-----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, PQ/6j5Y1LWNKR5E7DO7GJ7oIN6HINtpt7mTI2OhbYvFX4wBNLUaekvm1KZfOcs6T W3KLRZ5cyA5FPDW8b5Y2pw== 0000950124-99-003758.txt : 19990615 0000950124-99-003758.hdr.sgml : 19990615 ACCESSION NUMBER: 0000950124-99-003758 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990604 ITEM INFORMATION: FILED AS OF DATE: 19990614 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: 99645819 BUSINESS ADDRESS: STREET 1: 500 GRISWOLD ST CITY: DETROIT STATE: MI ZIP: 48226 BUSINESS PHONE: 3139652430 8-K 1 FORM 8-K 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 4, 1999 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 6.85% Senior Secured Insured Quarterly Notes due 2038 and its 6.85% Senior Notes due 2039 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 4, 1999 with respect to the 6.85% Senior Secured Insured Quarterly Notes due 2038. 1-2 Purchase Agreement dated June 4, 1999 with respect to the 6.85% Senior Notes due 2039. 4-1 Second Supplemental Indenture dated as of June 9, 1999 to the Senior Debt Securities Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A. 23-1 Consent of PricewaterhouseCoopers LLP with respect to the 6.85% Senior Notes due 2039. 23-2 Consent of PricewaterhouseCoopers LLP with respect to the 6.85% Senior Secured Insured Quarterly Notes due 2038.
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 Consolidate Gas Company /s/ Harold Gardner ---------------------------------- Harold Gardner Vice President and Chief Accounting Officer Date: June 14, 1999 4 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ------- --- ----------- 1-1 Purchase Agreement dated June 4, 1999 with respect to the 6.85% Senior Secured Insured Quarterly Notes due 2038. 1-2 Purchase Agreement dated June 4, 1999 with respect to the 6.85% Senior Notes due 2039. 4-1 Second Supplemental Indenture dated as of June 9, 1999 to the Senior Debt Securities Indenture dated as of June 1, 1998 between Michigan Consolidated Gas Company and Citibank, N.A. 23-1 Consent of PricewaterhouseCoopers LLP with respect to the 6.85% Senior Notes due 2039. 23-2 Consent of PricewaterhouseCoopers LLP with respect to the 6.85% Senior Secured Insured Quarterly Notes due 2038. EX-1.1 2 SERVER SECURED INSURED QUARTERLY NOTES DUE 2038 1 EXHIBIT 1.1 MICHIGAN CONSOLIDATED GAS COMPANY (A MICHIGAN CORPORATION) DEBT SECURITIES PURCHASE AGREEMENT JUNE 4, 1999 Edward D. Jones & Co., L.P. 12555 Manchester Road St. Louis, Missouri 63131 Ladies and Gentlemen: Michigan Consolidated Gas Company (the "COMPANY"), a Michigan corporation, confirms its agreement (this "AGREEMENT") with Edward D. Jones & Co., L.P. (the "UNDERWRITER"), with respect to the issue and sale by the Company and the purchase by the Underwriter, acting severally and not jointly, of the principal amount set forth in Schedule II of $55,000,000 aggregate principal amount of the Company's 6.85% Senior Secured Insured Quarterly Notes due 2038 (the "SECURITIES"). The Securities will be issued by the Company under its Indenture, dated as of June 1, 1998, as supplemented by the First Supplemental Indenture, dated as of June 18, 1998 (the "BASE INDENTURE"), between the Company and Citibank, N.A., as trustee (the "TRUSTEE"), and a second supplement to the Base Indenture (the "SECOND SUPPLEMENTAL INDENTURE," and together with the Base Indenture and any amendments or supplements thereto, the "INDENTURE") to be entered into between the Company and the Trustee, which will be secured by the concurrent issuance and delivery to the Trustee of the Company's First Mortgage Bonds, Collateral Series C (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 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 2 having other terms that mirror those of the Securities. The Company proposes to sell to the Underwriter 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"). 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 the Underwriter 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 -3- 4 424 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 Underwriter 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 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 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. (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 -4- 5 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. (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, -5- 6 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 Securities. (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 hereafter acquired, free from all prior liens, charges or encumbrances, except -6- 7 as set forth in subparagraph xxii 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 Indenture, the Securities, the 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. (xviii) 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 -7- 8 its subsidiary's principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xix) 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 performance by the Company of its obligations hereunder; 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. (xx) 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. (xxi) 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 and the Indenture, 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. (xxii) 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 -8- 9 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. (xxiii) 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. (xxiv) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group Inc. ("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). (xxv) 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 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 -9- 10 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. (xxvi) 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"). (xxvii) 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. (xxviii) 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. (xxix) 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. (xxx) The Company has authorized all necessary action to be taken by it for the procurement of an irrevocable financial guarantee insurance policy (the "Insurance Policy") issued by MBIA Insurance Corporation (the "Insurer"), insuring the payment of principal and interest on the Securities, when due. (b) Any certificate signed by any officer of the Company and delivered to the Underwriter or to counsel for the Underwriter 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. -10- 11 SECTION 2. Sale and Delivery to the Underwriter; 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 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 Underwriter and the Company, at 9:00 a.m. (Eastern time) on the third (fourth, if pricing of the Securities occurs after 4:00 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 Underwriter 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 Underwriter, for the account of the Underwriter against payment to the Company by wire transfer of immediately available funds to a bank account designated by the Company. (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 Underwriter 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 Underwriter 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 Underwriter 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 Underwriter 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 Underwriter or counsel for the Underwriter shall object. (d) The Company has furnished or will deliver to the Underwriter and counsel for the Underwriter, 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 Underwriter, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriter. The copies of the Registration Statement and each amendment thereto furnished to the Underwriter 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 -12- 13 Underwriter 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. (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 Underwriter 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 Underwriter, without charge, such number of copies of such amendment or supplement as the Underwriter may reasonably request. (g) The Company will use its best efforts, in cooperation with the Underwriter, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Underwriter 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 Underwriter 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 Senior Secured Insured Quarterly 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 make generally available and, upon request, furnish the Underwriter 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 the Underwriter, 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 the Underwriter, except for the offer by the Company of $55,000,000 aggregate principal amount of its 6.85% Senior Notes due June 1, 2039. (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 -14- 15 of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto; (ii) the printing and delivery to the Underwriter of this Agreement, the Indenture 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 Underwriter, 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 Underwriter 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 Underwriter of copies of each preliminary prospectus, any Term Sheet, the Prospectus and any amendments or supplements thereto; (vii) the preparation, printing and delivery to the Underwriter 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 Underwriter in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse the Underwriter 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 Underwriter. SECTION 5. Conditions of Underwriter's Obligations. The obligations of the Underwriter 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 Underwriter. 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). -15- 16 (b) On the Closing Date the Underwriter shall have received: (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 Underwriter, together with signed or reproduced copies of such letter for the Underwriter, 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 under the Secured Indenture -16- 17 in the manner provided for in the Secured 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 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 Securities. (viii) Except as to property acquired subsequent to the date of execution of the Thirty-fifth 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 -17- 18 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. (x) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to (A) the Secured Indenture and the issuance and delivery of the Collateral Bonds and (B) the Indenture and the issuance and delivery of the Securities, 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 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 knowledge of such counsel, 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 -18- 19 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. (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 execution, delivery and performance by the Company of this Agreement; the execution, delivery and performance by the Company of the Indenture, the Securities, the 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 -19- 20 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. (xx) 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 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 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 or the Secured Indenture, 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. (xxi) The information and statements in the Prospectus under the captions "Summary of the Offer," "The