interest payment date(s) and on the Maturity Date (each an "Interest Payment Date") as provided in the Related Notes, from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid, commencing on the Interest Payment Date next succeeding the Original Issue Date, until the Company's obligation with respect to the payment of such principal sum shall be discharged as provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds represented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to such Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding such date. If the Company shall default in the payment of interest due on any Interest Payment Date, then interest shall be payable from the next preceding Interest Payment Date to which interest has been paid, or, if no such interest has been paid on the Collateral Bonds represented by this certificate, from the Original Issue Date. So long as there is no existing default in the payment of interest, the person in whose name the Collateral Bonds represented by this certificate were registered at the close of business on the relevant Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date, except that if the Company shall default in the payment of interest due on such Interest Payment Date, such defaulted interest shall be paid to the person in whose name the Collateral Bonds represented by this Certificate are registered on the Record Date for the Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Collateral Bonds. The term "Record Date" as used herein with respect to any Interest Payment Date shall mean the last Business Day which is more than ten calendar days prior to such Interest Payment Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the city of New York are required or authorized to close and, in the case of Related Notes in the Floating Rate Mode (as defined in the form of Related Note), a day that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. The bonds represented by this certificate, of the series hereinafter specified, are bonds of the Company (herein called the "bonds") known as its "First Mortgage Bonds," issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust dated as of March 1, 1944, duly executed by the Company to City Bank Farmers Trust Company (now known as Citibank, N.A., successor trustee, as "Mortgage Trustee") and Ralph E. Morton (Robert T. Kirchner, successor individual trustee and, together with Citibank, N.A., the "Secured Trustees") as restated in Part II of the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, which became effective on April 1, 1994, to which indenture and all indentures supplemental thereto executed on and after July 15, 1989 reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the bonds are, and are to be, issued and secured, and the rights of the holders of the bonds and of the Secured Trustees in respect of such security (which indenture and all indentures supplemental thereto, including the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, are hereinafter collectively called the "Secured Indenture"). As provided in the Secured Indenture, the bonds may be for various principal sums and are issuable in series, which may mature at different times, may bear interest at different rates and may otherwise vary as therein provided. The bonds represented by this certificate are part of a Series designated "Collateral Bonds," herein called Collateral Bonds, created by the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, as provided for in the Secured Indenture. -2- 13 With the consent of the Company and to the extent permitted by and as provided in the Secured Indenture and the Senior Indenture, the rights and obligations of the Company and/or the rights of the holders of the Collateral Bonds of the Thirty-second Series and/or the terms and provisions of the Secured Indenture may be modified or altered by such affirmative vote or votes of the holders of the Related Notes then outstanding as are specified in the Senior Indenture. The Collateral Bonds shall be redeemed if and to the extent Related Notes are redeemed, as provided in the Senior Indenture with respect to the Related Notes and in the Related Notes. In case an event of default as defined in the Secured Indenture or the Senior Indenture shall occur, the principal of the Collateral Bonds may become or be declared due and payable in the manner, with the effect, and subject to the conditions provided in the Secured Indenture and the Senior Indenture. The Senior Trustee has agreed pursuant to the Senior Indenture to hold the Collateral Bonds as collateral for the benefit of the holders of the Related Notes under all circumstances and not to transfer (except to a successor trustee) such Collateral Bonds until the earlier of the Release Date or the prior retirement of the Related Notes through redemption, repurchase or otherwise. "Release Date" means the date on which all First Mortgage Bonds of the Company issued and outstanding under the Secured Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no default or event of default has occurred and is continuing under the Senior Indenture. On the Release Date, the Senior Trustee shall deliver to the Company for cancellation all Collateral Bonds, and the Company shall cause the Senior Trustee to provide notice to all holders of Related Notes of the occurrence of the Release Date. As a result, on the Release Date, the Collateral Bonds shall cease to secure the Related Notes. Following the Release Date, the Company shall cause the Secured Indenture to be closed, and the Company shall not issue any additional Collateral Bonds to be issued thereunder. From and after the Release Date, the Company's obligations in respect of the Collateral Bonds shall be satisfied and discharged. No recourse shall be had for the payment of the principal of, or the interest on, the Collateral Bonds, or for any claim based hereon or otherwise in respect of the Collateral Bonds or the Secured Indenture, Senior Indenture or any indenture supplemental to either thereof, or against any incorporator, stockholder, director or officer, past, present or future, of the Company, as such, or any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, directors or officers being waived and released by the owner hereof and every owner of any Related Note by the acceptance of the Collateral Bonds or such Related Note, as the case may be, and as part of the consideration for the issue thereof, and being likewise waived and released pursuant to the Secured Indenture and the Senior Indenture. The Collateral Bonds shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually executed by the Mortgage Trustee or its successor in trust under the Secured Indenture. IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this certificate to be executed under its name with the signature of its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice-President, or any other officer selected by the Board of Directors, under its corporate seal, which may be a facsimile, attested with the signature of its Secretary or one of its Assistant Secretaries. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY -3- 14 By President and Chief Executive Officer Attest: Secretary The bonds represented by this certificate constitute Collateral Bonds of the series designated and described in the within-mentioned Secured Indenture. CITIBANK, N.A., as Mortgage Trustee By Authorized Officer ---------------------------------------------------------------- -4- 15 APPENDIX II No. R-1 Principal Amount $75,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES B being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 23, 1998 MATURITY DATE: June 30, 2038 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES A (HEREINAFTER, "COLLATERAL BONDS"), REPRESENTED BY THIS CERTIFICATE ARE BEING ISSUED AND DELIVERED BY THE COMPANY TO CITIBANK, N.A., AS TRUSTEE (IN SUCH CAPACITY, THE "SENIOR TRUSTEE") UNDER AN INDENTURE, DATED AS OF JUNE 1, 1998, BETWEEN THE COMPANY AND THE SENIOR TRUSTEE, AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE THERETO DATED AS OF JUNE 18, 1998 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $75,000,000 AGGREGATE PRINCIPAL AMOUNT OF RESETABLE MANDATORY PUTABLE/REMARKETABLE SECURITIES DUE JUNE 30, 2038 (THE "RELATED NOTES") ISSUED PURSUANT TO THE SENIOR INDENTURE. THE COLLATERAL BONDS MAY NOT BE SOLD OR OTHERWISE TRANSFERRED (EXCEPT TO A SUCCESSOR TRUSTEE) UNTIL THE EARLIER OF THE RELEASE DATE (AS DEFINED BELOW) OR THE PRIOR RETIREMENT OF THE RELATED NOTES THROUGH REDEMPTION, REPURCHASE OR OTHERWISE. THE INTEREST RATE ON THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THAT OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES, A FORM OF WHICH IS ANNEXED HERETO AS APPENDIX I. THE INTEREST PAYMENT DATES IN RESPECT OF THE COLLATERAL BONDS SHALL AT ALL TIMES BE IDENTICAL TO THOSE OF, AND SHALL BE ESTABLISHED IN THE MANNER SET FORTH IN, THE RELATED NOTES. THE COMPANY SHALL MAKE PAYMENTS OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON, THE COLLATERAL BONDS, TO THE SENIOR TRUSTEE, WHICH PAYMENTS SHALL BE APPLIED BY THE SENIOR TRUSTEE TO THE SATISFACTION OF OBLIGATIONS ON THE RELATED NOTES. THE MATURITY DATE SPECIFIED ABOVE IS ALSO THE MATURITY DATE OF THE RELATED NOTES. MICHIGAN CONSOLIDATED GAS COMPANY (hereinafter called the "Company"), a corporation of the State of Michigan, for value received, hereby promises to pay to CITIBANK, N.A., as trustee for the benefit of the holders of the Related Notes, or registered assigns (in such capacity, the "Senior Trustee"), the sum of SEVENTY-FIVE MILLION DOLLARS ($75,000,000) -1- 16 on the Maturity Date specified above, at the corporate trust office of the Mortgage Trustee hereinafter named in the Borough of Manhattan, The City of New York, New York, or at the principal office of any successor in trust, in lawful money of the United States of America, and to pay interest thereon at the Interest Rate(s) from time to time specified in or determined pursuant to the Related Notes, in like lawful money payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York on such interest payment date(s) and on the Maturity Date (each an "Interest Payment Date") as provided in the Related Notes, from the Original Issue Date specified above or from the most recent Interest Payment Date to which interest has been paid, commencing on the Interest Payment Date next succeeding the Original Issue Date, until the Company's obligation with respect to the payment of such principal sum shall be discharged as provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds represented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to such Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding such date. If the Company shall default in the payment of interest due on any Interest Payment Date, then interest shall be payable from the next preceding Interest Payment Date to which interest has been paid, or, if no such interest has been paid on the Collateral Bonds represented by this certificate, from the Original Issue Date. So long as there is no existing default in the payment of interest, the person in whose name the Collateral Bonds represented by this certificate were registered at the close of business on the relevant Record Date with respect to an Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date, except that if the Company shall default in the payment of interest due on such Interest Payment Date, such defaulted interest shall be paid to the person in whose name the Collateral Bonds represented by this Certificate are registered on the Record Date for the Interest Payment Date fixed by the Company for the payment of such defaulted interest, provided that in no case shall such Record Date be less than ten days after notice thereof shall have been mailed to all registered holders of Collateral Bonds. The term "Record Date" as used herein with respect to any Interest Payment Date shall mean the last Business Day which is more than ten calendar days prior to such Interest Payment Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in the city of New York are required or authorized to close and, in the case of Related Notes in the Floating Rate Mode (as defined in the form of Related Note), a day that is also a London Business Day. "London Business Day" means any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. The bonds represented by this certificate, of the series hereinafter specified, are bonds of the Company (herein called the "bonds") known as its "First Mortgage Bonds," issued and to be issued in one or more series under, and all equally and ratably secured by, an Indenture of Mortgage and Deed of Trust dated as of March 1, 1944, duly executed by the Company to City Bank Farmers Trust Company (now known as Citibank, N.A., successor trustee, as "Mortgage Trustee") and Ralph E. Morton (Robert T. Kirchner, successor individual trustee and, together with Citibank, N.A., the "Secured Trustees") as restated in Part II of the Twenty-ninth Supplemental Indenture dated as of July 15, 1989, which became effective on April 1, 1994, to which indenture and all indentures supplemental thereto executed on and after July 15, 1989 reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the terms and conditions upon which the bonds are, and are to be, issued and secured, and the rights of the holders of the bonds and of the Secured Trustees in respect of such security (which indenture and all indentures supplemental thereto, including the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, are hereinafter collectively called the "Secured Indenture"). As provided in the Secured Indenture, the bonds may be for various principal sums and are issuable in series, which may mature at different times, may bear interest at different rates and may otherwise vary as therein provided. The bonds represented by this certificate are part of a Series designated "Collateral Bonds," herein called Collateral Bonds, created by the Thirty-fifth Supplemental Indenture dated as of June 18, 1998, as provided for in the Secured Indenture. -2- 17 With the consent of the Company and to the extent permitted by and as provided in the Secured Indenture and the Senior Indenture, the rights and obligations of the Company and/or the rights of the holders of the Collateral Bonds of the Thirty-second Series and/or the terms and provisions of the Secured Indenture may be modified or altered by such affirmative vote or votes of the holders of the Related Notes then outstanding as are specified in the Senior Indenture. The Collateral Bonds shall be redeemed if and to the extent Related Notes are redeemed, as provided in the Senior Indenture with respect to the Related Notes and in the Related Notes. In case an event of default as defined in the Secured Indenture or the Senior Indenture shall occur, the principal of the Collateral Bonds may become or be declared due and payable in the manner, with the effect, and subject to the conditions provided in the Secured Indenture and the Senior Indenture. The Senior Trustee has agreed pursuant to the Senior Indenture to hold the Collateral Bonds as collateral for the benefit of the holders of the Related Notes under all circumstances and not to transfer (except to a successor trustee) such Collateral Bonds until the earlier of the Release Date or the prior retirement of the Related Notes through redemption, repurchase or otherwise. "Release Date" means the date on which all First Mortgage Bonds of the Company issued and outstanding under the Secured Indenture, other than the Collateral Bonds, have been retired (at, before or after the maturity thereof) through payment, redemption or otherwise provided that no default or event of default has occurred and is continuing under the Senior Indenture. On the Release Date, the Senior Trustee shall deliver to the Company for cancellation all Collateral Bonds, and the Company shall cause the Senior Trustee to provide notice to all holders of Related Notes of the occurrence of the Release Date. As a result, on the Release Date, the Collateral Bonds shall cease to secure the Related Notes. Following the Release Date, the Company shall cause the Secured Indenture to be closed, and the Company shall not issue any additional Collateral Bonds to be issued thereunder. From and after the Release Date, the Company's obligations in respect of the Collateral Bonds shall be satisfied and discharged. No recourse shall be had for the payment of the principal of, or the interest on, the