Company," "Use of Proceeds," "Description of the First Mortgage Bonds," "Description of the Senior Debt Securities" and the "Description of the Senior Secured Insured Quarterly Notes," to the extent that they involve matters of law, summaries of legal matters, the Company's charter and by-laws, legal documents or proceedings, or legal conclusions, have been reviewed by such counsel and are correct in all material respects. -20- 21 (xxii) 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. (xxiii) 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. (xxiv) 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. (xxv) 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 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 Secured Indenture, the Indenture and the Securities. -21- 22 (xxvi) 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 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. (xxvii) 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. (xxviii) 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. (xxix) 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 -22- 23 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 LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Underwriter, together with signed or reproduced copies of such letter for the Underwriter, in form and substance satisfactory to the Underwriter, with respect to such matters as the Underwriter 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. (c) On the Closing Date, the Underwriter 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 Underwriter shall have received from Deloitte & Touche LLP a letter dated such date in form and substance satisfactory to the Underwriter, together with signed or reproduced copies of such letter for the Underwriter, to the effect set forth below and as to such other matters as the Underwriter may reasonably request, that: -23- 24 (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 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 -24- 25 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; (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 Underwriter, in each case as compared with the corresponding period in the preceding year and with any other period of corresponding length specified by the Underwriter, 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. -25- 26 (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 Underwriter, 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 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 Underwriter. (e) On the Closing Date, the Underwriter 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 Underwriter shall have received satisfactory evidence that the Insurance Policy has been issued by the Insurer and confirmation that the Securities shall be rated "Aaa" by Moody's Investors Service Inc. and "AAA" by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.; and the Company shall have delivered to the Underwriter a letter, dated the Closing Date, from such rating agencies, in form satisfactory to the Underwriter, 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" -26- 27 (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, the Underwriter shall have received from Kutak Rock, counsel to the Insurer, an opinion substantially in the form attached hereto as Schedule III. (h) On the Closing Date, the Underwriter shall have received a certificate of an appropriate officer of the Insurer, dated as of the Closing Date, to the effect that the information being presented in the Prospectus Supplement is true and accurate in all material respects with respect to the Insurer, that there is no pending litigation against the Insurer that would materially affect the Insurer's ability to perform its obligations, and that all necessary corporate action has been take with respect to the execution, delivery and performance of the Insurance Policy, and that the execution and delivery of the Insurance Policy do not conflict with the organizational documents of the Insurer. (i) On the Closing Date, counsel for the Underwriter 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 Underwriter and counsel for the Underwriter. 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 Underwriter 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 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 -27- 28 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 the Underwriter), 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 the Underwriter 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 Underwriter (or any person controlling such Underwriter) 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 -28- 29 Section 20 of the 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 the Underwriter 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 the Underwriter, 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 -29- 30 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. 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 Underwriter 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 Underwriter 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 Underwriter 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 Underwriter, 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 Underwriter 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 Underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriter 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 Underwriter 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. -30- 31 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 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 Underwriter's 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 Underwriter. SECTION 9. Termination of Agreement. (a) The Underwriter 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 Underwriter, 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 -31- 32 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) The Underwriter may terminate this Agreement, by notice to the Company at any time on or prior to the Closing Date, if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Prospectus, any change or any development which would materially and adversely affect the Insurer's condition (financial or otherwise) or operations or which would materially and adversely affect the Insurer's ability to perform its obligations under the Insurance Policy. (c) 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. 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 Underwriter shall be directed to Edward D. Jones & Co, L.P. at 12555 Manchester Road, St. Louis, Missouri 63131 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 Underwriter 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 Underwriter, 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 Underwriter, 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 Underwriter, and said controlling persons and officers and directors and their heirs and legal Underwriter, 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. -32- 33 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 Underwriter 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, Treasurer and Chief Financial Officer CONFIRMED AND ACCEPTED, as of the date first above written: By: EDWARD D. JONES & CO., L.P. By: /s/ James A. Krekeler ------------------------------ Authorized Signatory -34- 35 SCHEDULE I UNDERWRITER: Edward D. Jones & Co, L.P. PURCHASE PRICE AND DESCRIPTION OF THE SECURITIES: TITLE: 6.85% Senior Secured Insured Quarterly Notes due 2038. PRINCIPAL AMOUNT: $55,000,000 PURCHASE PRICE: 96.85% 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 1, 2038 INTEREST RATE: 6.85% INTEREST PAYMENT DATES: March 1, June 1, September 1 and December 1. REDEMPTION PROVISIONS: As set forth in the Prospectus under the caption headed "Description of the Senior Secured Insured Quarterly Notes - Optional 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 9, 1999 LOCATION: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 36 PLACE OF DELIVERY AND PAYMENT: DELIVERY: Edward D. Jones & Co., L.P. 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 ------------------- ----------------- Edward D. Jones & Co., L.P................................................ $55,000,000 Total..................................................................... $55,000,000 ===========
38 SCHEDULE III FORM OF OPINION OF INSURER'S COUNSEL The opinion of Insurer's counsel shall be to the effect that: 1. [Name of Insurer] (the "Corporation") is a stock insurance corporation, duly incorporated and validly existing under the laws of [State], and is licensed and authorized to issue the Insurance Policy under the laws of [State]. 2. The Insurance Policy has been duly executed and is a valid and binding obligation of the Corporation enforceable in accordance with its terms. 3. The Insurance Policy is not required to be registered under the Securities Act. 4. The statements set forth under the caption "The Policy and the Insurer" in the Prospectus Supplement dated June 4, 1999 insofar as such statements constitute a description of the Insurance Policy, accurately summarize the Insurance Policy. -4- EX-1.2 3 SERVER NOTES DUE 2039 1 EXHIBIT 1.2 MICHIGAN CONSOLIDATED GAS COMPANY (A MICHIGAN CORPORATION) DEBT SECURITIES PURCHASE AGREEMENT JUNE 4, 1999 Merrill Lynch & Co. Merrill Lynch Pierce, Fenner & Smith Incorporated A. G. Edwards & Sons, Inc. c/o Merrill Lynch & Co. World Financial Center - North Tower New York, New York 10281-1327 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 A. G. Edwards & Sons, Inc. (collectively, the "UNDERWRITERS", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), 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 $55,000,000 aggregate principal amount of the Company's 6.85% Senior Notes due 2039 (the "SECURITIES"). The Securities will be issued by the Company under its Indenture, dated as of June 1, 1998, as supplemented by the First Supplemental Indenture, dated as of June 18, 1998 (the "BASE INDENTURE"), between the Company and Citibank, N.A., as trustee (the "TRUSTEE"), and a second supplement to the Base Indenture (the "SECOND SUPPLEMENTAL INDENTURE," and together with the Base Indenture and any amendments or supplements thereto, the "INDENTURE") to be entered into between the Company and the Trustee, which will be secured by the concurrent issuance and delivery to the Trustee of the Company's First Mortgage Bonds, Collateral Series D (the "COLLATERAL BONDS"), issued under and ratably secured by the Indenture of Mortgage and Deed of Trust 2 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 -2- 3 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 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 -3- 4 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. 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 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 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. (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 -4- 5 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 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 -5- 6 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 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 Securities. -6- 7 (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 hereafter acquired, free from all prior liens, charges or encumbrances, except as set forth in subparagraph xxii 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 Indenture, the Securities, the 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 -7- 8 foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective property, assets or operations. (xviii) 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. (xix) 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 performance by the Company of its obligations hereunder; 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. (xx) 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. (xxi) 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 and the Indenture, 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. (xxii) 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 -8- 9 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. (xxiii) 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. (xxiv) The Company is a "public utility company" and a "subsidiary company" of MCN Energy Group Inc. ("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). (xxv) 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 -9- 10 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, 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. (xxvi) 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"). (xxvii) 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. (xxviii) 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. (xxix) 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. (xxx) The Company has authorized all necessary action to be taken by it for the procurement of an irrevocable financial guarantee insurance policy (the "Insurance Policy") issued by MBIA Insurance Corporation (the "Insurer"), insuring the payment of principal and interest on the Securities, when due. (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 -10- 11 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 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 Underwriters and the Company, at 9:00 a.m. (Eastern time) on the third (fourth, if pricing of the Securities occurs after 4:00 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 Underwriters 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 Underwriters, 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 Underwriters, 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 Underwriters in New York, New York not later than 10:00 a.m. (Eastern time) on the business day prior to the Closing Date. -11- 12 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. (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 Underwriters 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 Underwriters 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 Underwriters 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 Underwriters or counsel for the Underwriters shall object. (d) The Company has furnished or will deliver to the Underwriters 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 Underwriters, 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 -12- 13 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 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 Underwriters 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. -13- 14 (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 Underwriters 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 Senior Notes--Security; Release Date." (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 make generally available and, upon request, furnish the Underwriters 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, -14- 15 except for the offer by the Company of $55,000,000 aggregate principal amount of its 6.85% Senior Secured Insured Quarterly Notes due June 1, 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 Indenture 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; (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 Underwriters 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: -15- 16 (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 Underwriters shall have received: (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 -16- 17 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 under the Secured Indenture in the manner provided for in the Secured 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 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 Securities. (viii) Except as to property acquired subsequent to the date of execution of the Thirty-fifth 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 -17- 18 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. (x) All taxes and fees required to be paid by the laws of the State of Michigan and jurisdictional subdivisions thereof with respect to (A) the Secured Indenture and the issuance and delivery of the Collateral Bonds and (B) the Indenture and the issuance and delivery of the Securities, 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. -18- 19 (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 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 knowledge of such counsel, 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. (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 -19- 20 Bankruptcy Exceptions; the Secured Indenture has been duly qualified under the 1939 Act. (xix) The execution, delivery and performance by the Company of this Agreement; the execution, delivery and performance by the Company of the Indenture, the Securities, the 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. (xx) 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 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 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 or the Secured Indenture, 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 -20- 21 subsidiaries, could not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. (xxi) The information and statements in the Prospectus under the captions "Summary of the Offer," "The Company," "Use of Proceeds," "Description of the First Mortgage Bonds," "Description of the Senior Debt Securities" and the "Description of the Senior Notes," to the extent that they involve matters of law, summaries of legal matters, the Company's charter and by-laws, legal documents or proceedings, or legal conclusions, have been reviewed by such counsel and are correct in all material respects. (xxii) 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. (xxiii) 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. (xxiv) 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. (xxv) 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 -21- 22 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 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 Secured Indenture, the Indenture and the Securities. (xxvi) 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 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. (xxvii) 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. -22- 23 (xxviii) 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. (xxix) 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 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 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 Underwriters, with respect to such matters as the Underwriters 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. (c) On the Closing Date, the Underwriters 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 -23- 24 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 Underwriters shall have received from Deloitte & Touche LLP a letter dated such date in form and substance satisfactory to the Underwriters, 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 Underwriters 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 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 -24- 25 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; (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 Underwriters, in each case as compared with the corresponding period in the preceding year and with any other period of corresponding length specified by -25- 26 the Underwriters, 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 Underwriters, 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 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 Underwriters. (e) On the Closing Date, the Underwriters shall have received from Deloitte & Touche LLP a letter, dated as of the Closing Date, to the effect that they reaffirm the statements made -26- 27 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 Underwriters shall have received satisfactory evidence that the Insurance Policy has been issued by the Insurer and confirmation that the Securities shall be rated "Aaa" by Moody's Investors Service Inc. and "AAA" by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.; and the Company shall have delivered to the Underwriters a letter, dated the Closing Date, from such rating agencies, in form satisfactory to the Underwriters, 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, the Underwriters shall have received from Kutak Rock, counsel to the Insurer, an opinion substantially in the form attached hereto as Schedule III. (h) On the Closing Date, the Underwriters shall have received a certificate of an appropriate officer of the Insurer, dated as of the Closing Date, to the effect that the information being presented in the Prospectus Supplement is true and accurate in all material respects with respect to the Insurer, that there is no pending litigation against the Insurer that would materially affect the Insurer's ability to perform its obligations, and that all necessary corporate action has been take with respect to the execution, delivery and performance of the Insurance Policy, and that the execution and delivery of the Insurance Policy do not conflict with the organizational documents of the Insurer. (i) 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 Underwriters 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 Underwriters 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. -27- 28 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 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 -28- 29 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 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 -29- 30 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. 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. -30- 31 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 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. -31- 32 SECTION 9. Termination of Agreement. (a) The Underwriters 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 Underwriters, 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) The Underwriters may terminate this Agreement, by notice to the Company at any time on or prior to the Closing Date, if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Prospectus, any change or any development which would materially and adversely affect the Insurer's condition (financial or otherwise) or operations or which would materially and adversely affect the Insurer's ability to perform its obligations under the Insurance Policy. (c) 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 Underwriters 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 Underwriters shall not have completed such arrangements within -32- 33 such 24-hour period, then 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 Underwriters 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 Merrill Lynch & Co. at World Financial Center - - North Tower, New York, New York 10281-1327 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 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 Underwriters, 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 Underwriters, and said controlling persons and officers and directors and their heirs and legal Underwriters, 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. -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, Treasurer and Chief Financial Officer CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED A.G. EDWARDS & SONS, INC. By: MERRILL LYNCH & CO. By: /s/ Anthony Leness ----------------------------- Authorized Signatory -34- 35 SCHEDULE I UNDERWRITERS: Merrill Lynch & Co, Merrill Lynch, Pierce, Fenner & Smith Incorporated A.G. Edwards & Sons, Inc. PURCHASE PRICE AND DESCRIPTION OF THE SECURITIES: TITLE: 6.85% Senior Notes due 2039. PRINCIPAL AMOUNT: $55,000,000 PURCHASE PRICE: 96.85% 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 1, 2039 INTEREST RATE: 6.85% INTEREST PAYMENT DATES: March 1, June 1, September 1 and December 1. REDEMPTION PROVISIONS: As set forth in the Prospectus under the caption headed "Description of the Senior Notes - Optional Redemption." AUTHORIZED DENOMINATIONS: $25 and integral multiples thereof. OTHER PROVISIONS: TIME AND DATE OF DELIVERY AND PAYMENT: TIME: 9:00 A.M. (Eastern time) DATE: June 9, 1999 LOCATION: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street New York, NY 10019-5389 36 PLACE OF DELIVERY AND PAYMENT: DELIVERY: Merrill Lynch & Co. 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 ------------------- ----------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................ $30,000,000 A.G. Edwards & Sons, Inc................................................. $25,000,000 ----------- Total..................................................................... $55,000,000 ===========