Collateral Bonds, or for any claim based hereon or otherwise in respect of the Collateral Bonds or the Secured Indenture, Senior Indenture or any indenture supplemental to either thereof, or against any incorporator, stockholder, director or officer, past, present or future, of the Company, as such, or any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, directors or officers being waived and released by the owner hereof and every owner of any Related Note by the acceptance of the Collateral Bonds or such Related Note, as the case may be, and as part of the consideration for the issue thereof, and being likewise waived and released pursuant to the Secured Indenture and the Senior Indenture. The Collateral Bonds shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been manually executed by the Mortgage Trustee or its successor in trust under the Secured Indenture. IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this certificate to be executed under its name with the signature of its Chairman, Chief Executive Officer, President, Vice Chairman or a Vice-President, or any other officer selected by the Board of Directors, under its corporate seal, which may be a facsimile, attested with the signature of its Secretary or one of its Assistant Secretaries. Dated: June 23, 1998 MICHIGAN CONSOLIDATED GAS COMPANY -3- 18 By President and Chief Executive Officer Attest: Secretary The bonds represented by this certificate constitute Collateral Bonds of the series designated and described in the within-mentioned Secured Indenture. CITIBANK, N.A., as Mortgage Trustee By Authorized Officer ---------------------------------------------------------------- -4- EX-10.1 6 RESET REMARKETING AGREEMENT: SALOMON BROS. 1 EXHIBIT 10.1 RESET REMARKETING AGREEMENT RESET REMARKETING AGREEMENT, dated as of June 23, 1998 (the "Reset Remarketing Agreement"), by and between Michigan Consolidated Gas Company, a Michigan corporation (the "Company"), and Salomon Brothers Inc ("Salomon Brothers Inc"). WHEREAS, the Company has issued $75,000,000 aggregate principal amount of Resetable MAndatory Putable/remarketable Securities ("MAPS(sm)") due June 30, 2038 (the "Senior Notes"), pursuant to an Indenture dated as of June 1, 1998, as supplemented and amended (the "Indenture"), by and between the Company and Citibank, N.A., as trustee (the "Trustee"), which Senior Notes have been secured by the issuance and delivery to the Trustee of the Company's First Mortgage Bonds, Collateral Series B (the "Collateral Bonds"), issued under and ratably secured by the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (the "Original Secured Indenture"), as supplemented and amended by thirty-five indentures supplemental thereto, including specifically the Twenty-Ninth Supplemental Indenture, and the Thirty-Fifth Supplemental Indenture creating the series in which the Collateral Bonds were issued (the "Thirty-Fifth Supplemental Indenture") (the Original Secured Indenture and all supplemental indentures thereto being referred to collectively herein as the "Secured Indenture"), in a principal amount equal to that of and having other terms that mirror those of the Senior Notes; and WHEREAS, the Senior Notes are being sold initially pursuant to a purchase agreement dated June 18, 1998 (the "Purchase Agreement") between the Company and Salomon Brothers Inc; WHEREAS, the Company has requested Salomon Brothers Inc to act as Reset Remarketing Agent, as defined in Section 2(a) hereof, and as Rate Agent, as defined in Section 2 hereof, in connection with the Senior Notes, and as such to perform the services described herein; and WHEREAS, Salomon Brothers Inc is prepared to act as Reset Remarketing Agent and Rate Agent with respect to the remarketing of the Senior Notes pursuant to the terms of, but subject to the conditions set forth in, this Agreement. NOW, THEREFORE, for and in consideration of the covenants herein made, and subject to conditions herein set forth, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not defined in this Agreement shall have the respective meanings assigned to them in the Indenture (including the form of the Senior Notes). Section 2. Appointment and Obligations of Salomon Brothers Inc. (a) The Company hereby appoints Salomon Smith Barney, and Salomon Brothers Inc hereby accepts such appointment, (i) as the Rate Agent for the Senior Notes, to determine (A) LIBOR and the interest rate on the Senior Notes for any Interest Period and/or (B) the yield to maturity on the applicable 2 United States Treasury security that is used in connection with the determination of the applicable Fixed Rate, and the ensuing applicable Fixed Rate; and (ii) as the exclusive remarketing agent (the"Reset Remarketing Agent") for the purpose of (x) recommending to the Company the Spread for each Subsequent Spread Period that, in the opinion of the Reset Remarketing Agent, will enable the Reset Remarketing Agent to remarket, for delivery on any Reset Tender Date (as defined below), all tendered Senior Notes with respect to which the Reset Remarketing Agent receives a Reset Tender Notice (as defined below) at 100% of the principal amount thereof, (y) if the Company and the Reset Remarketing Agent agree on the Spread referred to in (x) above, entering into a reset remarketing agreement supplement (each, a "Reset Remarketing Agreement Supplement") with the Company, substantially in the form attached hereto as Exhibit A, pursuant to which the Reset Remarketing Agent will agree to purchase the Senior Notes tendered by the beneficial owners thereof (the "Beneficial Owners") and, on a best efforts basis, to remarket such Senior Notes (each such purchase and remarketing being hereinafter referred to as a "Remarketing"), and (z) performing such other duties as are assigned to the Reset Remarketing Agent in the Senior Notes and/or the Indenture and/or the applicable Reset Remarketing Agreement Supplement. For purposes of this Agreement, the term "Reset Tender Date" with respect to any Subsequent Spread Period shall mean the Business Day immediately following any Spread Determination Date. (b) Notwithstanding the foregoing, the obligations of the parties hereunder, except for the obligation of the Company set forth in paragraph (c) below, shall not commence until the earliest to occur (the "Effective Date") of (i) the failure of Salomon Brothers Inc (the "Mandatory Tender Remarketing Agent") by the eleventh Business Day prior to June 30, 2003 (the "First Remarketing Date") to notify the Company and the Reset Remarketing Agent of its election to exercise its option (the "Remarketing Right") to remarket the Senior Notes during the period from the First Remarketing Date until June 30, 2013 (the "Second Remarketing Date") pursuant to that certain Mandatory Tender Remarketing Agreement dated as of the date hereof between the Company and the Mandatory Tender Remarketing Agent as in effect on the date hereof; (ii) the receipt of notice from the Company of its desire that this Agreement become effective notwithstanding the exercise by the Mandatory Tender Remarketing Agent of its option to purchase the Senior Notes; and (iii) the Second Remarketing Date. (c) Thirty calendar days prior to the First Remarketing Date, the Company shall request that DTC provide preliminary notification to its Participants that, on the date that is ten Business Days prior to the First Remarketing Date, either the Remarketing Right will be exercised and the Senior Notes will be subject to mandatory tender or the Senior Notes will be in Reset Mode and a Duration/Interest Mode Determination Date will have occurred. (d) If the Mandatory Tender Remarketing Agent does not provide notification of its intention to exercise the Remarketing Right as provided above, then on the date that is ten Business Days prior to the First Remarketing Date, the Company shall request that DTC notify its Participants of the occurrence of a Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Senior Note wishes to tender such Senior Note for remarketing. (e) With respect to all Subsequent Spread Periods established after the First Remarketing Date, the Company shall request not later than five nor more than ten calendar days -2- 3 prior to any Duration/Interest Mode Determination Date, that DTC notify its Participants of such Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Senior Note wishes to tender such Senior Note for remarketing. (f) Unless the Company shall have notified the Reset Remarketing Agent of its election to redeem the Senior Notes in full, on or before the tenth Business Day prior to the commencement (the "Commencement Date") of each Subsequent Spread Period (the "Duration/Interest Mode Determination Date"), the Reset Remarketing Agent shall make a recommendation to the Company with respect to the duration, redemption date(s), redemption type (i.e., par, premium, or make-whole, including in the case of make-whole, Reinvestment Spread), redemption prices (if applicable), Commencement Date, Interest Payment Dates and Interest Rate Mode (i.e., Fixed Rate Interest Mode or Floating Rate Interest Mode) and any other relevant terms (other than the Spread) for each Subsequent Spread Period and all of such terms shall be agreed to by the Company and the Reset Remarketing Agents by 3:00 p.m., New York City time on such Duration/Interest Mode Determination Date. (g) On or before the fifth Business Day prior to the Commencement Date of each Subsequent Spread Period (the "Spread Determination Date"), the Reset Remarketing Agent shall make a recommendation to the Company with respect to the Spread to apply during such Subsequent Spread Period, and the Spread shall be agreed to by the Company and the Reset Remarketing Agent by 1:00 p.m. New York City time on such Spread Determination Date, irrespective of whether the Senior Notes shall be in the Floating Rate Interest Mode or the Fixed Rate Interest Mode. (h) On the third Business Day prior to the Commencement Date of each Subsequent Spread Period for which Senior Notes will be in the Fixed Rate Interest Mode (a "Fixed Rate Determination Date"), the Company shall cause the Rate Agent (as defined below) to notify the Reset Remarketing Agent of the applicable U.S. Treasury Security to be used for the calculation of the Fixed Rate to apply to the Senior Notes for such Subsequent Spread Period, and the Remarketing Agent and the Company shall agree on such Fixed Rate by 1:00 p.m. New York City time, on such Fixed Rate Determination Date. (i) On the second Business Day prior to the Commencement Date of each Subsequent Spread Period for which Senior Notes will be in the Floating Rate Interest Mode, and on the second Business Day prior to each Interest Reset Date during such Subsequent Spread Period (each, a "LIBOR Determination Date"), the Company shall cause the Rate Agent to notify the Reset Remarketing Agent of (i) LIBOR and (ii) the applicable interest rate for the initial Interest Period in such Subsequent Spread Period and the Reset Remarketing Agent and the Company shall agree on such Floating Rate, Interest Rate by [3:00 p.m.,] New York City time, on such LIBOR Determination Date. (j) In the event that the Company and the Reset Remarketing Agent do not agree on the Spread for any Subsequent Spread Period, then the Company is required unconditionally to repurchase and retire all of the Notes on the Tender Date at a price equal to 100% of the principal amount thereof, together with accrued interest to the Reset Tender Date. In the event that the Reset Remarketing Agent fails to purchase any Notes tendered on the Tender Date, then the Company is required unconditionally to repurchase and retire such Notes. -3- 4 (k) In connection with any Remarketing, the Reset Remarketing Agent shall make, or shall cause the Trustee to make, payment to the DTC Participant of each tendering Beneficial Owner of Senior Notes subject to remarketing, by book-entry through DTC by the close of business on such Reset Tender Date against delivery through DTC of such Beneficial Owner's tendered Senior Notes, of 100% of the principal amount of the tendered Senior Notes that have been purchased for remarketing by the Reset Remarketing Agent. The Company shall make, or cause the Trustee to make, payment of interest to each Beneficial Owner of Senior Notes due on the relevant Reset Tender Date by book-entry through DTC by the close of business on such Reset Tender Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are required or authorized to close and, in the case of Senior Notes in the Floating Interest Rate Mode, that is also a London Business Day. "Fixed Rate" means a per annum rate and will be determined by adding the applicable Spread (as agreed to by the Company and the Reset Remarketing Agent on the preceding Spread Determination Date) to the yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the applicable United States Treasury security, selected by the Rate Agent or its agent after consultation with the Reset Remarketing Agent, as having a maturity comparable to the duration selected for the following Subsequent Spread Period, which would be used in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the duration selected for the following Subsequent Spread Period. "Initial Spread Period" means the period from and including June 23, 1998 to but excluding June 30, 2003. "LIBOR" means the London interbank offered rate and shall be determined by the Rate Agent as provided below: (i) LIBOR will be determined on the basis of the offered rate for deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date, which appears on Telerate Page 3750 (as defined below) as of approximately 11:00 a.m., London time, on such LIBOR Determination Date. "Telerate Page 3750" means the display designated on page "3750" on Dow Jones Markets Limited or any successor thereto (or such other page as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. Dollar deposits). If no such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR Determination Date will be determined in accordance with the provisions of paragraph (ii) below. The term "London Business Day" means any day on which dealings in deposits in U.S. Dollars are transacted in the London interbank market. (ii) With respect to a LIBOR Determination Date on which no rate appears on Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date, the Rate Agent shall request the principal London offices of each of four -4- 5 major reference banks in the London interbank market selected by the Rate Agent (after consultation with the Company) to provide the Rate Agent with a quotation of the rate at which deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date, are offered by it to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR for such LIBOR Determination Date will be the arithmetic mean of such quotations as calculated by the Rate Agent. If fewer than two quotations are provided, LIBOR for such LIBOR Determination Date will be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., New York City time, on such LIBOR Determination Date by three major banks in The City of New York selected by the Rate Agent (after consultation with the Company) for loans in U.S. Dollars to leading European banks, of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the Rate Agent are not quoting as mentioned in this sentence, LIBOR for such LIBOR Determination Date will be LIBOR determined with respect to the immediately preceding LIBOR Determination Date. The Index Maturity applicable to Notes in the Floating Rate Interest Mode will be, in the case of Notes paying (i) monthly, one month; (ii) quarterly, three months; and (iii) semi-annually, six months. "Reinvestment Spread" means, with respect to the Senior Notes, a number, expressed as a number of basis points or as a percentage, selected by the Company and agreed to by the Reset Remarketing Agent on the Duration/Interest Mode Determination Date. "Reset Tender Notice" means the written notice by each Beneficial Owner to the Reset Remarketing Agent of a Senior Note of its intention to tender Senior Notes for purchase and remarketing, which notice must be received by the Reset Remarketing Agent during the period commencing at 3:00 p.m., New York City time, on the Spread Determination Date and ending at 12:00 noon, New York City time, on the second Business Day following such Spread Determination Date for such Subsequent Spread Period (the "Notice Date"). "Subsequent Spread Period" means any period either (i) after the Initial Spread