-3- 38 SCHEDULE III FORM OF OPINION OF INSURER'S COUNSEL The opinion of Insurer's counsel shall be to the effect that: 1. [Name of Insurer] (the "Corporation") is a stock insurance corporation, duly incorporated and validly existing under the laws of [State], and is licensed and authorized to issue the Insurance Policy under the laws of [State]. 2. The Insurance Policy has been duly executed and is a valid and binding obligation of the Corporation enforceable in accordance with its terms. 3. The Insurance Policy is not required to be registered under the Securities Act. 4. The statements set forth under the caption "The Policy and the Insurer" in the Prospectus Supplement dated June 4, 1999 insofar as such statements constitute a description of the Insurance Policy, accurately summarize the Insurance Policy. -4- EX-4.1 4 SECOND SUPPLEMENTAL INDENTURE 1 EXHIBIT 4.1 ================================================================================ SECOND SUPPLEMENTAL INDENTURE FROM MICHIGAN CONSOLIDATED GAS COMPANY TO CITIBANK, N.A. TRUSTEE ------------- Dated as of June 9, 1999 SUPPLEMENTAL TO INDENTURE Dated as of June 1, 1998 Senior Debt Securities ================================================================================ 2 3 This SECOND SUPPLEMENTAL INDENTURE is made as of the 9th day of June, by and between MICHIGAN CONSOLIDATED GAS COMPANY, a corporation 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, as supplemented by a First Supplemental Indenture dated as of June 18, 1998; and Section 3.1 of the Indenture provides that Securities shall be issued in series and that a Board Resolution and an Officer's Certificate shall specify the terms of each issue of Securities; and The Company desires to establish a series of Securities to be designated "Senior Secured Insured Quarterly Notes due 2038" (the "Senior Secured Insured Quarterly Notes") and a series of Securities to be designated "Senior Notes, due 2039" (the "Senior Notes") (together, the "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 Second 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 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 the Securities as follows: 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 "Senior Secured Insured Quarterly Notes due 2038" and "Senior Notes due 2039." The aggregate principal amount of the Senior Secured Insured Quarterly Notes shall be limited to Fifty-Five Million Dollars ($55,000,000) and the aggregate principal amount of the Senior Notes shall be limited to Fifty-Five Million Dollars ($55,000,000). 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, with respect to each issue of the Senior Secured Insured Quarterly Notes and the Senior Notes, the form of Securities for each of the Senior Secured Insured Quarterly Notes and the Senior Notes 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 by law and which shall not be inconsistent with the terms and provisions of the Indenture or this Supplemental Indenture. The terms of such forms of Securities are incorporated by reference herein. 4 ARTICLE III TRANSFER OF COLLATERAL BONDS The Company hereby issues, delivers and transfers to the Trustee (A) in connection with the issuance of the Senior Secured Insured Quarterly Notes, Fifty-Five Million Dollars ($55,000,000) aggregate principal amount of a related issue of Collateral Bonds of the Company designated "First Mortgage Bonds, Collateral Series C" and (B) in connection with the issuance of the Senior Notes, Fifty-Five Million Dollars ($55,000,000) aggregate principal amount of a related issue of Collateral Bonds of the Company designated "First Mortgage Bonds, Collateral Series D" (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 the 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 the 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 the 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 or the Related Issue of Securities. The Trustee shall enforce all of its rights under the First Mortgage Indenture as a holder of the Related Issue of Collateral Bonds transferred to it as provided in this Article III for the benefit of the Insurer and the Holders of the 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 the Related Issue of Securities. The Company shall make payments of the principal of, and premium or interest on, the Collateral Bonds to the Trustee, which payments shall be applied by the Trustee to satisfaction of all obligations then due on the 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 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 (as defined in the Senior Indenture) 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. 5 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, (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 Section 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 6 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 convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. 7 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 9, 1999. MICHIGAN CONSOLIDATED GAS COMPANY By: /s/ Harold Gardner ------------------------------------- Name: Harold Gardner Title: Vice President and Chief Accounting Officer ATTEST: /s/ Ronald E. Christian - ----------------------------- Secretary CITIBANK, N.A., as Trustee By: /s/ R. Duma ------------------------------------- Name: R. Duma Title: Senior Trust Officer ATTEST: /s/ Nancy Forte - ----------------------------- Authorized Officer 8 Annex I $55,000,000 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 6.85% Senior Secured Insured Quarterly Notes due 2038 Principal Amount: $55,000,000 Authorized Denomination: $1,000 Regular Record Date: close of business on the 15th calendar day prior to the relevant Interest Payment Date Original Issue Date: June 9, 1999 Stated Maturity: June 1, 2038 Interest Payment Dates: March 1, June 1, September 1 and December 1 Interest Rate: 6.85% per annum 9 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 FIFTY-FIVE MILLION DOLLARS ($55,000,000) on June 1, 2038 (the "Stated Maturity Date"), in the coin or currency of the United States, and to pay interest thereon from the Original Issue Date shown above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on each Interest Payment Date as specified above, commencing on September 1, 1999 and on the Stated Maturity at the rate per annum shown above (the "Interest Rate") until the principal hereof is paid or made available for payment and on any overdue principal and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date (other than an Interest Payment Date that is the Stated Maturity or a Redemption Date) will, as provided in the Senior Indenture, be paid to the Person in whose name this 6.85% Senior Secured Insured Quarterly Note Due 2038 is registered on the Regular Record Date as specified above next preceding such Interest Payment Date; provided that any interest payable at Stated Maturity or on a Redemption Date will be paid to the Person to whom principal is payable. Except as otherwise provided in the Senior Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Senior Secured Insured Quarterly Note is registered at the close of business on a Special Record Date for the payment of such defaulted Interest to be fixed by the Senior Trustee, notice whereof shall be given to Holders of securities of this series not less than 10 days prior to such special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the securities of this series shall be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Senior Indenture. Payments of interest on this Senior Secured Insured Quarterly Note will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for this Senior Secured Insured Quarterly Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Senior Secured Insured Quarterly Note is not a business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. "Business Day" means a day other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office is closed for business. Payment of principal of, premium, if any, and interest on the securities of this series shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal of, premium, if any, and interest on securities of this series represented by a Global Security shall be made by wire 10 transfer of immediately available funds to the Holder of such Global Security, provided that, in the case of payments of principal and premium, if any, such Global Security is first surrendered to the Paying Agent (as defined in the Senior Indenture). If any of the securities of this series are not longer represented by a Global Security, (i) payments of principal, premium, if any, and interest due at the Stated Maturity or earlier redemption of such Securities shall be made at the office of the Paying Agent upon surrender of such Securities to the Paying Agent, and (ii) payments of interest shall be made, at the option of the Company, subject to such surrender where applicable, (A) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (B) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto. UNTIL THE RELEASE DATE (AS DEFINED ON THE REVERSE HEREOF), THIS SENIOR SECURED INSURED QUARTERLY NOTE 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 SENIOR SECURED INSURED QUARTERLY NOTES 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 Senior Secured Insured Quarterly Note 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 Senior Secured Insured Quarterly Note 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. 11 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: June 9, 1999 MICHIGAN CONSOLIDATED GAS COMPANY By: -------------------------------- Title: Attest: By: ------------------------------- Title: CERTIFICATION OF AUTHENTICATION Dated: June 9, 1999 This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. CITIBANK, N.A., as Trustee By: --------------------------------- Authorized Signatory 12 MICHIGAN CONSOLIDATED GAS COMPANY 6.85% Senior Secured Insured Quarterly Notes due 2038 (c) Senior Indenture. (1) This Senior Secured Insured Quarterly Note 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 and the Second Supplemental Indenture dated as of June 9, 1999, 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 6.85% Senior Secured Insured Quarterly Notes (the "Senior Secured Insured Quarterly Notes") of the Company, which series is limited in aggregate principal amount to $55,000,000. (2) 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. (c) The Company shall make payment of any principal or interest due on the Notes to the Trustee by the close of business on the second day next preceding the date on which such payment is due to the Holders of the Senior Secured Insured Quarter Notes. (d) The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture. "Insurance Paying Agent" means State Street Bank and Trust Company, N.A., New York, New York, or any successor thereto, as the Fiscal Agent under the Policy. "Insurer" means MBIA Insurance Corporation, a New York-domiciled stock insurance corporation. 