Period, if the Remarketing Right has not been exercised or (ii) after the Second Remarketing Date, if the Remarketing Right is exercised. Section 3. Fees and Expenses. The obligations of the Company to pay to the Reset Remarketing Agent on each Reset Tender Date the fees and expenses set forth in the applicable Reset Remarketing Agreement Supplement shall survive the termination of this Agreement and remain in full force and effect until all such payments shall have been made in full. -5- 6 Section 4. Removal of the Reset Remarketing Agent. With respect to any Subsequent Spread Period, the Company may in its absolute discretion remove the Reset Remarketing Agent by giving notice to the Reset Remarketing Agent prior to 3:00 p.m., New York City time, on the Duration/Mode Determination Date applicable thereto, such removal to be effective upon the Company's appointment of a successor Reset Remarketing Agent. In such case, the Company will use its best efforts to appoint a successor Reset Remarketing Agent and enter into such a reset remarketing agreement with such persons as soon as reasonably practicable. Section 5. Covenants of the Company. The Company covenants with the Reset Remarketing Agent as follows: (a) The Company will provide prompt notice by telephone, confirmed in writing (which may include facsimile or other electronic transmission), to the Reset Remarketing Agent of (i) any notification or announcement by a "nationally recognized statistical rating organization" (as defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act) with regard to the ratings of any securities of the Company, including, without limitation, notification or announcement of a downgrade in or withdrawal of the rating of any security of the Company or notification or announcement of the placement of any rating of any securities of the Company under surveillance or review, including placement on CreditWatch or on Watch List with negative implications, or (ii) the occurrence at any time of any event set forth in Section 8(b) of this Agreement. (b)(i) The Company shall furnish to the Reset Remarketing Agent if the Reset Remarketing Agent determines, based on advice of counsel, that changes in applicable law, regulations or interpretations of the Securities and Exchange Commission make it necessary or advisable to deliver a current prospectus in connection with a Remarketing, a then currently effective registration statement under the 1933 Act and a then current prospectus relating to the Senior Notes (and Collateral Bonds, if applicable) to be used by the Reset Remarketing Agent for remarketing and resale of the Senior Notes (such registration statement (whether consisting of the registration statement relating to the initial issuance of the Senior Notes and Collateral Bonds, or any amendment thereto or a new registration statement) and any amendments thereto, including any such prospectus (whether consisting of the prospectus relating to the initial issuance of the Senior Notes and Collateral Bonds or any amendment or supplement thereto or a new prospectus) relating to the Senior Notes (and Collateral Bonds, if applicable) constituting a part thereof, and all documents incorporated therein by reference, as from time to time amended or supplemented pursuant to the 1934 Act, the 1933 Act, or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus shall be provided to the Reset Remarketing Agent by the Company for use in connection with the remarketing of the Senior Notes which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective, the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Reset Remarketing Agent for such use); and (ii) The Company shall also furnish to the Reset Remarketing Agent in connection with the remarketing of Senior Notes, such other information as the Reset Remarketing Agent may reasonably request from time to time. -6- 7 The Company agrees, at its expense, to provide the Reset Remarketing Agent with as many copies of the foregoing written materials and other Company approved information as the Reset Remarketing Agent may reasonably request for use in connection with the remarketing of Senior Notes and consents to the use thereof for such purpose. (c) If, at any time during which the Reset Remarketing Agent would be obligated to take any action under this Agreement, any event or condition known to the Company relating to or affecting the Company, any subsidiary thereof or the Senior Notes shall occur which could reasonably be expected to cause any of the reports, documents, materials or information referred to in paragraph (b) above or any document incorporated therein by reference (collectively, the "Reset Remarketing Materials") to contain an untrue statement of a material fact or omit to state a material fact, the Company shall promptly notify the Reset Remarketing Agent in writing of the circumstances and details of such event or condition. (d) So long as the Senior Notes are outstanding, the Company will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (e) Except as otherwise provided herein, the Company agrees that neither it nor any of its subsidiaries or affiliates shall defease, purchase or otherwise acquire, or enter into any agreement to defease, purchase or otherwise acquire, any of the Senior Notes prior to the remarketing thereof by the Reset Remarketing Agent. (f) Notwithstanding any provision to the contrary set forth in the Indenture, the Company shall (i) use its best efforts to maintain the Senior Notes in book-entry form with The Depository Trust Company ("DTC") or any successor thereto and to appoint a successor depositary to the extent necessary to maintain the Senior Notes in book-entry form, and (ii) waive any discretionary right it otherwise has under the Indenture to cause the Senior Notes to be issued in certificated form. Section 6. Dealing in the Senior Notes; Purchase of Senior Notes by the Company. (a) Salomon Brothers Inc, when acting as Reset Remarketing Agent or in its individual or any other capacity, may, to the extent permitted by law, buy, sell, hold and deal in any of the Senior Notes. Salomon Brothers Inc, as Holder or Beneficial Owner of the Senior Notes may exercise any vote or join as a Holder or Beneficial Owner, as the case may be, in any action which any Holder or Beneficial Owner of Senior Notes may be entitled to exercise or take pursuant to the Indenture with like effect as if it did not act in any capacity hereunder. Salomon Brothers Inc, in its individual capacity, either as principal or agent, may also engage in or have an interest in any financial or other transaction with the Company as freely as if it did not act in any capacity hereunder. (b) The Company may purchase Senior Notes in the remarketing, provided that the Interest Rate established with respect to the Senior Notes in any such Remarketing is not different from the Interest Rate that would have been established if the Company had not purchased such Senior Notes. -7- 8 Section 7. Representations and Warranties by the Company. The Company represents and warrants to the Reset Remarketing Agent, as of the date hereof, as of the Effective Date, and as of each Reset Tender Date (each, a "Representation Date") as follows: (a) It has made all the filings with the Commission that it is required to make under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder (the "1934 Act Regulations") (collectively, the "1934 Act Documents"), (ii) each 1934 Act Document complies in all material respects with the requirements of the 1934 Act and 1934 Act Regulations, and each 1934 Act Document did not at the time of filing with the Commission, and as of each Representation Date, as modified or superseded by any subsequently filed 1934 Act Document on or prior to such Representation Date, will not, include an untrue statement of a material fact or omit to state a 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 and (iii) the applicable Reset Remarketing Materials (as defined herein), as of each Representation Date after the date hereof, as modified or superseded by any subsequently filed 1934 Act Document on or prior to such Representation Date (or, if applicable, by any document filed pursuant to the 1933 Act and the rules and regulations thereunder (the "1933 Act Regulations")), will not include an untrue statement of a material fact or omit to state a 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. (b) The Company further represents and warrants to the Reset Remarketing Agent as of each Representation Date as follows: (i) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the 1934 Act Documents are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (ii) The financial statements included or incorporated by reference in the 1934 Act Documents, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included or incorporated by reference in the 1934 Act Documents present fairly in accordance with GAAP the information required to be stated therein. The pro forma financial statements and the related notes thereto, if any, included or incorporated by reference in the 1934 Act Documents present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (iii) Since the respective dates as of which information is given in the 1934 Act Documents, except as otherwise stated therein, (A) there has been no material adverse -8- 9 change and no development which could reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Company's common stock in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (iv) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Michigan, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the 1934 Act Documents and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (v) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company, under any agreement to which the Company or any of its subsidiaries is a party or otherwise. (vi) Each subsidiary of the Company has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the 1934 Act Documents and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the 1934 Act Documents, all of the issued and outstanding capital stock of each such subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, as the case may be, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any such subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary. (vii) This Reset Remarketing Agreement and the Reset Remarketing Agreement Supplement have been duly authorized, executed and delivered by the Company. -9- 10 (viii) The Indenture has been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"), and, assuming it has been duly executed and delivered by the Trustee, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) (the "Bankruptcy Exceptions"). (ix) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (x) The Secured Indenture constitutes a legally valid and direct enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where all of the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or hereafter acquired, free from all prior liens, charges or encumbrances, except as set forth in subparagraph (xviii) below, and except, in the case of property hereafter acquired, any thereof existing at the time of acquisition. (xi) The Senior Notes have been duly authorized and executed by the Company and authenticated, issued and delivered in the manner provided for in the Indenture, and constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and are in the form contemplated by, and entitled to the benefits of, the Indenture. (xii) The Collateral Bonds have been duly authorized and executed by the Company and authenticated, issued, and delivered in the manner provided for in the Secured Indenture and have been issued and delivered to the Trustee as provided for in the Thirty-Fifth Supplemental Indenture as security for the Senior Notes, and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. The Collateral Bonds are in the form contemplated by, and entitled to the benefits of, the Secured Indenture. -10- 11 (xiii) Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its respective subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments") or in violation of any applicable law, rule or regulation or any judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets, which violation or default would singly or in the aggregate, have a Material Adverse Effect. (xiv) The execution, delivery and performance of the Purchase Agreement, this Agreement, the Mandatory Tender Remarketing Agreement, the Indenture, the Senior Notes, the Thirty-Fifth Supplemental Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; and the consummation of the transactions contemplated herein and therein and compliance by the Company with its obligations hereunder and under the Indenture, the Secured Indenture, the Thirty-Fifth Supplemental Indenture, the Senior Notes, and the Collateral Bonds have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to (other than the lien of the Indenture on the Collateral Bonds), the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xv) There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the 1934 Act Documents (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not -11- 12 described in the 1934 Act Documents, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xvi) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the remarketing of the Senior Notes hereunder or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery or performance of the Indenture by the Company, except such as have or shall have been already obtained. (xvii) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and neither the Company is aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiary's principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xviii) There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and/or filed as required. (xix) The Company has good and marketable title to the properties specifically described in and conveyed by the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permissible encumbrances as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not materially impair the use of the property affected thereby in the operation of the business of the Company; the Company and its subsidiaries have good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except the liens of the Secured Indenture and such liens, encumbrances and defects as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as are not material and do not interfere with the conduct of the business of the Company and its subsidiaries. -12- 13 (xx) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory Commission, the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and to conduct the business now operated by each of them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxi) Except as described in any Reset Remarketing Materials and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance or code, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, the "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are in compliance with their requirements, and (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries. (xxii) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group, a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935 (the "1935 Act"), and such "holding company" and the Company are presently exempt from the provisions of the 1935 Act (except Section 9 thereof). (xxiii) The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. -13- 14 (xxiv) None of the Company and its subsidiaries or any of their respective directors, officers or controlling persons, has taken or will take, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the remarketing of the Senior Notes. (xxv) No "forward looking statement" (as defined in Rule 175 under the 1933 Act) contained in the Registration Statement, any preliminary prospectus or the Prospectus was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. (xxvi) The Company is not an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (xxvii) The Senior Notes are rated "A2" by Moody's Investors Service, Inc. and "A" by Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. or such other rating as to which the Company shall have most recently notified the Reset Remarketing Agent pursuant to Section 3(a) hereof. References in the foregoing representations and warranties to the 1934 Act Documents shall be deemed to refer to the Registration Statement (as defined in Section 5(b) below) and Prospectus (as defined in Section 5(b) above), in each case including the