13 "Policy" means the financial guaranty insurance policy issued by the insurer with respect to regularly scheduled payments due for principal of and interest on the Senior Secured Insured Quarterly Notes as provided in such policy. (d) Transfer. No service charge will be made for any transfer or exchange of Senior Secured Insured Quarterly Notes, but payment will be required of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Company shall not be required (a) to issue, transfer or exchange any Senior Secured Insured Quarterly Notes except to the Insurer during a period beginning at the opening of business fifteen (15) days before the day of the mailing of a notice pursuant to Section 12.4 of the Indenture identifying the serial numbers of the Senior Secured Insured Quarterly Notes to be called for redemption, and ending at the close of business on the day of the mailing, or (b) to transfer or exchange any Senior Secured Insured Quarterly Notes theretofore selected for redemption in whole or in part, except the unredeemed portion of any Note redeemed in part. (e) Redemption at the Company's Option. The Senior Secured Insured Quarterly Notes shall be subject to redemption at the option of the Company, in whole or in part, without premium or penalty, at any time or from time to time on or after June 1, 2004 at a Redemption Price equal to 100% of the principal amount to be redeemed plus accrued but unpaid interest to the Redemption Date. In the event of redemption of the Senior Secured Insured Quarterly Notes in part only, a new Senior Secured Insured Quarterly Note or Notes for the unredeemed portion will be issued in the name or names of the Holders thereof upon the surrender thereof. The Senior Secured Insured Quarterly Notes will not have a sinking fund. Notice of redemption shall be given as provided in Section 12.4 of the Indenture. Any redemption of less than all of the Senior Secured Insured Quarterly Notes shall, with respect to the principal thereof, be divisible by $1,000. (f) Redemption at the Holder's Option. For purposes of this provision a "Beneficial Owner" means the Person who has the right to sell, transfer or otherwise dispose of an interest in Senior Secured Insured Quarterly Notes and the right to receive the proceeds therefrom, as well as the interest and principal payable to the Holder thereof. In general, a determination of beneficial ownership in the Senior Secured Insured Quarterly Notes will be determined by the Company, in its sole discretion, which determinations shall be final and binding on all parties. Unless the Senior Secured Insured Quarterly Notes have been declared due and payable prior to their maturity by reason of an Event of Default, the personal representative or other Person authorized to represent the estate of the deceased Beneficial Owner or from a surviving joint tenant(s) or tenant(s) by the entirety (each, a "Representative") of a deceased Beneficial 14 Owner has the right to request redemption prior to Stated Maturity of all or part of such interest, expressed in integral multiples of $1,000 principal amount, in the Senior Secured Insured Quarterly Notes, and the Company will redeem the same subject to the limitations that the Company will not be obligated to redeem, during the period from the Original Issue Date through and including June 1, 2000 (the "Initial Period"), and during any twelve-month period which ends on and includes each June 1, thereafter (each such twelve-month period being hereinafter referred to as a "Subsequent Period"), (i) on behalf of a deceased Beneficial Owner any interest principal amount of $25,000 or (ii) interests in the Senior Secured Insured Quarterly Notes in an aggregate principal amount exceeding $1,650,000. A request for redemption may initiated by the Representative of a deceased Beneficial Owner at any time and in any principal amount in integral multiples of $1,000. Representatives of deceased Beneficial Owners must make arrangements with the Participant through whom such interest is owned in order that timely presentation of redemption requests can be made by the Participant to the Senior Trustee. If the Company, although not obligated to do so, chooses to redeem interests of any deceased Beneficial Owner in the Senior Secured Insured Quarterly Notes in the Initial Period or any Subsequent Period in excess of the $25,000 limitation, such redemption, to the extent that it exceeds the $25,000 limitation for any deceased Beneficial Owner, shall not be included in the computation of the $1,650,000 limitation for such initial Period or such Subsequent Period, as the case may be, or for any succeeding Subsequent Period. Any Senior Secured Insured Note (or portion thereof) tendered pursuant to the redemption request may be withdrawn by a written request by the Representative received by the Senior Trustee at least 10 days prior to its repayment. Subject to the $25,000 and $1,650,000 limitations, the Company will, after the death of any Beneficial Owner, redeem the interest of such Beneficial Owner in the Senior Secured Insured Quarterly Notes within 60 days following receipt by the Senior Trustee of a redemption request. The Senior Trustee will notify the Company promptly after receipt of any redemption request and the Company will provide all funds necessary for such redemption prior to the date of redemption to the Paying Agent. If redemption requests exceed the aggregate principal amount of interests in Senior Secured Insured Quarterly Notes required to be redeemed during the Initial Period or during any Subsequent Period, then such excess redemption requests will be applied in the order received by the Senior Trustee to successive Subsequent Periods, regardless of the number of Subsequent Periods required to redeem such interests. All redemption requests will be redeemed in the order in which trustee receives the redemption request. To obtain repayment pursuant to a redemption request, the Representative must provide to the Participant (i) a written request for repayment signed by the Representative, and such signature must be guaranteed by a member firm of a registered national securities exchange or of the NASD or a commercial bank or trust company having an office or correspondent in the United States, (ii) appropriate evidence satisfactory to the Company and the Senior Trustee that (A) the Representative has authority to act on behalf of the deceased Beneficial Owner, (B) the death of such Beneficial Owner has occurred and (C) the deceased was the owner of a beneficial interest in such Senior Secured Insured Quarterly Note at the time of death, (iii) if applicable, a properly executed assigned or endorsed, and (iv) if the beneficial interest in such Senior Secured Insured Quarterly Note is held by a nominee of the deceased Beneficial Owner, a certificate satisfactory to the Senior Trustee from such nominee attesting to the deceased's ownership of a beneficial interest in such Senior 15 Secured Insured Quarterly Note. The Participant will provide these documents to the Senior Trustee. All questions as to the eligibility or validity of any exercise of redemption on behalf of a deceased Beneficial Owner will be determined by the Company, in its sole discretion, which determinations will be final and binding on all parties. For purposes of this provision an interest in Senior Secured Insured Quarterly Notes held in tenancy by the entirety, joint tenancy or by tenants in common will be deemed to be held by a single Beneficial Owner and the death of a tenant by the entirety, joint tenant or tenant in common will be deemed the death of a Beneficial Owner. The death of a Person who, during his lifetime, was entitled to subsequently all of the rights of a Beneficial Owner of an interest in the Senior Secured Insured Quarterly Notes will be deemed the death of the Beneficial Owner, regardless of the recordation of such interest on the records of the Participant, if such rights can be established to the satisfaction of the Participant and the Company. In the case of any redemption request which is presented pursuant to this provision and which has not been fulfilled at the time of the Company gives notice of its election to partially redeem Senior Secured Insured Quarterly Notes as described in item 3 above, such interest or portion thereof shall not be subject to redemption pursuant to such item 3 subject to redemption pursuant to this provision. (g) Special Insurance Provisions. (1) Supplemental Indentures. The consent of the Insurer shall be required with respect to any indenture or indentures supplemental to the Indenture requiring the consent of the Holders of the Senior Secured Insured Quarterly Notes pursuant to Section 10.2 of the Senior Indenture. (2) Events of Default and Remedies. Subject to Section 1.7 of the Senior Indenture and to the Trust Indenture Act, including, without limitation, Sections 316(a)(1) and 317(a) thereof, if an Event of Default with respect to the Senior Secured Insured Quarterly Notes occurs and is continuing, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Senior Secured Insured Quarterly Notes or the Senior Trustee for the benefit of the Holders of the Senior Secured Insured Quarterly Notes under the Senior Indenture, including, without limitation, (i) the right to accelerate the principal of the Senior Secured Insured Quarterly Notes as provided in Section 6.2 of the Indenture, and (ii) the right to annul any such declaration of acceleration, and the Insurer shall also be entitled to approve any waiver of an Event of Default with respect to the Senior Secured Insured Quarterly Notes, the obligation of the Senior Trustee to comply with any direction to be subject to compliance with the conditions set forth in Sections 7.3(e) of the Senior Indenture (as if references in those Sections to Holders were references to the Insurer) and the protections provided to the Senior Trustee by Sections 315(d)(3) of the Trust Indenture Act shall be applicable with respect to any direction from the Insurer given pursuant thereto (as if references in said Section to Holders were references to the Insurer). 16 (3) Insurance Policy Payment Procedures. (a) If, as of the close of business on the second day next preceding any date on which payment of principal or interest is due, the Senior Trustee does not have sufficient funds for any payment of principal or interest on the due date or if the Senior Trustee has notice that any Holder has been required to disgorge payments of principal or interest on the Senior Secured Insured Quarterly Notes to a trustee in bankruptcy or creditors or others pursuant to a final judgement by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Holder within the meaning of any applicable bankruptcy laws, then the Senior Trustee shall notify the Insurer or its designee of such fact by telephone or telegraph notice, confirmed in writing by registered or certified mail. (b) The Senior Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the Senior Secured Insured Quarterly Notes as follows: (i) If and to the extent there is a deficiency in amounts required to pay interest on the Senior Secured Insured Quarterly Notes, the Senior Trustee shall (x) execute and deliver to the Insurance Paying Agent, in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Holders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (y) receive as designee of the respective Holders (and not as Senior Trustee) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest to assigned, and (z) disburse the same to such respective Holders; and (ii) If and to the extent of a deficiency in amounts required to pay principal of the Senior Secured Insured Quarterly Notes, the Senior Trustee shall (x) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Holders in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Senior Secured Insured Quarterly Notes surrendered to the Insurance Paying Agent to the extent of the principal amount thereof as has not previously been paid or for which moneys are not held by the Senior Trustee and available for such payment (but such assignment shall be delivered only if payment from the Insurance Payment Agent is received), (y) receive as designee of the respective Holders (and not as Trustee) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (z) disburse the same to such Holders. (c) Payments with respect to claims for interest on and principal of Senior Secured Insured Quarterly Notes disbursed by the Senior Trustee from proceeds of the Policy shall not be considered to discharge the obligation of the Company with respect to such Senior Secured Insured Quarterly Notes, and the Insurer shall become the owner of such Senior Secured Insured 17 Quarterly Notes and claims for the interest thereon in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (d) Irrespective of whether any such assignment is executed and delivered, the Company and the Senior Trustee hereby agree for the benefit of the Insurer that, (i) They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Senior Trustee), on account of principal of or interest on the Senior Secured Insured Quarterly Notes, the Insurer will be subrogated to the rights of such Holders to receive the amount of such principal and interest from the Company, with respect thereon as provided and solely from the sources stated in the Senior Indenture and the Senior Secured Insured Quarterly Notes; and (ii) They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in the Senior Indenture and the Senior Secured Insured Quarterly Note, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Senior Secured Insured Quarterly Notes of Holders, and will otherwise treat the Insurer as the owner of such rights to the extent of the amount of such principal and interest. (4) Application of Term "Outstanding" to Senior Secured Insured Quarterly Notes. In the event that the principal and/or interest due on the Senior Secured Insured Quarterly Notes shall be paid by the Insurer pursuant to the Policy, the Senior Secured Insured Quarterly Notes shall remain Outstanding for all purposes of the Senior Indenture, not be considered defeased or otherwise satisfied and not be considered paid by the Company, and the Senior Indenture and all covenants, agreements and other obligations of the Company to the Holders of Senior Secured Insured Quarterly Notes shall continue to exist and such covenants, agreements and other obligations shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such Holders to the extent of such payment. (5) Insurer as Third Party Beneficiary. To the extent that the Senior Indenture confers upon or gives or grants to the Insurer any right, remedy or claim under or by reason of the Senior Indenture, the Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. (6) Notices. Any notice that is required to be given to a Holder of the Senior Secured Insured Quarterly Note or to the Senior Trustee pursuant to the Senior Indenture shall also be provided to the Insurer. All notices required to be given to the Insurer under the Senior 18 Indenture shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: IPM-PCF. (7) These Special Insurance Provisions shall apply notwithstanding anything in the Senior Indenture to the contrary, but only so long as the Policy shall be in full force and effect and the Insurer is not in default thereunder. (8) Amendments or Supplements. The Senior Trustee, in determining whether any amendments or supplements to the Senior Indenture may be made without the consent of the Holders, or in determining whether any action should be taken, shall consider the effect of such action on the rights of the Holders as if the Policy were not in effect. (h) Security; Release Date. Prior to the Release Date (as hereinafter defined), the Senior Secured Insured Quarterly Notes shall be secured by First Mortgage Bonds designated as Collateral Bonds, Series C (the "Collateral Bonds"), delivered by the Company to the Senior Trustee for the benefit of the Holders of the Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly 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 mays 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 SENIOR SECURED INSURED QUARTERLY NOTES IN ANY MANNER PROVIDED THAT NO DEFAULT OR EVENT OR 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 SENIOR SECURED INSURED QUARTERLY NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH COLLATERAL BONDS. (i) Effect of Event of Default. In case an Event of Default with respect to the Senior Secured Insured Quarterly Notes shall occur and be continuing, the unpaid principal of the Senior 19 Secured Insured Quarterly Notes may be declared due and payable, in the manner, with the effect and subject to the conditions provided in the Senior Indenture. (j) 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 Senior Secured Insured Quarterly Note 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 Senior Insured Quarterly 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 Senior Secured Insured Quarterly Note of each series at the time Outstanding, on behalf of the Holders of all Senior Secured Insured Quarterly Notes of such series, to waive compliance by the Company with certain provisions of the Senior Indenture and certain past defaults under the Senor Indenture and their consequences. Any such consent or waiver by the Holder of this Senior Secured Insured Quarterly Note shall bind such Holder and all future Holders of this Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly Note. (k) Obligations of Company. No reference herein to the Senior Indenture and no provision of this Senior Secured Insured Quarterly 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. (l) Denominations, Transfer and Exchange. (1) The Senior Secured Insured Quarterly 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, Senior Secured Insured Quarterly Notes of this Series are exchangeable for a like aggregate principal amount of Senior Secured Insured Quarterly Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. (2) As provided in the Senior Indenture and subject to certain limitations therein set forth, the transfer of this Senior Secured Insured Quarterly Note is registrable in the Security Register, upon surrender of this Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly Notes of 20 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. (3) 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 Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly Note is registered as the owner hereof for all purposes, whether or not this Senior Secured Insured Quarterly Note be overdue, and neither the Company, the Senior Trustee nor any such agent shall be affected by notice to the contrary. (m) 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 Senior Secured Insured Quarterly 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 Senior Secured Insured Quarterly Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Senior Secured Insured Quarterly Note. (n) Governing Law. The Senior Indenture and this Senior Secured Insured Quarterly Note shall for all purposes be governed by, and construed in accordance with, the internal laws of the State of New York. STATEMENT OF INSURANCE The Insurer has issued a financial guarantee insurance policy (the "Policy") containing the following provisions, such policy being on file at Citibank, N.A., New York, New York: The Insurer, in consideration of the payment of the premium and subject to the terms of the policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to Citibank, N.A., or its successor (the "Paying Agent"), of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the 21 meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: $55,000,000 Michigan Consolidated Gas Company 6.85% Senior Secured Insured Quarterly Notes Due June 2038. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to such owners or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. The policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party hose agreement with the Issuer constitutes the underlying security for the Obligations. An service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non-cancelable for any reason. The premium on this policy is not refundable for any reason including te payment prior to maturity of the Obligations. This policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. 22 ------------------------------------------- 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) JF TEN -- as joint tenants with Uniform Gifts to right of survivorship Minor Act and not as tenants in common ADDITIONAL ABBREVIATION 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: ------------------------------------------ 23 Annex II $55,000,000 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 6.85% Senior Notes due 2039 Principal Amount: $55,000,000 Authorized Denomination: $25 Regular Record Date: close of business on the 15th calendar day prior to the relevant Interest Payment Date Original Issue Date: June 9, 1999 Stated Maturity: June 1, 2039 Interest Payment Dates: March 1, June 1, September 1 and December 1 Interest Rate: 6.85% per annum 24 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 FIFTY-FIVE MILLION DOLLARS ($55,000,000) on June 1, 2039 (the "Stated Maturity Date"), in the coin or currency of the United States, and to pay interest thereon from the Original Issue Date shown above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears on each Interest Payment Date as specified above, commencing on September 1, 1999 and on the Stated Maturity at the rate per annum shown above (the "Interest Rate") until the principal hereof is paid or made available for payment and on any overdue principal and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date (other than an Interest Payment Date that is the Stated Maturity or a Redemption Date) will, as provided in the Senior Indenture, be paid to the Person in whose name this 6.85% Senior Note Due 2039 is registered on the Regular Record Date as specified above next preceding such Interest Payment Date; provided that any interest payable at Stated Maturity or on a Redemption Date will be paid to the Person to whom principal is payable. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Senior Note is registered at the close of business on a Special Record Date for the payment of such defaulted Interest to be fixed by the Senior Trustee, notice whereof shall be given to Holders of securities of this series not less than 10 days prior to such special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the securities of this series shall be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Senior Indenture. Payments of interest on this Senior Note will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for this Senior Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Senior Note is not a business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. "Business Day" means a day other than (i) a Saturday or a Sunday, (ii) a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office is closed for business. Payment of principal of, premium, if any, and interest on the securities of this series shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of principal of, premium, if any, and interest on securities of this series represented by a Global Security shall be made by wire transfer of immediately available funds to the Holder of such Global Security, provided that, in the case of payments of principal and premium, if any, such Global Security is first surrendered to the Paying 25 Agent (as defined in the Senior Indenture). If any of the Securities of this series are not longer represented by a Global Security, (i) payments of principal, premium, if any, and interest due at the Stated Maturity or earlier redemption of such Securities shall be made at the office of the Paying Agent upon surrender of such Securities to the Paying Agent, and (ii) payments of interest shall be made, at the option of the Company, subject to such surrender where applicable, (A) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (B) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto. UNTIL THE RELEASE DATE (AS DEFINED ON THE REVERSE HEREOF), THIS SENIOR NOTE 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 SENIOR NOTES 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 Senior Note 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 Senior Note 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. 26 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: June 9, 1999 MICHIGAN CONSOLIDATED GAS COMPANY By: ---------------------------------- Title: ------------------------ Attest: By: -------------------------------- Title: CERTIFICATION OF AUTHENTICATION Dated: June 9, 1999 This is one of the Securities of the series designated therein referred to in the within-mentioned Senior Indenture. CITIBANK, N.A., as Trustee By: ------------------------------------ Authorized Signatory 27 MICHIGAN CONSOLIDATED GAS COMPANY 6.85% Senior Notes due 2039 (o) Senior Indenture. (1) This Senior Note 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 and the Second Supplemental Indenture dated as of June 9, 1999, 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 6.85% Senior Notes (the "Senior Notes") of the Company, which series is limited in aggregate principal amount to $55,000,000. (2) 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. (3) The Company shall make payment of any principal or interest due on the Notes to the Trustee by the close of business on the second day next preceding the date on which such payment is due to the Holders of the Senior Notes. (4) The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture. "Insurance Paying Agent" means State Street Bank and Trust Company, N.A., New York, New York, or any successor thereto, as the Fiscal Agent under the Policy. "Insurer" means MBIA Insurance Corporation, a New York-domiciled stock insurance corporation. 28 "Policy" means the financial guaranty insurance policy issued by the insurer with respect to regularly scheduled payments due for principal of and interest on the Senior Notes as provided in such policy. (p) Transfer. No service charge will be made for any transfer or exchange of Senior Notes, but payment will be required of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Company shall not be required (a) to issue, transfer or exchange any Senior Notes except to the Insurer during a period beginning at the opening of business fifteen (15) days before the day of the mailing of a notice pursuant to Section 12.4 of the Indenture identifying the serial numbers of the Senior Notes to be called for redemption, and ending at the close of business on the day of the mailing, or (b) to transfer or exchange any Senior Notes theretofore selected for redemption in whole or in part, except the unredeemed portion of any Note redeemed in part. (q) Redemption at the Company's Option. The Senior Notes shall be subject to redemption at the option of the Company, in whole or in part, without premium or penalty, at any time or from time to time on or after June 1, 2004 at a Redemption Price equal to 100% of the principal amount to be redeemed plus accrued but unpaid interest to the Redemption Date. In the event of redemption of the Senior Notes in part only, a new Senior Note or Notes for the unredeemed portion will be issued in the name or names of the Holders thereof upon the surrender thereof. The Senior Notes will not have a sinking fund. Notice of redemption shall be given as provided in Section 12.4 of the Indenture. Any redemption of less than all of the Senior Notes shall, with respect to the principal thereof, be divisible by $25. (r) Special Insurance Provisions. (1) Supplemental Indentures. The consent of the Insurer shall be required with respect to any indenture or indentures supplemental to the Senior Indenture requiring the consent of the Holders of the Senior Notes pursuant to Section 10.2 of the Indenture. (2) Events of Default and Remedies. Subject to Section 1.7 of the Indenture and to the Trust Indenture Act, including, without limitation, Sections 316(a)(1) and 317(a) thereof, if an Event of Default with respect to the Senior Notes occurs and is continuing, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Senior Notes or the Senior Trustee for the benefit of the Holders of the Senior Notes under the Senior Indenture, including, without limitation, (i) the right to accelerate the principal of the Senior Notes as provided in Section 6.2 of the Senior Indenture, and (ii) the right to annul any 29 such declaration of acceleration, and the Insurer shall also be entitled to approve any waiver of an Event of Default with respect to the Senior Notes, the obligation of the Senior Trustee to comply with any direction to be subject to compliance with the conditions set forth in Sections 7.3(e) of the Senior Indenture (as if references in those Sections to Holders were references to the Insurer) and the protections provided to the Trustee by Sections 315(d)(3) of the Trust Indenture Act shall be applicable with respect to any direction from the Insurer given pursuant thereto (as if references in said Section to Holders were references to the Insurer). (3) Insurance Policy Payment Procedures. (a) If, as of the close of business on the second day next preceding any date on which payment of principal or interest is due, the Trustee does not have sufficient funds for any payment of principal or interest on the due date or if the Senior Trustee has notice that any Holder has been required to disgorge payments of principal or interest on the Senior Notes to a trustee in bankruptcy or creditors or others pursuant to a final judgement by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Holder within the meaning of any applicable bankruptcy laws, then the Senior Trustee shall notify the Insurer or its designee of such fact by telephone or telegraph notice, confirmed in writing by registered or certified mail. (b) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the Senior Notes as follows: 1. If and to the extent there is a deficiency in amounts required to pay interest on the Senior Notes, the Senior Trustee shall (x) execute and deliver to the Insurance Paying Agent, in form satisfactory to the Insurance Paying Agent, an instrument appointing the Insurer as agent for such Holders in any legal proceeding related to the payment of such interest and an assignment to the Insurer of the claims for interest to which such deficiency relates and which are paid by the Insurer, (y) receive as designee of the respective Holders (and not as Senior Trustee) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest to assigned, and (z) disburse the same to such respective Holders; and 2. If and to the extent of a deficiency in amounts required to pay principal of the Senior Notes, the Senior Trustee shall (x) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the Insurer as agent for such Holders in any legal proceeding relating to the payment of such principal and an assignment to the Insurer of any of the Senior Notes surrendered to the Insurance Paying Agent to the extent of the principal amount thereof as has not previously been paid or for which moneys are not held by the Senior Trustee and available for such payment (but such assignment shall be delivered only if payment from the Insurance Payment Agent is received), (y) receive as designee of the respective Holders (and not as Trustee) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (z) disburse the same to such Holders. 30 (c) Payments with respect to claims for interest on and principal of Senior Notes disbursed by the Senior Trustee from proceeds of the Policy shall not be considered to discharge the obligation of the Company with respect to such Senior Notes, and the Insurer shall become the owner of such Senior Notes and claims for the interest thereon in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (d) Irrespective of whether any such assignment is executed and delivered, the Company and the Senior Trustee hereby agree for the benefit of the Insurer that, 1. They recognize that to the extent the Insurer makes payments, directly or indirectly (as by paying through the Senior Trustee), on account of principal of or interest on the Senior Notes, the Insurer will be subrogated to the rights of such Holders to receive the amount of such principal and interest from the Company, with respect thereon as provided and solely from the sources stated in the Senior Indenture and the Senior Notes; and 2. They will accordingly pay to the Insurer the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), with interest thereon as provided in the Senior Indenture and the Senior Note, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Senior Notes of Holders, and will otherwise treat the Insurer as the owner of such rights to the extent of the amount of such principal and interest. (4) Application of Term "Outstanding" to Senior Notes. In the event that the principal and/or interest due on the Senior Notes shall be paid by the Insurer pursuant to the Policy, the Senior Notes shall remain Outstanding for all purposes of the Senior Indenture, not be considered defeased or otherwise satisfied and not be considered paid by the Company, and the Senior Indenture and all covenants, agreements and other obligations of the Company to the Holders of Senior Notes shall continue to exist and such covenants, agreements and other obligations shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such Holders to the extent of such payment. (5) Insurer as Third Party Beneficiary. To the extent that the Senior Indenture confers upon or gives or grants to the Insurer any right, remedy or claim under or by reason of the Senior Indenture, the Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder. (6) Notices. Any notice that is required to be given to a Holder of the Senior Note or to the Trustee pursuant to the Senior Indenture shall also be provided to the Insurer. All notices required to be given to the Insurer under the Senior Indenture shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: IPM-DCF. 31 (7) These Special Insurance Provisions shall apply notwithstanding anything in the Senior Indenture to the contrary, but only so long as the Policy shall be in full force and effect and the Insurer is not in default thereunder. (8) Amendments or Supplements. The Senior Trustee, in determining whether any amendments or supplements to the Senior Indenture may be made without the consent of the Holders, or in determining whether any action should be taken, shall consider the effect of such action on the rights of the Holders as if the Policy were not in effect. (s) Security; Release Date. Prior to the Release Date (as hereinafter defined), the Senior Notes shall be secured by First Mortgage Bonds designated as Collateral Bonds, Series D (the "Collateral Bonds"), delivered by the Company to the Senior Trustee for the benefit of the Holders of the Senior 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 Senior 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 mays 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 SENIOR NOTES IN ANY MANNER PROVIDED THAT NO DEFAULT OR EVENT OR 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 SENIOR NOTES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH COLLATERAL BONDS. (t) Effect of Event of Default. In case an Event of Default with respect to the Senior Notes shall occur and be continuing, the unpaid principal of the Senior Notes may be declared due and payable, in the manner, with the effect and subject to the conditions provided in the Senior Indenture. (u) 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 32 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 Senior Note 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 Senior 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 Senior Note of each series at the time Outstanding, on behalf of the Holders of all Senior Notes of such series, to waive compliance by the Company with certain provisions of the Senior Indenture and certain past defaults under the Senor Indenture and their consequences. Any such consent or waiver by the Holder of this Senior Note shall bind such Holder and all future Holders of this Senior 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 Senior Note. (v) Obligations of Company. No reference herein to the Senior Indenture and no provision of this Senior 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. (w) Denominations, Transfer and Exchange. (1) The Senior Notes are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Senior Indenture and subject to certain limitations therein set forth, Senior Notes of this Series are exchangeable for a like aggregate principal amount of Senior Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. (2) As provided in the Senior Indenture and subject to certain limitations therein set forth, the transfer of this Senior Note is registrable in the Security Register, upon surrender of this Senior 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 Senior 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 Senior 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. (3) 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 Senior 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 Senior Note is registered as the owner hereof for all purposes, whether or not this Senior Note be overdue, and neither the Company, the Senior Trustee nor any such agent shall be affected by notice to the contrary. 33 (x) 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 Senior 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 Senior Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Senior Note. (y) Governing Law. The Senior Indenture and this Senior Note shall for all purposes be governed by, and construed in accordance with, the internal laws of the State of New York. 34 STATEMENT OF INSURANCE The Insurer has issued a financial guaranty insurance policy (the "Policy") containing the following provisions, such policy being on file at Citibank, N.A. in New York, New York: The Insurer, in consideration of the payment of the premium and subject to the terms of the policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to Citibank, N.A. or its successor (the "Paying Agent"), of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: $55,000,000 Michigan Consolidated Gas Company 6.85% Senior Notes Due 2039. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with State Street Bank and Trust Company, N.A., in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to such owners or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of 35 such Insured Amounts and legally available therefor. The policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party hose agreement with the Issuer constitutes the underlying security for the Obligations. An service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non-cancelable for any reason. The premium on this policy is not refundable for any reason including te payment prior to maturity of the Obligations. This policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. 36 ------------------------------------------- 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) JF TEN -- as joint tenants with Uniform Gifts to right of survivorship Minor Act and not as tenants in common ADDITIONAL ABBREVIATION 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: ------------------------------------------ 37 ANNEX III No. Principal Amount $55,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES C being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 9, 1999 MATURITY DATE: June 1, 2038 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES C (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 AND THE SECOND SUPPLEMENTAL INDENTURE THRETO DATED AS OF JUNE 9, 1999 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $55,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6.85% SENIOR SECURED INSURED QUARTERLY NOTES DUE 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 ANNEX 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. 38 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 FIFTY-FIVE MILLION DOLLARS ($55,000,000). 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 provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds presented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to the Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding the 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 presented 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. 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 39 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") 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 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. 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, purchase 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 (as defined in the Senior Indenture), have been retired (at, before or after the maturity hereof) 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. 40 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 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, 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, state 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. 41 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this bond to be executed under its name with the signature of its Chairman, 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 Secretary. Dated: June 9, 1999 MICHIGAN CONSOLIDATED GAS COMPANY By: -------------------------------- Title: Attest: By: --------------------------- Title: 42 CERTIFICATE OF AUTHENTICATION This is one of the bonds of the series designated therein, described in the within--mentioned Indenture and Thirty-fifth Supplemental Indenture. Dated: June 9, 1999 CITIBANK, N.A., as Trustee By: ------------------------------ Authorized Signatory 43 ANNEX IV No. Principal Amount $55,000,000 MICHIGAN CONSOLIDATED GAS COMPANY FIRST MORTGAGE BONDS, COLLATERAL SERIES D being a series of FIRST MORTGAGE BONDS ORIGINAL ISSUE DATE: June 9, 1999 MATURITY DATE: June 1, 2039 THE FIRST MORTGAGE BONDS, COLLATERAL SERIES D (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 AND THE SECOND SUPPLEMENTAL INDENTURE THRETO DATED AS OF JUNE 9, 1999 (AS SO SUPPLEMENTED, THE "SENIOR INDENTURE"). THE COLLATERAL BONDS ARE TO BE HELD IN TRUST AS COLLATERAL FOR THE BENEFIT OF THE HOLDERS OF $55,000,000 AGGREGATE PRINCIPAL AMOUNT OF 6.85% SENIOR NOTES DUE 2039 (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 ANNEX 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. 44 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 FIFTY-FIVE MILLION DOLLARS ($55,000,000). 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 provided in the Secured Indenture hereinafter mentioned and the Senior Indenture. If the date of the Collateral Bonds presented by this certificate is after a Record Date (as defined below) with respect to any Interest Payment Date and prior to the Interest Payment Date, then payment of interest shall commence on the second Interest Payment Date succeeding the 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 presented 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. 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 45 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") 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 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. 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, purchase 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 (as defined in the Senior Indenture), have been retired (at, before or after the maturity hereof) 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. 46 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 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, 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, state 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. 47 IN WITNESS WHEREOF, MICHIGAN CONSOLIDATED GAS COMPANY has caused this bond to be executed under its name with the signature of its Chairman, 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 Secretary. Dated: June 9, 1999 MICHIGAN CONSOLIDATED GAS COMPANY By: -------------------------------- Title: Attest: By: ---------------------------- Title: 48 CERTIFICATE OF AUTHENTICATION This is one of the bonds of the series designated therein, described in the within--mentioned Indenture and Thirty-fifth Supplemental Indenture. Dated: June 9, 1999 CITIBANK, N.A., as Trustee By: --------------------------------- Authorized Signatory EX-23.1 5 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Prospectus Supplement of Michigan Consolidated Gas Company relating to 6.85% Senior Notes due 2039, of our report dated February 2, 1999, on our audits of the consolidated financial statements of MBIA Insurance Corporation and Subsidiaries as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998. We also consent to the reference to our Firm under the caption "Experts." /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP June 4, 1999 EX-23.2 6 CONSENT OF PRICEWATERHOUSECOOPRERS LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Prospectus Supplement of Michigan Consolidated Gas Company relating to 6.85% Senior Secured Insured Quarterly Notes due 2038, of our report dated February 2, 1999, on our audits of the consolidated financial statements of MBIA Insurance Corporation and Subsidiaries as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998. We also consent to the reference to our Firm under the caption "Experts." /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP June 4, 1999 -----END PRIVACY-ENHANCED MESSAGE-----