documents incorporated by reference therein, if such are required pursuant to such Section 5(b). Section 8. Conditions to the Reset Remarketing Agent's Obligations. The obligations of the Reset Remarketing Agent under this Agreement have been undertaken in reliance on, and shall be subject to, (a) the due performance by the Company of its obligations and agreements as set forth in this Agreement and the accuracy of the representations and warranties in this Agreement and any certificate delivered pursuant hereto, and (b) the further condition that none of the following events shall have occurred at any time: (i) the rating of any securities of the Company shall have been down-graded or put under surveillance or review, including being put on CreditWatch or Watch List with negative implications, or withdrawn by a nationally recognized statistical rating organization; (ii) without the prior written consent of the Reset Remarketing Agent, neither the Indenture (including the Senior Notes) nor the Secured Indenture (including the Collateral Bonds) shall have been amended in any manner, or otherwise contain any provision not contained therein as of the date hereof, that in either case in the judgment of -14- 15 the Reset Remarketing Agent materially and adversely changes the nature of the Senior Notes or the Collateral Bonds, as the case may be, or the remarketing procedures (it being understood that, notwithstanding the provisions of this clause (ii), the Company shall not be prohibited from amending the Indenture); (iii) trading in any securities of the Company or any of its affiliates shall have been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices shall have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Agents, Inc. or any other governmental authority, or if a banking moratorium shall have been declared by either Federal or New York authorities; (iv) there shall have occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Reset Remarketing Agent, impracticable to remarket the Senior Notes or to enforce contracts for the sale of the Senior Notes; (v) an Event of Default (as defined in the Indenture), or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Senior Notes shall have occurred and be continuing; (vi) a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, shall have occurred; (vii) the Senior Notes are not maintained in book-entry form with DTC or any successor thereto; provided, that the Reset Remarketing Agent, in its sole discretion and subject to receipt of an opinion of counsel for the Company reasonably satisfactory to the Reset Remarketing Agent, may waive the foregoing condition if in the Reset Remarketing Agent's judgment the Indenture and the Senior Notes can be amended, and they are amended, so as to permit the remarketing of the Senior Notes in certificated form and otherwise as contemplated herein; (c) The obligations of the Reset Remarketing Agent to purchase and remarket the Senior Notes shall also be subject to the terms and conditions of the applicable Reset Remarketing Agreement Supplement. Section 9. Indemnification. (a) The Company agrees to indemnify and hold harmless the Reset Remarketing Agent and its officers, directors and employees and each person, -15- 16 if any, who controls the Reset Remarketing Agent within the meaning of Section 20 of the 1934 Act as follows: (i) against any loss, liability, claim, damage or expense whatsoever (collectively, "Damages"), as incurred, arising out of, (A) the failure to have an effective Registration Statement under the 1933 Act relating to the Senior Notes, if required, or the failure to satisfy the prospectus delivery requirements of the 1933 Act because the Company failed to provide the Reset Remarketing Agent with a Prospectus for delivery, as required by Section 5 hereof, or (B) any untrue statement or alleged untrue statement of a material fact contained in any of the Reset Remarketing Materials (including any incorporated documents), or (C) the omission or alleged omission therefrom of a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, or (D) any violation by the Company of, or any failure by the Company to perform any of its obligations under, this Agreement, or (E) the acts or omissions of the Reset Remarketing Agent in connection with its duties and obligations to determine the Interest Rate or other terms with respect to any Subsequent Spread Period, as provided hereunder, except Damages that are finally judicially determined to be due to its gross negligence or willful misconduct; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever arising out of, or based upon, any of items (A) through (E) in clause (i) above; provided that (subject to clause (d) below) such settlement is effected with the written consent of the Company, which consent shall not be unreasonably withheld; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Reset Remarketing Agent), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever arising out of, or based upon, any of items (A) through (E) in clause (i) above to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that the foregoing indemnity shall not apply to any losses, liabilities, claims, damages and expenses to the extent arising out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Reset Remarketing Agent expressly for use in the Reset Remarketing Materials. (b) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to clause (a) above, counsel to the indemnified parties shall be selected by Salomon Brothers Inc, and, in the case -16- 17 of parties indemnified pursuant to clause (b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 9 or Section 10 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission or fault, culpability or a failure to act by or on behalf of any indemnified party. (c) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by clause 9 (a) (ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (d) The indemnity agreements contained in this Section 10 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Reset Remarketing Agent, and shall survive the termination or cancellation of this Agreement and the remarketing of any Senior Notes hereunder. Section 10. Contribution. If the indemnification provided for in Section 9 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Reset Remarketing Agent on the other hand from the remarketing of the Senior Notes pursuant to this Agreement or (ii) if the allocation provided by clause (i) 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 of the Reset Remarketing Agent on the other hand in connection with the acts, failures to act, statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Reset Remarketing Agent on the other hand in connection with the remarketing of the Senior Notes -17- 18 pursuant to this Agreement shall be deemed to be in the same respective proportions as (i) the aggregate principal amount of the Senior Notes, and (ii) the aggregate positive difference, if any, between the price at which the Senior Notes are sold by the Reset Remarketing Agent in the remarketing and the price paid by the Reset Remarketing Agent for the Senior Notes tendered on any Reset Tender Date. The relative fault of the Company on the one hand and the Reset Remarketing Agent on the other hand shall be determined by reference to, among other things, the responsibility hereunder of the applicable party for any act or failure to act relating to the losses, liabilities, claims, damages or expenses incurred or, in the case of any losses, liabilities, claims, damages or expenses arising out of any untrue or alleged untrue statement of a material fact contained in any of the Reset Remarketing Materials or the omission or alleged omission to state a material fact therefrom, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Reset Remarketing Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Reset Remarketing Agent agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 10. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 10 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such act or failure to act or untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 10, the Reset Remarketing Agent shall not be required to contribute any amount in excess of the amount by which the total price at which the Senior Notes remarketed by it and resold to the public were sold to the public exceeds the amount of any damages which the Reset Remarketing Agent has otherwise been required to pay by reason of any act or failure to act for which it is responsible hereunder or any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 10, each person, if any, who controls the Reset Remarketing Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Reset Remarketing Agent, and each officer and director of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. -18- 19 Section 11. Termination of this Reset Remarketing Agreement. Subject to Section 3 hereof relating to the payment of fees and expenses, this Agreement shall terminate as to the Reset Remarketing Agent on the effective date of the removal of such Reset Remarketing Agent pursuant to Section 4 hereof. Section 12. Reset Remarketing Agent's Performance: Duty of Care. The duties and obligations of the Reset Remarketing Agent hereunder shall be determined solely by the express provisions of this Agreement, the Senior Notes and the Indenture, the Secured Indenture and the Collateral Bonds and the applicable Reset Remarketing Agreement Supplement. No implied covenants or obligations of or against the Reset Remarketing Agent shall be read into this Agreement, the Indenture or the Secured Indenture. In the absence of bad faith on the part of the Reset Remarketing Agent, the Reset Remarketing Agent may conclusively rely upon any document furnished to it, which purports to conform to the requirements of this Agreement, the Indenture, or the Secured Indenture, as to the truth of the statements expressed in any of such documents. The Reset Remarketing Agent shall be protected in acting upon any document or communication reasonably believed by it to have been signed, presented or made by the proper party or parties. The Reset Remarketing Agent shall incur no liability hereunder to any Beneficial Owner or Holder of Senior Notes in its individual capacity or as Reset Remarketing Agent for any action or failure to act in connection with the remarketing or otherwise. The Reset Remarketing Agent shall incur no liability to the Company with respect to calculation of the Interest Rate applicable to any Interest Period, except as a result of gross negligence or willful misconduct on its part. Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE. Section 14. Term of Agreement. Unless otherwise terminated in accordance with the provisions hereof, this Agreement shall remain in full force and effect from the date hereof until the first day thereafter on which no Senior Notes are outstanding. Section 15. Successors and Assigns. The rights and obligations of the Company hereunder may not be assigned or delegated to any other person without the prior written consent of Salomon Brothers Inc, the rights and obligations of Salomon Brothers Inc hereunder may not be assigned or delegated to any other person without the prior written consent of the Company, and any attempt by either party to do so will be unenforceable. This Agreement shall inure to the benefit of and be binding upon the Company and Salomon Brothers Inc and their respective permitted successors and assigns. The terms "successors" and "assigns" shall not include any purchaser of any Senior Notes merely because of such purchase. Section 16. Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. Section 17. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any or all jurisdictions because it conflicts with any provision of any constitution, statute, rule -19- 20 or public policy or for any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case, circumstances or jurisdiction, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever. Section 18. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Section 19. Amendments. This Agreement may be amended by any instrument in writing signed by each of the parties hereto. Section 20. Notices. Unless otherwise specified, any notices, requests, consents or other communications given or made hereunder or pursuant hereto shall be made in writing or transmitted by any standard form of telecommunication or by telephone and confirmed in writing. All written notices shall be deemed to be validly given or made, if delivered by hand, when so delivered, of if mailed, when mailed registered or certified mail, return receipt requested and postage prepaid. All notices by telecommunication (including telephone) shall be deemed to be validly given or made when received. All such notices, requests, consents or other communications shall be addressed as follows: if to the Company, to 500 Griswold Street, Detroit, Michigan 48226, Attn: Ronald E. Christian, Esq., Vice President, General Counsel and Secretary, Facsimile No.: (313) 965-0009; and if to Salomon Brothers Inc, to Salomon Brothers Inc, 388 Greenwich Street, New York, NY 10013, Attention: Legal Department (Marianne Spinelli, Esq.), or to such other address as either of the above shall specify to the other in writing. Section 21. Benefit. (a) Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon or give any person other than the parties hereto any remedy or claim under or by reason of this Agreement or any term, covenant or condition hereof, all of which shall be for the sole and exclusive benefit of the parties. (b) No beneficial owner of any Note shall have any rights or claims under this Agreement or any Remarketing Agreement Supplement or against the Company or the Remarketing Agent as a result of the Remarketing Agent's not purchasing such Notes. -20- 21 IN WITNESS WHEREOF, each of the Company and Salomon Brothers Inc has caused this Agreement to be executed in its name and on its behalf by one of its duly authorized officers as of the date first above written. MICHIGAN CONSOLIDATED GAS COMPANY By: /s/ Howard L. Dow III ----------------------------------- Name: Howard L. Dow III Title: Senior Vice President and Chief Financial Officer SALOMON BROTHERS INC By: /s/ John W. Dickey ----------------------------------- Name: John W. Dickey Title: Authorized Signatory -21- 22 EXHIBIT A RESET REMARKETING AGREEMENT SUPPLEMENT Salomon Brothers Inc, (the "Reset Remarketing Agent") hereby agrees to purchase the Senior Notes described below (the "Senior Notes") that have been tendered by the holders thereof for sale on _____________, _____ (the "Reset Tender Date"). It is acknowledged and agreed that the Senior Notes need not be further registered under the Securities Act of 1933, as amended (the "Act"), and that, in connection with the remarketing of the Senior Notes by the Reset Remarketing Agent in accordance with the terms of the Reset Remarketing Agreement dated as of June 23, 1998, no prospectus meeting the requirements of Section 10 of the Act need be delivered, or filed pursuant to Rule 424 under the Act. It is understood that the Reset Remarketing Agent will deliver to purchasers and prospective purchasers, in connection with the remarketing, one or more forms of written communication describing the terms of the Senior Notes (each, a "Reset Remarketing Memorandum"), the form of each of which shall be delivered to Michigan Consolidated Gas Company, a Michigan corporation (the "Company"), not less than two Business Days prior to its use and subject to the approval of the Company prior to its use by the Reset Remarketing Agent, which approval shall not be unreasonably withheld or delayed. The Reset Remarketing Agent shall offer to purchase Senior Notes and purchase validly tendered Senior Notes on the Reset Tender Date in accordance with all applicable laws and regulations and interpretations of the Securities and Exchange Commission. The representations and warranties made pursuant to the above-referenced Reset Remarketing Agreement (other than paragraphs (b)(viii), (x), (xi) and (xii) of Section 7); Section 3(o) of the attached Purchase Agreement (which date shall be the date of the Reset Remarketing Agreement Supplement and the relevant Reset Tender Date); Section 8 of the attached Purchase Agreement (except that Section 8 is amended to allow termination of this Agreement by the Agent if the Company's representations and warranties therein are not accurate and correct); paragraphs (c) and (f) of Section 5 of the attached Purchase Agreement; and Section 7 and the last paragraph of Section 5 of the attached Purchase Agreement are incorporated in their entirety into this Agreement and made applicable to the obligations of the Reset Remarketing Agent to the extent applicable to any remarketing of the Senior Notes, except as explicitly amended hereby. The terms "Registration Statement" and "Prospectus" shall be deemed to refer to each such document as amended to the date hereof and the Tender Date, and the term "Incorporated Documents" shall similarly be deemed to include those filed and incorporated by reference through such dates. If the Reset Remarketing Agent determines, based on advice of counsel, that changes in applicable law, regulations or interpretations of the Securities and Exchange Commission make it necessary or advisable to deliver a current prospectus in connection with this Remarketing, the attached Purchase Agreement shall apply in its entirety. All references in such Purchase Agreement to (i) the "Agent" shall be deemed to refer to the Reset Remarketing Agent, (ii) the "Securities" shall be deemed to refer to the Senior Notes, (iii) the Purchase Agreement shall be deemed to refer to the 23 Reset Remarketing Agreement Supplement, and (iv) "Closing Date" shall be deemed to refer to the Reset Tender Date. To the extent the provisions of such Purchase Agreement refer to the "Prospectus" or the "Registration Statement," such references shall be deemed to refer to any Remarketing Memorandum or registration statement, if any, that the Company is required to prepare or file pursuant to applicable law, regulations or interpretations of the Securities and Exchange Commission in effect at the time of such remarketing of the Senior Notes, including all documents incorporated by reference therein. For the purposes of Section 6 of the attached Purchase Agreement, the relative benefit received by the Company on the one hand and the Reset Remarketing Agent on the other in connection with the remarketing of the Senior Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the aggregate public offering price of the Senior Notes bears to the remarketing fee received by the Reset Remarketing Agent pursuant to this Agreement. All capitalized terms not otherwise defined in this Agreement have the respective meanings assigned thereto in the Senior Notes, the form of which is attached hereto. Company: Michigan Consolidated Gas Company 500 Griswold Street Detroit, Michigan 48226 Reset Remarketing Agent and Address: Salomon Brothers Inc 388 Greenwich Street New York, New York 10013 Title of Senior Notes: Resetable MAndatory Putable/remarketable Securities, due June 30, 2038 Principal Amount of Senior Notes to be Purchased: Title of Indenture: Indenture dated as of June 1, 1998, as supplemented and amended, by and between the Company and the Trustee Trustee: Citibank, N.A. Current Ratings: Moody's Investors Service Inc.: "A2" Standard & Poor's Corporation: "A" Certain Terms of the Senior Notes: Maturity: June 30, 2038 Spread Determination Date: Duration/Mode Determination Date: -2- 24 Tender Notice Date: Interest Reset Dates: Tender Date: New Interest Rate: As determined by application of the provisions set forth in the attached form of the Senior Notes on the LIBOR Determination Date or the Fixed Rate Determination Date, as applicable. Spread: Interest Payment Dates: June 30 and December 30. Subsequent Spread Period: Redemption Provisions: As set forth in the Prospectus under the caption headed "Description of the Notes -- Redemption." Beneficial Owner Tender Provisions: As set forth in the attached Prospectus Supplement dated June 17, 1998. In the event that the Reset Remarketing Agent fails to purchase all Senior Notes validly tendered for purchase on the Reset Tender Date, then the Reset Remarketing Agent shall promptly notify the Company and the Trustee of such failure. Shorter Subsequent Spread Period: In the event that (A) the Reset Remarketing Agent fails to purchase all Senior Notes validly tendered for purchase on the Reset Tender Date for any reason, and (B) the Company has not given notice of redemption of all of the Senior Notes then outstanding in accordance with the provisions described in the attached form of the Senior Notes, then the Subsequent Spread Period shall be a period of one year, which Subsequent Spread Period shall be deemed to have commenced upon the Commencement Date that coincides with the Reset Tender Date. -3- 25 Legal Opinion: If required to be delivered pursuant to this Reset Remarketing Agreement Supplement, the opinion to be delivered pursuant to Section 5(b)(1)(v) of the attached Purchase Agreement shall be delivered by counsel satisfactory to the Reset Remarketing Agent and shall be modified to read as follows: "the Senior Notes are in the form contemplated by the Indenture and have been duly and validly authorized; a single global Note registered in the name of CEDE & Co., a nominee of The Depository Trust Company ("DTC"), has been duly authenticated in accordance with the provisions of the Indenture, paid for and delivered to DTC, and constitutes a legal, valid and binding obligation of the Company. The Reset Remarketing Agent will acquire a "securities entitlement" (within the meaning of Section 8-501 of the Uniform Commercial Code as in effect in the State of New York (the "UCC")) with respect to any Senior Notes which a prior owner causes DTC or a securities intermediary to credit to the Reset Remarketing Agent's securities account. Assuming that the Reset Remarketing Agent acquires such security entitlement for value and without notice of an adverse claim, then pursuant to Section 8-502 of the UCC an action based on an adverse claim to the Senior Notes, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against the Reset Remarketing Agent, or such other opinion as shall be appropriate under the law then in effect to the effect that no other person may assert rights in the Senior Notes against the Reset Remarketing Agent. If required to be delivered pursuant to this Reset Remarketing Purchase Agreement, the opinion to be delivered pursuant to Section 5(b)(3) of the attached Purchase Agreement may be delivered by any counsel designated by the Reset Remarketing Agent and reasonably acceptable to the Company. -4- 26 Form of Senior Notes: Global certificate registered in the name of the nominee, which currently is CEDE & Co., of the depository of the Senior Notes, which is DTC. The beneficial owners of the Senior Notes ("Beneficial Owners") are not entitled to receive definitive certificates representing their Senior Notes, except under limited circumstances. A Beneficial Owner's ownership of a Note currently is recorded on or through the records of the brokerage firm or other entity that is a participant in DTC and that maintains such Beneficial Owner's account. Purchase Price: 100% of the principal amount of the Senior Notes. Payable to DTC for the Beneficial Owners of Tendered Senior Notes. Remarketing Fee: _____% of the principal amount of the Senior Notes outstanding on each Reset Tender Date. Closing: -5- 27 The foregoing terms are hereby confirmed and agreed to as of this ___ day of _________. MICHIGAN CONSOLIDATED GAS COMPANY By: -------------------------------- Name: Title: SALOMON BROTHERS INC By: -------------------------------- Name: Title: -6- EX-10.2 7 RESET REMARKETING AGREEMENT: MERRILL LYNCH 1 EXHIBIT 10.2 RESET REMARKETING AGREEMENT RESET REMARKETING AGREEMENT, dated as of June 23, 1998 (the "Reset Remarketing Agreement"), by and between Michigan Consolidated Gas Company, a Michigan corporation (the "Company"), and Merrill Lynch & Co./ Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). WHEREAS, the Company has issued $75,000,000 aggregate principal amount of Extendable MandatOry Par Put Remarketed Securities(sm) ("MOPPRS(sm)") due June 30, 2038 (the "Senior Notes"), pursuant to an Indenture dated as of June 1, 1998, as supplemented and amended (the "Indenture"), by and between the Company and Citibank, N.A., as trustee (the "Trustee"), which Senior Notes have been secured by the issuance and delivery to the Trustee, on behalf of the holders of the Senior Notes, of the Company's First Mortgage Bonds, Collateral Series A (the "Collateral Bonds"), issued under and ratably secured by the Indenture of Mortgage and Deed of Trust dated as of March 1, 1944 (the "Original Secured Indenture"), as supplemented and amended by thirty-five indentures supplemental thereto, including specifically the Twenty-Ninth Supplemental Indenture, and the Thirty-Fifth Supplemental Indenture creating the series in which the Collateral Bonds were issued (the "Thirty-Fifth Supplemental Indenture") (the Original Secured Indenture and all supplemental indentures thereto being referred to collectively herein as the "Secured Indenture"), in a principal amount equal to that of and having other terms that mirror those of the Senior Notes; and WHEREAS, the Senior Notes are being sold initially pursuant to a purchase agreement dated June 18, 1998 (the "Purchase Agreement") between the Company and Merrill Lynch; WHEREAS, the Company has requested Merrill Lynch to act as Reset Remarketing Agent, as defined in Section 2(a) hereof, and as Rate Agent, as defined in Section 2 hereof, in connection with the Senior Notes, and as such to perform the services described herein; and WHEREAS, Merrill Lynch is prepared to act as Reset Remarketing Agent and Rate Agent with respect to the remarketing of the Senior Notes pursuant to the terms of, but subject to the conditions set forth in, this Agreement. NOW, THEREFORE, for and in consideration of the covenants herein made, and subject to conditions herein set forth, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not defined in this Agreement shall have the respective meanings assigned to them in the Indenture (including the form of the Senior Notes). Section 2. Appointment and Obligations of Merrill Lynch. (a) The Company hereby appoints Merrill Lynch, and Merrill Lynch hereby accepts such appointment, (i) as the Rate Agent for the Senior Notes, to determine (A) LIBOR and the interest rate on the Senior Notes for 2 any Interest Period and/or (B) the yield to maturity on the applicable United States Treasury security that is used in connection with the determination of the applicable Fixed Rate, and the ensuing applicable Fixed Rate; and (ii) as the exclusive remarketing agent (the"Reset Remarketing Agent") for the purpose of (x) recommending to the Company the Spread for each Subsequent Spread Period that, in the opinion of the Reset Remarketing Agent, will enable the Reset Remarketing Agent to remarket, for delivery on any Reset Tender Date (as defined below), all tendered Senior Notes with respect to which the Reset Remarketing Agent receives a Reset Tender Notice (as defined below) at 100% of the principal amount thereof, (y) if the Company and the Reset Remarketing Agent agree on the Spread referred to in (x) above, entering into a reset remarketing agreement supplement (each, a "Reset Remarketing Agreement Supplement") with the Company, substantially in the form attached hereto as Exhibit A, pursuant to which the Reset Remarketing Agent will agree to purchase the Senior Notes tendered by the beneficial owners thereof (the "Beneficial Owners") and , on a best-efforts basis, to remarket such Senior Notes (each such purchase and remarketing being hereinafter referred to as a "Remarketing"), and (z) performing such other duties as are assigned to the Reset Remarketing Agent in the Senior Notes and/or the Indenture and/or the applicable Reset Remarketing Agreement Supplement. For purposes of this Agreement, the term "Reset Tender Date" with respect to any Subsequent Spread Period shall mean the Business Day immediately following any Spread Determination Date. (b) Notwithstanding the foregoing, the obligations of the parties hereunder, except for the obligation of the Company set forth in paragraph (c) below, shall not commence until the earlier to occur (the "Effective Date") of: (i) the failure of Merrill Lynch & Co./Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Mandatory Tender Remarketing Agent") by the eleventh Business Day prior to June 30, 2008 (the "First Remarketing Date") to notify the Company and the Reset Remarketing Agent of its election to exercise its option (the "Remarketing Right") to remarket the Senior Notes during the period from the First Remarketing Date until June 30, 2018 (the "Second Remarketing Date") pursuant to that certain Mandatory Tender Remarketing Agreement dated as of the date hereof between the Company and the Mandatory Tender Remarketing Agent as in effect on the date hereof; and (ii) the Second Remarketing Date. (c) Thirty calendar days prior to the First Remarketing Date, the Company shall request that DTC provide preliminary notification to its Participants that, on the date that is ten Business Days prior to the First Remarketing Date, either the Remarketing Right will be exercised and the Senior Notes will be subject to mandatory tender or the Senior Notes will be in Reset Mode and a Duration/Interest Mode Determination Date will have occurred. (d) If the Mandatory Tender Remarketing Agent does not provide notification of its intention to exercise the Remarketing Right as provided above, then on the date that is ten Business Days prior to the First Remarketing Date, the Company shall request that DTC notify its Participants of the occurrence of a Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Senior Note wishes to tender such Senior Note for remarketing. (e) With respect to all Subsequent Spread Periods established after the First Remarketing Date, the Company shall request not later than five nor more than ten calendar days prior to any Duration/Interest Mode Determination Date, that DTC notify its Participants of such -2- 3 Duration/Interest Mode Determination Date and of the procedures that must be followed if any Beneficial Owner of a Senior Note wishes to tender such Senior Note for remarketing. (f) Unless the Company shall have notified the Reset Remarketing Agent of its election to redeem the Senior Notes in full, on or before the tenth Business Day prior to the commencement (the "Commencement Date") of each Subsequent Spread Period (the "Duration/Interest Mode Determination Date"), the Reset Remarketing Agent shall make a recommendation to the Company with respect to the duration, redemption date(s), redemption type (i.e., par, premium, or make-whole, including in the case of make-whole, Reinvestment Spread), redemption prices (if applicable), Commencement Date, Interest Payment Dates and Interest Rate Mode (i.e., Fixed Rate Interest Mode or Floating Rate Interest Mode) and any other relevant terms (other than the Spread) for each Subsequent Spread Period and all of such terms shall be agreed to by the Company and the Reset Remarketing Agents by 3:00 p.m., New York City time, on such Duration/Interest Mode Determination Date. (g) On or before the fifth Business Day prior to the Commencement Date of each Subsequent Spread Period (the "Spread Determination Date"), the Reset Remarketing Agent shall make a recommendation to the Company with respect to the Spread to apply during such Subsequent Spread Period, and the Spread shall be agreed to by the Company and the Reset Remarketing Agent by 1:00 p.m., New York City time, on such Spread Determination Date, irrespective of whether the Senior Notes shall be in the Floating Rate Interest Mode or the Fixed Rate Interest Mode. (h) On the third Business Day prior to the Commencement Date of each Subsequent Spread Period for which Senior Notes will be in the Fixed Rate Interest Mode (a "Fixed Rate Determination Date"), the Rate Agent shall notify the Reset Remarketing Agent of the applicable U.S. Treasury Security to be used for the determination of the Fixed Rate to apply to the Senior Notes for such Subsequent Spread Period, and the Remarketing Agent and the Company shall agree on such Fixed Rate by 1:00 p.m., New York City time, on such Fixed Rate Determination Date. (i) On the second Business Day prior to the Commencement Date of each Subsequent Spread Period for which Senior Notes will be in the Floating Rate Interest Mode, and on the second Business Day prior to each Interest Reset Date during such Subsequent Spread Period (each, a "LIBOR Determination Date"), the Rate Agent shall notify the Reset Remarketing Agent of (i) LIBOR and (ii) the applicable interest rate for the initial Interest Period in such Subsequent Spread Period. (j) In the event that the Company and the Reset Remarketing Agent do not agree on the Spread for any Subsequent Spread Period, then the Company is required unconditionally to repurchase and retire all of the Notes on the relevant Reset Tender Date at a price equal to 100% of the principal amount thereof, together with accrued interest to the Reset Tender Date. In the event that the Reset Remarketing Agent fails to purchase any Notes tendered on such Reset Tender Date, then the Company is required unconditionally to repurchase and retire such Notes. (k) In connection with any Remarketing, the Reset Remarketing Agent shall make, or shall cause the Trustee to make, payment to the DTC Participant of each tendering -3- 4 Beneficial Owner of Senior Notes subject to remarketing, by book-entry through DTC by the close of business on such Reset Tender Date against delivery through DTC of such Beneficial Owner's tendered Senior Notes, of 100% of the principal amount of the tendered Senior Notes that have been purchased for remarketing by the Reset Remarketing Agent. The Company shall make, or cause the Trustee to make, payment of interest to each Beneficial Owner of Senior Notes due on the relevant Reset Tender Date by book-entry through DTC by the close of business on such Reset Tender Date. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are required or authorized to close and, in the case of Senior Notes in the Floating Interest Rate Mode, that is also a London Business Day. "Fixed Rate" means a per annum rate and will be determined by adding the applicable Spread (as agreed to by the Company and the Reset Remarketing Agent on the preceding Spread Determination Date) to the yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the applicable United States Treasury security, selected by the Rate Agent or its agent after consultation with the Reset Remarketing Agent, as having a maturity comparable to the duration selected for the following Subsequent Spread Period, which would be used in accordance with customary financial practice in pricing new issues of corporate debt securities of comparable maturity to the duration selected for the following Subsequent Spread Period. "Initial Spread Period" means the period from and including June 23, 1998 to but excluding June 30, 2008. "LIBOR" means the London interbank offered rate and shall be determined by the Rate Agent as provided below: (i) LIBOR will be determined on the basis of the offered rate for deposits in U.S. Dollars of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date, which appears on Telerate Page 3750 (as defined below) as of approximately 11:00 a.m., London time, on such LIBOR Determination Date. "Telerate Page 3750" means the display designated on page "3750" on Dow Jones Markets Limited or any successor thereto (or such other page as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. Dollar deposits). If no such offered rate appears on Telerate Page 3750, LIBOR for such LIBOR Determination Date will be determined in accordance with the provisions of paragraph (ii) below. The term "London Business Day" means any day on which dealings in deposits in U.S. Dollars are transacted in the London interbank market. (ii) With respect to a LIBOR Determination Date on which no rate appears on Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date, the Rate Agent shall request the principal London offices of each of four major reference banks in the London interbank market selected by the Rate Agent (after consultation with the Company) to provide the Rate Agent with a quotation of the rate at which deposits in U.S. Dollars of the applicable Index Maturity commencing on the second -4- 5 London Business Day immediately following such LIBOR Determination Date, are offered by it to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time. If at least two such quotations are provided, LIBOR for such LIBOR Determination Date will be the arithmetic mean of such quotations as calculated by the Rate Agent. If fewer than two quotations are provided, LIBOR for such LIBOR Determination Date will be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., New York City time, on such LIBOR Determination Date by three major banks in The City of New York selected by the Rate Agent (after consultation with the Company) for loans in U.S. Dollars to leading European banks, of the applicable Index Maturity commencing on the second London Business Day immediately following such LIBOR Determination Date and in a principal amount equal to an amount of not less than U.S. $1,000,000 that is representative for a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the Rate Agent are not quoting as mentioned in this sentence, LIBOR for such LIBOR Determination Date will be LIBOR determined with respect to the immediately preceding LIBOR Determination Date. The Index Maturity applicable to Notes in the Floating Rate Interest Mode will be, in the case of Notes paying (i) monthly, one month; (ii) quarterly, three months; and (iii) semi-annually, six months. "Reinvestment Spread" means, with respect to the Senior Notes, a number, expressed as a number of basis points or as a percentage, selected by the Company and agreed to by the Reset Remarketing Agent on the Duration/Interest Mode Determination Date. "Reset Tender Notice" means the written notice by each Beneficial Owner to the Reset Remarketing Agent of a Senior Note of its intention to tender Senior Notes for purchase and remarketing, which notice must be received by the Reset Remarketing Agent during the period commencing at 3:00 p.m., New York City time, on the Spread Determination Date and ending at 12:00 noon, New York City time, on the second Business Day following such Spread Determination Date for such Subsequent Spread Period (the "Notice Date"). "Subsequent Spread Period" means any Spread Period either (i) after the Initial Spread Period, if the Remarketing Right has not been exercised or (ii) after the Second Remarketing Date, if the Remarketing Right is exercised. Section 3. Fees and Expenses. The obligations of the Company to pay to the Reset Remarketing Agent on each Reset Tender Date the fees and expenses set forth in the applicable Reset Remarketing Agreement Supplement shall survive the termination of this Agreement and remain in full force and effect until all such payments shall have been made in full. Section 4. Removal of the Reset Remarketing Agent. With respect to any Subsequent Spread Period, the Company may in its absolute discretion remove the Reset Remarketing Agent by giving notice to the Reset Remarketing Agent prior to 3:00 p.m., New York City time, on the Duration/Mode Determination Date applicable thereto, such removal to be effective -5- 6 upon the Company's appointment of a successor Reset Remarketing Agent. In such case, the Company will use its best efforts to appoint a successor Reset Remarketing Agent and enter into such a reset remarketing agreement with such persons as soon as reasonably practicable. Section 5. Covenants of the Company. The Company covenants with the Reset Remarketing Agent as follows: (a) The Company will provide prompt notice by telephone, confirmed in writing (which may include facsimile or other electronic transmission), to the Reset Remarketing Agent of (i) any notification or announcement by a "nationally recognized statistical rating organization" (as defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act) with regard to the ratings of any securities of the Company, including, without limitation, notification or announcement of a downgrade in or withdrawal of the rating of any security of the Company or notification or announcement of the placement of any rating of any securities of the Company under surveillance or review, including placement on CreditWatch or on Watch List with negative implications, or (ii) the occurrence at any time of any event set forth in Section 8(b) of this Agreement. (b) (i) The Company shall furnish to the Reset Remarketing Agent, if the Reset Remarketing Agent determines, based on advice of counsel, that changes in applicable law, regulations or interpretations of the Securities and Exchange Commission make it necessary or advisable to deliver a current prospectus in connection with a Remarketing, a then currently effective registration statement under the 1933 Act and a then current prospectus relating to the Senior Notes (and Collateral Bonds, if applicable) to be used by the Reset Remarketing Agent for remarketing and resale of the Senior Notes (such registration statement (whether consisting of the registration statement relating to the initial issuance of the Senior Notes and Collateral Bonds, or any amendment thereto or a new registration statement) and any amendments thereto, including any such prospectus (whether consisting of the prospectus relating to the initial issuance of the Senior Notes and Collateral Bonds or any amendment or supplement thereto or a new prospectus) relating to the Senior Notes (and Collateral Bonds, if applicable) constituting a part thereof, and all documents incorporated therein by reference, as from time to time amended or supplemented pursuant to the 1934 Act, the 1933 Act, or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus shall be provided to the Reset Remarketing Agent by the Company for use in connection with the remarketing of the Senior Notes which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective, the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Reset Remarketing Agent for such use); and (ii) The Company shall also furnish to the Reset Remarketing Agent in connection with the remarketing of Senior Notes such other information as the Reset Remarketing Agent may reasonably request from time to time. The Company agrees, at its expense, to provide the Reset Remarketing Agent with as many copies of the foregoing written materials and other Company approved information as the Reset -6- 7 Remarketing Agent may reasonably request for use in connection with the remarketing of Senior Notes and consents to the use thereof for such purpose. (c) If, at any time during which the Reset Remarketing Agent would be obligated to take any action under this Agreement, any event or condition known to the Company relating to or affecting the Company, any subsidiary thereof or the Senior Notes shall occur which could reasonably be expected to cause any of the reports, documents, materials or information referred to in paragraph (b) above or any document incorporated therein by reference (collectively, the "Reset Remarketing Materials") to contain an untrue statement of a material fact or omit to state a material fact, the Company shall promptly notify the Reset Remarketing Agent in writing of the circumstances and details of such event or condition. (d) So long as the Senior Notes are outstanding, the Company will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (e) Except as otherwise provided herein, the Company agrees that neither it nor any of its subsidiaries or affiliates shall defease, purchase or otherwise acquire, or enter into any agreement to defease, purchase or otherwise acquire, any of the Senior Notes prior to the remarketing thereof by the Reset Remarketing Agent. (f) Notwithstanding any provision to the contrary set forth in the Indenture, the Company shall (i) use its best efforts to maintain the Senior Notes in book-entry form with The Depository Trust Company ("DTC") or any successor thereto and to appoint a successor depositary to the extent necessary to maintain the Senior Notes in book-entry form, and (ii) waive any discretionary right it otherwise has under the Indenture to cause the Senior Notes to be issued in certificated form. Section 6. Dealing in the Senior Notes; Purchase of Senior Notes by the Company. (a) Merrill Lynch, when acting as Reset Remarketing Agent or in its individual or any other capacity, may, to the extent permitted by law, buy, sell, hold and deal in any of the Senior Notes. Merrill Lynch, as Holder or Beneficial Owner of the Senior Notes may exercise any vote or join as a Holder or Beneficial Owner, as the case may be, in any action which any Holder or Beneficial Owner of Senior Notes may be entitled to exercise or take pursuant to the Indenture with like effect as if it did not act in any capacity hereunder. Merrill Lynch, in its individual capacity, either as principal or agent, may also engage in or have an interest in any financial or other transaction with the Company as freely as if it did not act in any capacity hereunder. (b) The Company may purchase Senior Notes in the remarketing, provided that the Interest Rate established with respect to the Senior Notes in any such Remarketing is not different from the Interest Rate that would have been established if the Company had not purchased such Senior Notes. Section 7. Representations and Warranties by the Company. The Company represents and warrants to the Reset Remarketing Agent, as of the date hereof, as of the Effective Date, and as of each Reset Tender Date (each, a "Representation Date") as follows: -7- 8 (a) It has made all the filings with the Commission that it is required to make under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations thereunder (the "1934 Act Regulations") (collectively, the "1934 Act Documents"), (ii) each 1934 Act Document complies in all material respects with the requirements of the 1934 Act and 1934 Act Regulations, and each 1934 Act Document did not at the time of filing with the Commission, and as of each Representation Date, as modified or superseded by any subsequently filed 1934 Act Document on or prior to such Representation Date, will not, include an untrue statement of a material fact or omit to state a 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 and (iii) the applicable Reset Remarketing Materials (as defined herein), as of each Representation Date after the date hereof, as modified or superseded by any subsequently filed 1934 Act Document on or prior to such Representation Date (or, if applicable, by any document filed pursuant to the 1933 Act and the rules and regulations thereunder (the "1933 Act Regulations")), will not include an untrue statement of a material fact or omit to state a 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. (b) The Company further represents and warrants to the Reset Remarketing Agent as of each Representation Date as follows: (i) The accountants who certified the financial statements and supporting schedules included or incorporated by reference in the 1934 Act Documents are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (ii) The financial statements included or incorporated by reference in the 1934 Act Documents, together with the related schedules and notes, present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included or incorporated by reference in the 1934 Act Documents present fairly in accordance with GAAP the information required to be stated therein. The pro forma financial statements and the related notes thereto, if any, included or incorporated by reference in the 1934 Act Documents present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (iii) Since the respective dates as of which information is given in the 1934 Act Documents, except as otherwise stated therein, (A) there has been no material adverse change and no development which could reasonably be expected to result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse -8- 9 Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the Company's common stock in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (iv) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Michigan, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the 1934 Act Documents and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. (v) The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights arising by operation of law, under the charter or by-laws of the Company, under any agreement to which the Company or any of its subsidiaries is a party or otherwise. (vi) Each subsidiary of the Company has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as described in the 1934 Act Documents and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the 1934 Act Documents, all of the issued and outstanding capital stock of each such subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, as the case may be, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of any such subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary. (vii) This Reset Remarketing Agreement and the Reset Remarketing Agreement Supplement have been duly authorized, executed and delivered by the Company. (viii) The Indenture has been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"), and, assuming it has been duly executed and delivered by the Trustee, -9- 10 constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law)(the "Bankruptcy Exceptions"). (ix) The issuance and delivery by the Company of the Collateral Bonds to the Trustee constitute a sale by the Company of the Collateral Bonds to the Trustee as of the Closing Date or, if not a sale, the grant by the Company to the Trustee of a perfected security interest in the Collateral Bonds for the benefit of the holders of the Senior Notes. (x) The Secured Indenture constitutes a legally valid and direct enforceable first mortgage lien, except as the same may be limited by the laws of the State of Michigan (where all of the property covered thereby is located) affecting the remedies for the enforcement of the security provided for therein, which laws do not make inadequate the remedies necessary for the realization of the benefits of such security, or as the same may be limited by the Bankruptcy Exceptions, upon substantially all of the Company's properties and franchises, now owned or hereafter acquired, free from all prior liens, charges or encumbrances, except as set forth in subparagraph (xviii) below, and except, in the case of property hereafter acquired, any thereof existing at the time of acquisition. (xi) The Senior Notes have been duly authorized and executed by the Company and authenticated, issued and delivered in the manner provided for in the Indenture, and constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and are in the form contemplated by, and entitled to the benefits of, the Indenture. (xii) The Collateral Bonds have been duly authorized and executed by the Company and authenticated, issued, and delivered in the manner provided for in the Secured Indenture and have been issued and delivered to the Trustee as provided for in the Thirty-Fifth Supplemental Indenture as security for the Senior Notes, and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. The Collateral Bonds are in the form contemplated by, and entitled to the benefits of, the Secured Indenture. (xiii) Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the -10- 11 Company or any of its respective subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (collectively, "Agreements and Instruments") or in violation of any applicable law, rule or regulation or any judgment, order, writ or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets, which violation or default would, singly or in the aggregate, have a Material Adverse Effect. (xiv) The execution, delivery and performance of the Purchase Agreement, this Agreement, the Mandatory Tender Remarketing Agreement, the Indenture, the Senior Notes, the Thirty-Fifth Supplemental Indenture, the Collateral Bonds and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby; and the consummation of the transactions contemplated herein and therein and compliance by the Company with its obligations hereunder and under the Indenture, the Secured Indenture, the Thirty-Fifth Supplemental Indenture, the Senior Notes, and the Collateral Bonds have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to (other than the lien of the Indenture on the Collateral Bonds), the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary. (xv) There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary, which is required to be disclosed in the 1934 Act Documents (other than as disclosed therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the 1934 Act Documents, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. -11- 12 (xvi) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the remarketing of the Senior Notes hereunder or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery or performance of the Indenture by the Company, except such as have or shall have been already obtained. (xvii) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and neither the Company is aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiary's principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xviii) There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and/or filed as required. (xix) The Company has good and marketable title to the properties specifically described in and conveyed by the Secured Indenture (except such property as may have been disposed of or released from the lien thereof in accordance with the terms thereof) subject only to the lien of the Secured Indenture, to permissible encumbrances, as defined in the Secured Indenture, as to property acquired by the Company subsequent to the execution of the Original Secured Indenture, to any liens existing thereon or purchase money liens placed thereon at the time of such acquisition as permitted by the Secured Indenture, and to certain other reservations, rights of grantors under revocable permits, easements, licenses, zoning laws and ordinances and restrictions and minor defects or irregularities of title which do not materially impair the use of the property affected thereby in the operation of the business of the Company; the Company and its subsidiaries have good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except the liens of the Secured Indenture and such liens, encumbrances and defects as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; the pipeline, distribution main and underground gas storage easements enjoyed by the Company and its subsidiaries are valid, subsisting and enforceable easements with such exceptions as are not material and do not interfere with the conduct of the business of the Company and its subsidiaries. (xx) The Company and its subsidiaries possess all licenses, franchises, permits, certificates, authorizations, approvals, consents, orders and other operating rights (collectively, the "Governmental Licenses") issued by the Federal Energy Regulatory -12- 13 Commission, the State of Michigan, and all other federal, state, local or foreign regulatory agencies or bodies, governmental authorities or agencies necessary for the ownership or lease of the material properties owned or leased by each of them and to conduct the business now operated by each of them; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect and contain no unduly burdensome provisions that would interfere with the conduct of the business of the Company and its subsidiaries, considered as one enterprise and, except as otherwise set forth in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened that would result in a material modification, suspension or revocation thereof. (xxi) Except as described in any Reset Remarketing Materials and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance or code, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, the "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are in compliance with their requirements, and (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries. (xxii) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group, a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935 (the "1935 Act"), and such "holding company" and the Company are presently exempt from the provisions of the 1935 Act (except Section 9 thereof). (xxiii) The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. (xxiv) None of the Company and its subsidiaries or any of their respective directors, officers or controlling persons, has taken or will take, directly or indirectly, any action resulting in a violation of Regulation M under the 1934 Act, or designed to cause or result in, or that has constituted or that reasonably might be expected to constitute, the -13- 14 stabilization or manipulation of the price of any security of the Company to facilitate the remarketing of the Senior Notes. (xxv) No "forward looking statement" (as defined in Rule 175 under the 1933 Act) contained in the Registration Statement, any preliminary prospectus or the Prospectus was made or reaffirmed without a reasonable basis or was disclosed other than in good faith. (xxvi) The Company is not an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (xxvii) The Senior Notes are rated "A2" by Moody's Investors Service, Inc. and "A" by Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. or such other rating as to which the Company shall have most recently notified the Reset Remarketing Agent pursuant to Section 3(a) hereof. References in the foregoing representations and warranties to the 1934 Act Documents shall be deemed to refer to the Registration Statement (as defined in Section 5(b) below) and Prospectus (as defined in Section 5(b) above), in each case including the documents incorporated by reference therein, if such are required pursuant to such Section 5(b). Section 8. Conditions to the Reset Remarketing Agent's Obligations. The obligations of the Reset Remarketing Agent under this Agreement have been undertaken in reliance on, and shall be subject to, (a) the due performance by the Company of its obligations and agreements as set forth in this Agreement and the accuracy of the representations and warranties in this Agreement and any certificate delivered pursuant hereto, and (b) the further condition that none of the following events shall have occurred at any time: (i) the rating of any securities of the Company shall have been down-graded or put under surveillance or review, including being put on CreditWatch or Watch List with negative implications, or withdrawn by a nationally recognized statistical rating organization; (ii) without the prior written consent of the Reset Remarketing Agent, neither the Indenture (including the Senior Notes) nor the Secured Indenture (including the Collateral Bonds) shall have been amended in any manner, or otherwise contain any provision not contained therein as of the date hereof, that in either case in the judgment of the Reset Remarketing Agent materially and adversely changes the nature of the Senior Notes or the Collateral Bonds, as the case may be, or the remarketing procedures (it being understood that, notwithstanding the provisions of this clause (ii), the Company shall not be prohibited from amending the Indenture); -14- 15 (iii) trading in any securities of the Company or any of its affiliates shall have been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices shall have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Agents, Inc. or any other governmental authority, or if a banking moratorium shall have been declared by either Federal or New York authorities; (iv) there shall have occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Reset Remarketing Agent, impracticable to remarket the Senior Notes or to enforce contracts for the sale of the Senior Notes; (v) an Event of Default (as defined in the Indenture), or any event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, with respect to the Senior Notes shall have occurred and be continuing; (vi) a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, shall have occurred; or (vii) the Senior Notes are not maintained in book-entry form with DTC or any successor thereto; provided, that the Reset Remarketing Agent, in its sole discretion and subject to receipt of an opinion of counsel for the Company reasonably satisfactory to the Reset Remarketing Agent, may waive the foregoing condition if in the Reset Remarketing Agent's judgment the Indenture and the Senior Notes can be amended, and they are amended, so as to permit the remarketing of the Senior Notes in certificated form and otherwise as contemplated herein; (c) The obligations of the Reset Remarketing Agent to purchase and remarket the Senior Notes shall also be subject to the terms and conditions of the applicable Reset Remarketing Agreement Supplement. Section 9. Indemnification. (a) The Company agrees to indemnify and hold harmless the Reset Remarketing Agent and its officers, directors and employees and each person, if any, who controls the Reset Remarketing Agent within the meaning of Section 20 of the 1934 Act as follows: (i) against any loss, liability, claim, damage or expense whatsoever (collectively, "Damages"), as incurred, arising out of, (A) the failure to have an effective -15- 16 Registration Statement under the 1933 Act relating to the Senior Notes, if required, or the failure to satisfy the prospectus delivery requirements of the 1933 Act because the Company failed to provide the Reset Remarketing Agent with a Prospectus for delivery, as required by Section 5 hereof, or (B) any untrue statement or alleged untrue statement of a material fact contained in any of the Reset Remarketing Materials (including any incorporated documents), or (C) the omission or alleged omission therefrom of a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading, or (D) any violation by the Company of, or any failure by the Company to perform any of its obligations under, this Agreement, or (E) the acts or omissions of the Reset Remarketing Agent in connection with its duties and obligations to determine the Interest Rate or other terms with respect to any Subsequent Spread Period, as provided hereunder, except Damages that are finally judicially determined to be due to its gross negligence or willful misconduct; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever arising out of, or based upon, any of items (A) through (E) in clause (i) above; provided that (subject to clause (d) below) such settlement is effected with the written consent of the Company, which consent shall not be unreasonably withheld; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Reset Remarketing Agent), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever arising out of, or based upon, any of items (A) through (E) in clause (i) above to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that the foregoing indemnity shall not apply to any losses, liabilities, claims, damages and expenses to the extent arising out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Reset Remarketing Agent expressly for use in the Reset Remarketing Materials. (b) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to clause (a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to clause (b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any -16- 17 local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 9 or Section 10 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission or fault, culpability or a failure to act by or on behalf of any indemnified party. (c) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by clause 9 (a) (ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (d) The indemnity agreements contained in this Section 10 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Reset Remarketing Agent, and shall survive the termination or cancellation of this Agreement and the remarketing of any Senior Notes hereunder. Section 10. Contribution. If the indemnification provided for in Section 9 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Reset Remarketing Agent on the other hand from the remarketing of the Senior Notes pursuant to this Agreement or (ii) if the allocation provided by clause (i) 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 of the Reset Remarketing Agent on the other hand in connection with the acts, failures to act, statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Reset Remarketing Agent on the other hand in connection with the remarketing of the Senior Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as (i) the aggregate principal amount of the Senior Notes, and (ii) the aggregate positive difference, if any, between the price at which the Senior Notes are sold by the Reset Remarketing Agent in the remarketing and the price paid by the Reset Remarketing Agent for the Senior Notes tendered on any Reset Tender Date. -17- 18 The relative fault of the Company on the one hand and the Reset Remarketing Agent on the other hand shall be determined by reference to, among other things, the responsibility hereunder of the applicable party for any act or failure to act relating to the losses, liabilities, claims, damages or expenses incurred or, in the case of any losses, liabilities, claims, damages or expenses arising out of any untrue or alleged untrue statement of a material fact contained in any of the Reset Remarketing Materials or the omission or alleged omission to state a material fact therefrom, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Reset Remarketing Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Reset Remarketing Agent agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 10. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 10 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such act or failure to act or untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 10, the Reset Remarketing Agent shall not be required to contribute any amount in excess of the amount by which the total price at which the Senior Notes remarketed by it and resold to the public were sold to the public exceeds the amount of any damages which the Reset Remarketing Agent has otherwise been required to pay by reason of any act or failure to act for which it is responsible hereunder or any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 11, each person, if any, who controls the Reset Remarketing Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Reset Remarketing Agent, and each officer and director of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. Section 11. Termination of this Reset Remarketing Agreement. Subject to Section 3 hereof relating to the payment of fees and expenses, this Agreement shall terminate as to the Reset Remarketing Agent on the effective date of the removal of such Reset Remarketing Agent pursuant to Section 4 hereof. Section 12. Reset Remarketing Agent's Performance: Duty of Care. The duties and obligations of the Reset Remarketing Agent hereunder shall be determined solely by the express -18- 19 provisions of this Agreement, the Senior Notes and the Indenture, the Secured Indenture and the Collateral Bonds and the applicable Reset Remarketing Agreement Supplement. No implied covenants or obligations of or against the Reset Remarketing Agent shall be read into this Agreement, the Indenture or the Secured Indenture. In the absence of bad faith on the part of the Reset Remarketing Agent, the Reset Remarketing Agent may conclusively rely upon any document furnished to it, which purports to conform to the requirements of this Agreement, the Indenture, or the Secured Indenture, as to the truth of the statements expressed in any of such documents. The Reset Remarketing Agent shall be protected in acting upon any document or communication reasonably believed by it to have been signed, presented or made by the proper party or parties. The Reset Remarketing Agent shall incur no liability hereunder to any Beneficial Owner or Holder of Senior Notes in its individual capacity or as Reset Remarketing Agent for any action or failure to act in connection with the remarketing or otherwise. The Reset Remarketing Agent shall incur no liability to the Company with respect to calculation of the Interest Rate applicable to any Interest Period, except as a result of gross negligence or willful misconduct on its part. Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE. Section 14. Term of Agreement. Unless otherwise terminated in accordance with the provisions hereof, this Agreement shall remain in full force and effect from the date hereof until the first day thereafter on which no Senior Notes are outstanding. Section 15. Successors and Assigns. The rights and obligations of the Company hereunder may not be assigned or delegated to any other person without the prior written consent of Merrill Lynch, the rights and obligations of Merrill Lynch hereunder may not be assigned or delegated to any other person without the prior written consent of the Company, and any attempt by either party to do so will be unenforceable. This Agreement shall inure to the benefit of and be binding upon the Company and Merrill Lynch and their respective permitted successors and assigns. The terms "successors" and "assigns" shall not include any purchaser of any Senior Notes merely because of such purchase. Section 16. Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. Section 17. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any or all jurisdictions because it conflicts with any provision of any constitution, statute, rule or public policy or for any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case, circumstances or jurisdiction, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever. -19- 20 Section 18. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. Section 19. Amendments. This Agreement may be amended by any instrument in writing signed by each of the parties hereto. Section 20. Notices. Unless otherwise specified, any notices, requests, consents or other communications given or made hereunder or pursuant hereto shall be made in writing or transmitted by any standard form of telecommunication or by telephone and confirmed in writing. All written notices shall be deemed to be validly given or made, if delivered by hand, when so delivered, of if mailed, when mailed registered or certified mail, return receipt requested and postage prepaid. All notices by telecommunication (including telephone) shall be deemed to be validly given or made when received. All such notices, requests, consents or other communications shall be addressed as follows: if to the Company, to 500 Griswold Street, Detroit, Michigan 48226, Attn: Ronald E. Christian, Esq., Vice President, General Counsel and Secretary, Facsimile No.: (313) 965-0009; and if to Merrill Lynch, to Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill Lynch World Headquarters, World Financial Center, North Tower, New York, New York 10281-1209, Attention: Debt Syndicate, or to such other address as either of the above shall specify to the other in writing. Section 21. Benefit. (a) Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon or give any person other than the parties hereto any remedy or claim under or by reason of this Agreement or any term, covenant or condition hereof, all of which shall be for the sole and exclusive benefit of the parties. (b) No beneficial owner of any Note shall have any rights or claims under this Agreement or any Remarketing Agreement Supplement or against the Company or the Remarketing Agent as a result of the Remarketing Agent's not purchasing such Notes. -20- 21 IN WITNESS WHEREOF, each of the Company and Merrill Lynch has caused this Agreement to be executed in its name and on its behalf by one of its duly authorized officers as of the date first above written. MICHIGAN CONSOLIDATED GAS COMPANY By:/s/ Howard L. Dow III ------------------------------- Name: Howard L. Dow III Title: Senior Vice President and Chief Financial Officer MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:/s/ Anthony V. Leness ------------------------------- Name: Anthony V. Leness Title: Managing Director -21- 22 EXHIBIT A RESET REMARKETING AGREEMENT SUPPLEMENT Merrill Lynch & Co./ Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Reset Remarketing Agent") hereby agrees to purchase the Senior Notes described below (the "Senior Notes") that have been tendered by the holders thereof for sale on _____________, _____ (the "Reset Tender Date"). It is acknowledged and agreed that the Senior Notes need not be further registered under the Securities Act of 1933, as amended (the "Act"), and that, in connection with the remarketing of the Senior Notes by the Reset Remarketing Agent in accordance with the terms of the Reset Remarketing Agreement dated as of June 23, 1998, no prospectus meeting the requirements of Section 10 of the Act need be delivered, or filed pursuant to Rule 424 under the Act. It is understood that the Reset Remarketing Agent will deliver to purchasers and prospective purchasers, in connection with the remarketing, one or more forms of written communication describing the terms of the Senior Notes (each, a "Reset Remarketing Memorandum"), the form of each of which shall be delivered to Michigan Consolidated Gas Company, a Michigan corporation (the "Company"), not less than two Business Days prior to its use and subject to the approval of the Company prior to its use by the Reset Remarketing Agent, which approval shall not be unreasonably withheld or delayed. The Reset Remarketing Agent shall offer to purchase Senior Notes and purchase validly tendered Senior Notes on the Reset Tender Date in accordance with all applicable laws and regulations and interpretations of the Securities and Exchange Commission. The representations and warranties made pursuant to the above-referenced Reset Remarketing Agreement (other than paragraphs (b)(viii), (x), (xi) and (xii) of Section 7); Section 3(o) of the attached Purchase Agreement (which date shall be the date of the Reset Remarketing Agreement Supplement and the relevant Reset Tender Date); Section 9 of the attached Purchase Agreement (except that Section 9 is amended to allow termination of this Agreement by the Agent if the Company's representations and warranties therein are not accurate and correct); paragraphs (c) and (f) of Section 5 of the attached Purchase Agreement; and Section 8 and the last paragraph of Section 5 of the attached Purchase Agreement are incorporated in their entirety into this Agreement and made applicable to the obligations of the Reset Remarketing Agent to the extent applicable to any remarketing of the Senior Notes, except as explicitly amended hereby. The terms "Registration Statement" and "Prospectus" shall be deemed to refer to each such document as amended to the date hereof and the Reset Tender Date, and the term "Incorporated Documents" shall similarly be deemed to include those filed and incorporated by reference through such dates. If the Reset Remarketing Agent determines, based on advice of counsel, that changes in applicable law, regulations or interpretations of the Securities and Exchange Commission make it necessary or advisable to deliver a current prospectus in connection with this Remarketing, the attached Purchase Agreement shall apply in its entirety. All references in such Purchase Agreement to (i) the "Agent" shall be deemed to refer to the Reset Remarketing Agent, (ii) the "Securities" shall 23 be deemed to refer to the Senior Notes, (iii) the Purchase Agreement shall be deemed to refer to the Reset Remarketing Agreement Supplement, and (iv) "Closing Date" shall be deemed to refer to the Reset Tender Date. To the extent the provisions of such Purchase Agreement refer to the "Prospectus" or the "Registration Statement," such references shall be deemed to refer to any Remarketing Memorandum or registration statement, if any, that the Company is required to prepare or file pursuant to applicable law, regulations or interpretations of the Securities and Exchange Commission in effect at the time of such remarketing of the Senior Notes, including all documents incorporated by reference therein. For the purposes of Section 7 of the attached Purchase Agreement, the relative benefit received by the Company on the one hand and the Reset Remarketing Agent on the other in connection with the remarketing of the Senior Notes pursuant to this Agreement shall be deemed to be in the same respective proportions as the aggregate public offering price of the Senior Notes bears to the remarketing fee received by the Reset Remarketing Agent pursuant to this Agreement. All capitalized terms not otherwise defined in this Agreement have the respective meanings assigned thereto in the Senior Notes, the form of which is attached hereto. Company: Michigan Consolidated Gas Company 500 Griswold Street Detroit, Michigan 48226 Reset Remarketing Agent and Address: Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters World Financial Center North Tower, 26th Floor New York, New York 10281-1209 Title of Senior Notes: Extendable MandatOry Par Put Remarketed Securities(sm) due June 30, 2038 Principal Amount of Senior Notes to be Purchased: Title of Indenture: Indenture dated as of June 1, 1998, as supplemented and amended, by and between the Company and the Trustee Trustee: Citibank, N.A. Current Ratings: Moody's Investors Service Inc.: "A2" Standard & Poor's Corporation: "A" -2- 24 Certain Terms of the Senior Notes: Maturity: June 30, 2038 Spread Determination Date: Duration/Mode Determination Date: Tender Notice Date: Interest Reset Dates: Reset Tender Date: New Interest Rate: As determined by application of the provisions set forth in the attached form of the Senior Notes on the LIBOR Determination Date or the Fixed Rate Determination Date, as applicable. Spread: Interest Payment Dates: June 30 and December 30. Subsequent Spread Period: Redemption Provisions: As set forth in the Prospectus under the caption headed "Description of the Notes--Redemption." Beneficial Owner Tender Provisions: As set forth in the attached Prospectus Supplement dated June 17, 1998. In the event that the Reset Remarketing Agent fails to purchase all Senior Notes validly tendered for purchase on the Reset Tender Date, then the Reset Remarketing Agent shall promptly notify the Company and the Trustee of such failure. Shorter Subsequent Spread Period: In the event that (A) the Reset Remarketing Agent fails to purchase all Senior Notes validly tendered for purchase on the Reset Tender Date for any reason, and (B) the Company has not given notice of redemption of all of the Senior Notes then outstanding in -3- 25 accordance with the provisions described in the attached form of the Senior Notes, then the Subsequent Spread Period shall be a period of one year, which Subsequent Spread Period shall be deemed to have commenced upon the Commencement Date that coincides with the Reset Tender Date. Legal Opinion: If required to be delivered pursuant to this Reset Remarketing Agreement Supplement, the opinion to be delivered pursuant to Section 5(b)(1)(v) of the attached Purchase Agreement shall be delivered by counsel satisfactory to the Reset Remarketing Agent and shall be modified to read as follows: "the Senior Notes are in the form contemplated by the Indenture and have been duly and validly authorized; a single global Note registered in the name of CEDE & Co., a nominee of The Depository Trust Company ("DTC"), has been duly authenticated in accordance with the provisions of the Indenture, paid for and delivered to DTC, and constitutes a legal, valid and binding obligation of the Company. The Reset Remarketing Agent will acquire a "securities entitlement" (within the meaning of Section 8-501 of the Uniform Commercial Code as in effect in the State of New York (the "UCC")) with respect to any Senior Notes which a prior owner causes DTC or a securities intermediary to credit to the Reset Remarketing Agent's securities account. Assuming that the Reset Remarketing Agent acquires such security entitlement for value and without notice of an adverse claim, then pursuant to Section 8-502 of the UCC an action based on an adverse claim to the Senior Notes, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may not be asserted against the Reset Remarketing Agent, or such other opinion as shall be appropriate under the law then in effect to the effect that no other person may assert rights in the Senior Notes against the Reset Remarketing Agent. -4- 26 If required to be delivered pursuant to this Reset Remarketing Purchase Agreement, the opinion to be delivered pursuant to Section 5(b)(3) of the attached Purchase Agreement may be delivered by any counsel designated by the Reset Remarketing Agent and reasonably acceptable to the Company. Form of Senior Notes: Global certificate registered in the name of the nominee, which currently is CEDE & Co., of the depository of the Senior Notes, which is DTC. The beneficial owners of the Senior Notes ("Beneficial Owners") are not entitled to receive definitive certificates representing their Senior Notes, except under limited circumstances. A Beneficial Owner's ownership of a Note currently is recorded on or through the records of the brokerage firm or other entity that is a participant in DTC and that maintains such Beneficial Owner's account. Purchase Price: 100% of the principal amount of the Senior Notes. Payable to DTC for the Beneficial Owners of Tendered Senior Notes. Remarketing Fee: _____% of the principal amount of the Senior Notes outstanding on each Reset Tender Date. Closing: -5- 27 The foregoing terms are hereby confirmed and agreed to as of this ___ day of __________, ____. MICHIGAN CONSOLIDATED GAS COMPANY By: --------------------------------- Name: Title: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: -------------------------------- Name: Title: -6- -----END PRIVACY-ENHANCED MESSAGE-----